AMENDED CERTIFICATE OF DESIGNATION
PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF
SOCKET COMMUNICATIONS, INC.
Pursuant to Section 151 of the General Corporation Law of the State
of Delaware
Socket Communications, Inc., a Delaware corporation (the "Company"),
certifies that pursuant to authority given by the Company's Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware:
1. No shares of Series A Convertible Preferred Stock have been
issued by the Company.
2. The Board of Directors of the Company has duly adopted the
following recitals and resolutions amending the terms of the Series A
Convertible Preferred Stock of the Company:
WHEREAS, the Certificate of Incorporation of the Company provided for
a class of shares known as Preferred Stock, issuable from time to time
in one or more series; and
WHEREAS, the Board of Directors of the Company is authorized to
determine or alter the rights, preferences, privileges and
restrictions relating to any unissued series of said Preferred Stock
and the number of shares constituting and the designation of said
series; and
WHEREAS, the Board of Directors had previously approved, and had
authorized the appropriate officers of the Company to file with the
Secretary of State of Delaware, a Certificate of Designations,
Preferences and Rights (the "Certificate of Designations") of a new
series of Preferred Stock to be designated "Series A Convertible
Preferred Stock," and the Company filed such Certificate of
Designations with the Secretary of State of Delaware on September 12,
1996; and
WHEREAS, the Board of Directors wishes to amend the terms of the Series
A Preferred Stock as set forth in the Certificate of Designations.
NOW, THEREFORE, BE IT RESOLVED: that the Board of Directors hereby
designates, fixes the number of shares constituting, and determines
the rights, preferences, privileges and restrictions relating to the
Series A Convertible Preferred Stock:
1. Designation. The new series of Preferred Stock shall be designated
"Series A Convertible Preferred Stock." The number of shares constituting
the Series A Convertible Preferred Stock shall be 1,000,000. The Board of
Directors may at any time amend this Certificate of Designations,
Preferences and Rights to decrease the authorized number of shares of Series
A Convertible Preferred Stock to a number equal to or greater than the number
of shares of Series A Convertible Preferred Stock issued and outstanding at
the time of the amendment. The "Initial Sales Price" of the Series A
Convertible Preferred Stock shall be $100 and the "Original Issue Date" shall
mean the date on which shares of Series A Convertible Preferred Stock are
first sold to investors. The relative rights, preferences, privileges and
restrictions granted to or imposed upon the Series A Convertible Preferred
Stock or the holders thereof are specified below.
2. Dividend Rights of Series A Convertible Preferred Stock. The
holders of the Series A Convertible Preferred Stock shall be entitled to
receive dividends on each share of Series A Convertible Preferred Stock (a)
at an annual rate of 6% on each of the dates (each a "Dividend Payment Date")
six months and twelve months after the Original Issue Date (the "Mandatory
Dividends") and (b) otherwise when, as and if declared by the Board of
Directors, out of any funds legally available therefor, at the same rate as
is declared and paid on shares of Common Stock. No dividend may be paid on
or declared or set apart for the Common Stock in any one fiscal year unless
an equal or greater dividend is paid on, or declared and set apart for, each
share of Series A Convertible Preferred Stock. If a holder of Series A
Convertible Preferred Stock converts shares of Series A Convertible Preferred
Stock into Common Stock prior to a Dividend Payment Date, then the amount of
dividends paid on such converted shares shall be (a) prorated for the amount
of time such Series A Convertible Preferred Stock was issued and outstanding
and (b) paid on the next Dividend Payment Date. Dividends (other than the
Mandatory Dividends) on the Series A Convertible Preferred Stock shall not be
cumulative and no rights shall accrue to the holders of the Series A
Convertible Preferred Stock in the event the Company shall fail to declare or
pay dividends (other than the Mandatory Dividends) on the Series A Convertible
Preferred Stock, whether or not the earnings of the Company in that previous
fiscal year were sufficient to pay such dividends in whole or in part.
3. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Company, no distribution shall
be made on the shares of Common Stock without first making a distribution to
the holders of Series A Convertible Preferred Stock in an amount equal to the
number of shares of Series A Convertible Preferred Stock multiplied by the
Initial Sales Price, plus all declared but unpaid dividends (if any) thereon
(the "Stated Value"). If upon occurrence of such event, the assets and
property thus distributed among the holders of the Series A Convertible
Preferred Stock shall be insufficient to permit the payment to such holders
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of their full respective preferential amounts, then the entire assets and
property of the Company legally available for distribution shall be distributed
ratably among the holders of the Series A Convertible Preferred Stock such that
the same percentage of the preferential amount to which each series of Series
A Convertible Preferred Stock is entitled is paid on each share of Series A
Convertible Preferred Stock. If upon occurrence of such event, the assets
and property thus distributed among the holders of the Series A Convertible
Preferred Stock are sufficient to permit the payment to such holders of their
full respective preferential amounts, then the Company shall make a
distribution out of the remaining assets and property of the Company legally
available for distribution to the holders of Common Stock in an amount equal
to the Stated Value. In the event that both the holders of the Series A
Convertible Preferred Stock and the holders of Common Stock are paid their
respective preferential amounts, thereafter the holders of the Common Stock
and the holders of the Series A Convertible Preferred Stock are entitled to
share pro rata in all remaining assets of the Company available for
distribution, with the number of shares held by each holder of Series A
Convertible Preferred Stock deemed to be the number of shares of Common Stock
into which the Series A Convertible Preferred Stock are then convertible. A
consolidation or merger of the Company with or into any other corporation or
corporations, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or a sale of all or substantially all of the assets of the
Company, shall be deemed to be a liquidation, dissolution, or winding up of
the Company.
4. Conversion. The holders of the Series A Convertible Preferred Stock
shall have conversion rights as follows:
(a) Right to Convert. Each share of Series A Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
on or after the 60th day after the Original Issue Date at the office of the
Company or any transfer agent for the Series A Convertible Preferred Stock.
Each share of Series A Convertible Preferred Stock shall be converted into that
number of fully-paid and nonassessable shares of Common Stock that is equal to
the Initial Sales Price divided by the appropriate Conversion Price (as
hereinafter defined). The initial Conversion Price per share of Series A
Convertible Preferred Stock shall be the lower of: (i) the closing bid price
of the Company's Common Stock, as reported by the Nasdaq SmallCap Market, on
the date of the first issuance of Series A Convertible Preferred Stock by the
Company; and (ii) 65% of the average bid price of the Company's Common Stock,
as reported by the Nasdaq SmallCap Market, for the five business days prior to
the business day on which notice of conversion is transmitted by the holder of
such Share and shall be subject to adjustment as provided herein. (The number
of shares of Common Stock into which each share of Series A Convertible
Preferred Stock may be converted is hereinafter referred to as the "Conversion
Rate".) Upon any decrease or increase in the Conversion Price or the
Conversion Rate, as described in this Section 4, the Conversion Rate or
Conversion Price, as the case may be, shall be appropriately increased or
decreased.
(b) Automatic Conversion. All shares of Series A Convertible
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Preferred Stock outstanding shall automatically convert into shares of Common
Stock upon the earliest of (i) immediately preceding a merger or consolidation
of the Company if as a result of such transaction the holders of Common Stock
would receive publicly traded securities with a market value greater than the
Stated Value of the Series A Convertible Preferred Stock, or (ii) the first
anniversary of the Original Issue Date.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Series A Convertible Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to such fraction multiplied by the then fair
market value of such fractional shares as determined by the Board of Directors
of the Company. Before any holder of Series A Convertible Preferred Stock
shall be entitled to convert the same into full shares of Common Stock, and
to receive certificates there for, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Company or of any
transfer agent for the Series A Convertible Preferred Stock, and shall give
written notice to the Company at such office that he elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
to paragraph 4(b) above, the out standing shares of Series A Convertible
Preferred Stock shall be converted automatically without any further action
by the holders of such shares and whether or not the certificates representing
such shares are surrendered to the Company or its transfer agent; provided
further, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless either the certificates evidencing such shares of Series A Convertible
Preferred Stock are delivered to the Company or its transfer agent as provided
above, or the holder notifies the Company or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred
by it in connection with such certificates.
The Company shall, as soon as practicable after such delivery, or
after such agreement and indemnification, issue and deliver at such office to
such holder of Series A Convertible Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock, plus any declared and unpaid dividends on the converted Series A
Convertible Preferred Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of
the shares of Series A Convertible Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Reversion of Series A Convertible Preferred Stock into
Undesignated Preferred Stock. Upon the conversion of any shares of Series A
Convertible Preferred Stock into Common Stock, the shares so converted shall
revert to the status of authorized but undesignated Preferred Stock.
(e) Adjustments to Conversion Price for Diluting Issues.
i. Special Definition. For purposes of this paragraph 4(e),
"Additional Shares of Common" shall mean all shares of Common Stock issued
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(or, pursuant to paragraph 4(e)(iii), deemed to be issued) by the Company
after the Original Issue Date, other than shares of Common Stock issued or
issuable:
(1) upon conversion of shares of Preferred Stock;
(2) to the Corporation's employees, officers, directors
and consultants as may be determined by the
Corporation's Board of Directors from time to time;
(3) as a dividend or distribution on Preferred Stock or
pursuant to any event for which adjustment is made
pursuant to paragraph 4(e)(vi)(1) or (2) hereof; or
(4) upon exercise of any options or warrants to purchase
the Company's Common Stock or Preferred Stock
outstanding as of the Original Issue Date or granted
subsequent to the Original Issue Date pursuant to any
stock plan approved by the Company's Board of
Directors.
ii. No Adjustment of Conversion Price. No adjustment in the
Conversion Price of a particular share of Series A Convertible Preferred Stock
shall be made in respect of the issuance of Additional Shares of Common unless
the consideration per share for an Additional Share of Common issued or deemed
to be issued by the Company is less than the Conversion Price in effect on the
date of, and immediately prior to such issue, for such share of Series A
Convertible Preferred Stock.
iii. Deemed Issue of Additional Shares of Common. In the event
the Company at any time or from time to time after the Original Issue Date
shall issue any options, warrants or convertible securities or shall fix a
record date for the determination of holders of any class of securities
entitled to receive any such options, warrants or convertible securities, then
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such options or
warrants or, in the case of convertible securities and options or warrants
therefor, the conversion or exchange of such convertible securities or
exercise of such options or warrants, shall be deemed to be Additional Shares
of Common issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common shall not be deemed to have been
issued unless the consideration per share (determined pursuant to paragraph
4(e)(v) hereof) of such Additional Shares of Common would be less than the
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common are deemed to be issued:
(1) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of convertible
securities or shares of Common Stock upon the exercise
of such options or warrants or conversion or exchange
of such convertible securities;
(2) if such options, warrants or convertible securities
Page 5
by their terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or
decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it
affects such options or warrants or the rights of
conversion or exchange under such convertible
securities;
(3) no readjustment pursuant to clause (2) above shall
have the effect of increasing the Conversion Price to
an amount which exceeds the lower of (i) the
Conversion Price on the original adjustment date, or
(ii) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common
between the original adjustment date and such
readjustment date;
(4) upon the expiration of any such options or warrants
or any rights of conversion or exchange under such
convertible securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto) and any subsequent
adjustments based thereon shall, upon such expiration,
be recomputed as if:
(a) in the case of convertible securities or options
or warrants for Common Stock, the only Additional
Shares of Common issued were the shares of
Common Stock, if any, actually issued upon the
exercise of such options or warrants or the
conversion or exchange of such convertible
securities and the consideration received
therefor was the consideration actually received
by the Company for the issue of such exercised
options or warrants plus the consideration
actually received by the Company upon such
exercise or for the issue of all such convertible
securities which were actually converted or
exchanged, plus the additional consideration, if
any, actually received by the Company upon such
conversion or exchange, and
(b) in the case of options or warrants for
convertible securities, only the convertible
Page 6
securities, if any, actually issued upon the
exercise thereof were issued at the time of
issue of such options or warrants, and the
consideration received by the Company for the
Additional Shares of Common deemed to have been
then issued was the consideration actually
received by the Company for the issue of such
exercised options or warrants, plus the
consideration deemed to have been received by the
Company (determined pursuant to paragraph
4(e)(v)) upon the issue of the convertible
securities with respect to which such options or
warrants were actually exercised; and
(5) if such record date shall have been fixed and such
options, warrants or convertible securities are not
issued on the date fixed therefor, the adjustment
previously made in the Conversion Price which became
effective on such record date shall be canceled as
of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted
pursuant to this paragraph 4(e)(iii) as of the actual
date of their issuance.
iv. Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common. In the event the Company issues Additional Shares of Common
(including Additional Shares of Common deemed to be issued pursuant to
paragraph 4(e)(iii)) without consideration or for a consideration per share
less than the Conversion Price for the Series A Convertible Preferred Stock
in effect on the date of and immediately prior to such issue, then and in such
event such Conversion Price shall be reduced, concurrently with such issue, to
a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of Additional Shares of Common so issued
would purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of such Additional Shares of Common so issued; and
provided further that, for the purposes of this paragraph 4(e)(iv), all shares
of Common Stock issuable upon exercise, conversion or exchange of outstanding
options, warrants, Preferred Stock and convertible securities, as the case may
be, shall be deemed to be outstanding, and immediately after any Additional
Shares of Common are deemed issued pursuant to paragraph 4(e)(iii), such
Additional Shares of Common shall be deemed to be outstanding.
v. Determination of Consideration. For purposes of this
subsection 4(e), the consideration received by the Company for the issue of
any Additional Shares of Common shall be computed as follows:
(1) Cash and Property. Such consideration shall:
Page 7
(a) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the
Company excluding amounts paid or payable for
accrued interest or accrued dividends;
(b) insofar as it consists of property other than
cash, be computed at the fair value thereof at
the time of such issue, as determined in good
faith by the Board of Directors; and
(c) in the event Additional Shares of Common are
issued together with other shares or securities
or other assets of the Company for consideration
which covers both, be the proportion of such
consideration so received, computed as provided
in clauses (a) and (b) above, as determined in
good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Company for Additional
Shares of Common deemed to have been issued pursuant
to paragraph 4(e)(iii), relating to options, warrants
and convertible securities, shall be determined by
dividing
(a) the total amount, if any, received or receivable
by the Company as consideration for the issue of
such options, warrants or convertible securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of
such consideration) payable to the Company upon
the exercise of such options or warrants or the
conversion or exchange of such convertible
securities, or in the case of options or warrants
for convertible securities, the exercise of such
options for convertible securities and the
conversion or exchange of such convertible
securities by
(b) the maximum number of shares of Common Stock
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein for a subsequent adjustment
of such number) issuable upon the exercise of
such options or warrants or the conversion or
exchange of such convertible securities.
Page 8
vi. Adjustments to Conversion Rate.
(1) Adjustments for Subdivisions, Splits, Combinations,
Consolidations, Reorganizations or Reclassifications of Common Stock. In the
event that after the date of the first issuance of the Series A Convertible
Preferred Stock the outstanding shares of Common Stock shall be (a) subdivided
or split into a greater number of shares of Common Stock; (b) combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock; or (c) changed into a different number of shares of any other
class or classes of stock, whether by capital reorganization, reclassification
or otherwise, the holders of the shares of Series A Convertible Preferred
Stock shall receive upon conversion, the stock and/or securities to which the
holder would have been entitled had the holder held, at the time of said split,
subdivision, combination, consolidation, reorganization or reclassification,
the same number of shares of Common Stock as the number of Series A Convertible
Preferred Stock converted.
(2) Adjustments for Other Dividends and Distributions.
In the event the Company at any time after the date of the first issuance of
the Series A Convertible Preferred Stock makes, or fixes a record date for,
the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in the securities of the Company, then the
holders of the shares of Series A Convertible Preferred Stock shall receive
upon conversion, in addition to the number of shares of Common Stock receivable
thereupon, the stock or securities to which the holder would have been entitled
had the holder held, at the time of said dividend or other distribution, the
same number of shares of Common Stock as the number of Series A Convertible
Preferred Stock converted, and had they thereafter during the period from the
date of such event to and including the date of conversion, retained such stock
or securities receivable by them as aforesaid during such period, subject to
all other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Convertible Preferred
Stock.
vii. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price or Conversion Rate of the
Series A Convertible Preferred Stock pursuant to this Section 4, the Company,
at its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request at any time of any holder of Series A Convertible Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (1) such adjustment and readjustment, (2) the Conversion Price or
Conversion Rate at the time in effect, and (3) 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 a share of Series A Convertible Preferred Stock.
viii. Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Convertible Preferred Stock such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series A Convertible
Page 9
Preferred Stock; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
outstanding shares of the Series A Convertible Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Series A
Convertible Preferred Stock, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
5. Notice of Corporate Action. In the event of:
(a) any taking by the Company of a record of the holders of its
Common Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a dividend payable solely in cash
or shares of Common Stock) or other distribution, or any right or warrant to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right;
(b) any capital reorganization, reclassification or recapitalization
of the Company (other than a subdivision or combination of the outstanding
shares of its Common Stock), any consolidation or merger involving the Company
and any other person (other than a consolidation or merger with a wholly-owned
subsidiary of the Company, provided that the Company is the surviving or the
continuing corporation and no change occurs in the Common Stock), or any
transfer of all or substantially all the assets of the Company to any other
person; or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then, and in each such case, the Company shall cause to be mailed to the
holders of record of the outstanding shares of the Series A Convertible
Preferred Stock, at the address shown on the stock transfer books of the
Company, at least 20 days (or 10 days in case of any event specified in clause
(A) above) prior to the applicable record or effective date hereinafter
specified, a notice stating (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and the amount and character of such dividend, distribution or right or (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding up is to take place and the time, if any such time is to be fixed, as
of which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding up. The failure to give
any notice required by this Section 8, or any defect therein, shall not affect
the legality or validity of any such action requiring such notice.
6. Covenants. In addition to any other rights provided by law, the
Company shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares
of the Series A Convertible Preferred Stock:
Page 10
(a) amend or repeal any provision of, or add any provision to, the
Company's Certificate of Incorporation if such action would materially and
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, the Series A Convertible
Preferred Stock authorized hereby;
(b) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to any such
preference or priority of the Series A Convertible Preferred Stock;
(c) reclassify any shares of Common Stock into shares having any
preference or priority as to dividends or assets superior to any such
preference or priority of the Series A Convertible Preferred Stock; or
(d) increase the number of authorized shares of Series A
Convertible Preferred Stock, or
(e) reissue any shares acquired by the Company.
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IN WITNESS WHEREOF, said Socket Communications, Inc. has caused this
Amended Certificate of Designation of Preferences and Rights of the Series A
Convertible Preferred Stock to be duly executed by its President and Chief
Executive Officer and attested to by its Secretary this 2nd day of
October, 1996.
/s/ Martin W. Levetin
------------------------
Martin W. Levetin
Chief Executive Officer
ATTEST:
/s/ David W. Dunlap
- ----------------------
David W. Dunlap
Secretary