SURVIVING CORPORATION - ARTICLES OF INCORPORATION
1. Total Authorized Shares.
(a) Common Stock. The aggregate number of shares which the Corporation is
authorized to issue is 50,000,000 common shares (collectively, the "Common
Stock"), of which:
(i) 47,166,666 common shares shall be designated Class A Common Stock
having a par value of $0.01 per share (the "Class A Common Stock"); and
(ii) 2,833,334 common shares shall be designated Class B Common Stock
having a par value of $0.01 per share ("Class B Common Stock"). The Class A
Common Stock and the Class B Common Stock are collectively referred to herein as
the "Common Stock".
(b) Rights and Preferences. Each share of Class A Common Stock and each share
of Class B Common Stock shall, except as otherwise expressly provided in this
Article, be identical in all respects and shall have equal rights, powers and
privileges.
(c) Issuance. The authorized shares of Class B Common Stock will be issued
only (i) pursuant to the Agreement and Plan of Merger, dated February 3, 2000
(the "Merger Agreement"), among Centillion Data Systems, Inc. and the
Corporation, (ii) in a subdivision (by stock split or otherwise) of outstanding
shares of Class B Common Stock, or (iii) as a stock dividend or share
distribution (with respect to such shares of Class B Common Stock).
2. Voting Rights.
(a) General. Except with respect to the election of directors of the
Corporation occurring prior to July 1, 2003 which shall be governed by the
provisions of Section 2(b) below, and except as may otherwise be required by
laws of the State of Delaware, the holders of shares of Class A Common Stock and
the holders of shares of Class B Common Stock shall be entitled to one (1) vote
for each share of such stock held, shall vote as one class with respect to all
matters to be voted on by shareholders of the Corporation, and no separate vote
or consent of the holders of shares of Class A Common Stock, the holders of
share of Class B Common Stock (or the holders of shares of any other class or
series of stock of Corporation) shall be required for the approval of any such
matter.
(b) Board of Directors. The Board of Directors shall be divided into three
classes, which shall be as nearly equal in number as possible. Directors of each
class shall serve for a term of three years, and until their successors shall
have been elected and qualified. Upon the adoption of these Articles and the
filing of the Certificate of Merger with the Delaware Secretary of State, the
existing Board of Directors shall be reclassified. Each Director of the
reclassified Board of Directors shall be placed in one of the three classes, and
the initial term of office of each such class shall (except in the event of his
earlier resignation or removal) expire at the annual shareholders' taking place
in the year set forth opposite such Director's name (or, if later, upon the
election and qualification of his successor), as follows:
Name Class Term Expires
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Harold Garrison I 2001
Salah Osseiran
Michael H. Leeds II 2002
Tom Grein
Graham Bevington III 2003
Rupert Armitage
Anthony P. Johns
(i) For any meeting of Shareholders held prior to July 1, 2003, the
holders of Class B Common Stock, voting together as a single class, shall have
the right to elect the Class I Directors;
(ii) For any meeting of Shareholders held prior to July 1, 2003, the
holders of Class B Common Stock, voting together as a single class, shall have
the right to elect the Class II Directors;
(iii) For any meeting of Shareholders held prior to July 1, 2003, any
vacancies with respect to Class I or Class II Directors shall be filled by the
remaining Class I and Class II Directors voting as a group, or with respect to a
Class III Director by the remaining Class III Directors; and
(iv) If, prior to July 1, 2003, there is any increase or decrease in the
number of Directors, such Directors shall be assigned as Class I, II or II so
that the holders of Class B Common Stock, voting togther as a single class,
maintain a majority of the Board of Directors.
3. Conversion of Class B Common Stock.
The Class B Common Stock shall be subject to conversion as follows:
(a) Conversion at the Corporation's Election. During the Initial Conversion
Period the shares of Class B Common Stock shall be subject, in the sole
discretion of the Board of Directors, to conversion into a number of shares of
Class A Common Stock equal in value, on a per share equivalent basis, to the
value of Centillion LLC (excluding the value attributed to U.S. Patent No.
5287270, U.S. Patent No. 5325290 and the Related Patents) with the number of
shares into which the Class B Common Stock will be converted to be determined as
follows: Class A Common Stock valued at the lower of (i) $1.50 per share or 88%
of then Current Market Value of Class A Common Stock (for the first 1 million
shares of Class A Common Stock so issued less the number of share issued at the
Effective Time pursuant to Section 1.5(b)(i)(D) of the Merger Agreement or (B)
88% of the then Current Market Value of the Class A Common Stock (for any
additional shares).
(b) Conversion at the election of the holders of Class B Common Stock. During
the Interim Conversion Period, the shares of Class B Common Stock, at the
election of the holders of more than 50% of the outstanding shares of such Class
B Common Stock, shall be converted into shares of Class A Common Stock (i) in
the first 31 days of the Interim Conversion Period in the manner set forth in
Section 3(a) above and (ii) during the remainder of the Interim Conversion
Period, the Class A Common Stock shall be valued at 88% of the then Current
Market Value of the Class A Common Stock.
(c) Mandatory Conversion. Upon the occurrence of a Covered Disposition, all
of the issued and outstanding shares of Class B Common Stock shall be converted
into shares of Class A Common Stock equal in value, on a per share equivalent
basis, to the value of Centillion LLC, with the conversion based on 100% of the
then current market value of the Class A Common Stock to be issued upon such
conversion; provided, however, that in no event shall a mandatory conversion
under this Section 3(c) occur earlier than the fourth anniversary of the
Effective Time under the Merger Agreement.
(d) Valuation Procedures. In the event an appraisal is required under these
Articles of Incorporation with respect to the market value of Centillion LLC or
the Class B Common Stock, the Class III Directors will appoint a qualified
appraiser to determine such value. If the appraiser so appointed by the Class
III Directors is not acceptable to the Class I and Class II Directors, then the
Class I and Class II Directors shall appoint a qualified appraiser to determine
such value. If the appraiser appointed by the Class I and Class II Directors is
not acceptable to the Class III Directors, the two appraisers so selected shall
appoint a third appraiser who shall perform such appraisal and the results
thereof shall be binding upon all of the parties, with the cost of the appraisal
to be paid by the Corporation.
(e) Definitions. For purposes of this Section 3,
(i) The term "Initial Conversion Period" shall mean the period beginning
on the Effective Time under the Merger Agreement and ending on the earlier to
occur of (x) the second anniversary of such date, or (y) the date on which those
persons who were the original recipients of the Merger Consideration cease to
own, collectively fifty-one percent (51%) or more of the issued and outstanding
shares of Common Stock of the Corporation received pursuant to the Merger; and
(ii) The term "Interim Conversion Period" shall mean the three (3) year
period commencing immediately upon the expiration of the Initial Conversion
Period and ending on the third anniversary of such commencement date.
(f) Conversion Procedures. Any such conversion may be effected by
surrendering such holder's certificate or certificates for the stock to be
converted, duly endorsed, at the office of the Corporation or any transfer
agent. If so required by the Corporation, any certificate for shares surrendered
for conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder of such shares or
the duly authorized representative of such holder. Promptly thereafter, the
Corporation shall issue and deliver to such holder or such holder's nominee or
nominees, a certificate or certificates for the number of shares of Class A
Common Stock to which such holder shall be entitled as herein provided. All
conversions are to be effective, and valued, as of the last day of the calendar
quarter in which the election or event giving rise to mandatory conversion
occurs.
4. Dividends; Discrimination Between or Among Classes of Common Shares.
The Board of Directors shall have the sole authority and discretion to
declare and pay dividends on (i) the Class A Common Stock and (iii) the Class B
Common Stock, in equal or unequal amounts (including declaring and paying
dividends on one or more class of shares while declaring and paying no
dividends, or a different dividend, on one or more other classes of shares);
provided, however, that whenever a dividend is paid to the holders of the Class
B Common Stock, the Corporation shall also pay to the holders of Class A Common
Stock a dividend per share equal to or greater than the dividend per share paid
to the holders of Class B Common Stock unless a different dividend amount (or no
dividend) has been authorized by a 2/3's majority of the Board of Directors.
5. Liquidation.
In the event of a liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the corporation the holders of the shares of
Class A Common Stock and the holders of the shares of Class B Common Stock shall
share in the aggregate in the funds of the Corporation remaining for
distribution to its common shareholders in the same proportions as (i) the net
assets of Centillion LLC bear to (ii) the net assets of the corporation without
regard to the net assets of Centillion LLC. Neither the consolidation or merger
of the corporation with or into any other corporation or corporations nor the
sale, transfer or lease of all or substantially all of the assets of the
corporation shall itself be deemed to be a liquidation, dissolution or winding
up of the corporation within the meaning of this Paragraph 5 of this Article.
Notwithstanding anything to the contrary herein, the holders of the Class B
Common Stock shall have no rights to the specific assets owned by Centillion LLC
at the time of liquidation, dissolution or winding up of the Corporation.
6. Determinations by the Board of Directors.
Any determinations made by the Board of Directors under any provision in this
Article shall be final and binding on all shareholders of the corporation,
except as may otherwise be required by law. The Corporation shall prepare a
statement of any such determination by the Board of Directors respecting the
fair market value of any properties, assets or securities and shall file such
statement with the Secretary of the corporation. The Board of Directors shall
establish an Executive Committee to be composed of one Class III Director and
two Directors from Class I And Class II selected by each class of Directors. All
decisions of the Corporation or by the Directors required (i) by these Articles,
(ii) by any other Agreement, or (iii) otherwise, with respect to Centillion LLC
shall be made by the Executive Committee.
7. Relationship Between the Centillion Group and the Corporation.
The Directors of the Corporation shall require Centillion LLC to preserve,
maintain and maximize the value of its assets, and any contracts with respect
to, utilization of, or transfer of any of Centillion LLC's assets between and
among Centillion LLC and any other party (including the Corporation and its
other affiliates) shall be pursuant to transactions entered into at arm's-
length.
8. Certain Definitions.
Unless the context otherwise requires, the terms defined in this Section
shall have, for all purposes of this Article, the meanings herein specified:
"Centillion LLC" shall mean the Delaware limited liability company included
in the assets of Centillion Data Systems, Inc. immediately prior to the
Effective Time specified in the Merger Agreement.
"Common Stock Group" shall mean, as of any date, the interest of the
Corporation or any subsidiary in all of the businesses in which the Corporation
or any subsidiary is or has been engaged, directly or indirectly, and the
respective assets and liabilities of the Corporation or any subsidiary, other
than any businesses, assets or liabilities of Centillion LLC.
"Covered Disposition" shall mean: (a) any direct or indirect sale, transfer
or conveyance by the Corporation of fifty percent (50%) or more of either its
equity interest in the LLC or the assets of the LLC; or (b) any grant of any
pledge or other security interest in fifty percent (50%) or more of either the
equity interest of the Corporation in Centillion LLC or the assets of Centillion
LLC; or (c) any of the occurrences described in (a) or (b) which results in the
Corporation's receipt of more than $7,500,000.
"Current Market Value of the Class A Common Stock" shall mean the average of
the daily last reported sale price per share of the Class A Common Stock on the
NASDAQ National Market System (or if such stock is then listed on the New York
Stock Exchange, on such Exchange) during the most recent twenty (20) consecutive
full Business Days before such date,
provided that if there was no reported sale on any such day or days, there shall
be substituted the average of the closing bid and asked quotations on that
Market or Exchange on that day or days, and provided further that, if the Class
A Common Stock is not listed on that Market or Exchange on any such day or days,
there shall be substituted the comparable sale price or average of bid and asked
quotations on the principal national securities exchange on which such Class A
Common Stock is so listed, or if not so listed on any national securities
exchange, the average of the highest bid and the lowest asked quotations in the
over-the-counter market that day or days.
9. Amendments.
(a) Except as provided for in subparagraph (b) below, this Certificate of
Incorporation shall be amended in the manner provided for in the Delaware
General Corporation Law.
(b) Until July 1, 2003, except for amendments as a result of acquisitions
or capital raising, which amendments shall not be governed by this subparagraph
(b), all amendments to this Certificate of Incorporation shall require, prior to
submission to shareholders, the affirmative vote of a majority of the Board of
Directors, which vote must contain the affirmative vote of at least one (1)
Class III Director.