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EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
INTELLIGENT INFORMATION INCORPORATED
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INTELLIGENT INFORMATION INCORPORATED, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"DGCL"), DOES HEREBY CERTIFY:
1. The name of the corporation is INTELLIGENT INFORMATION INCORPORATED
(the "Corporation").
2. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on June 28, 1991.
3. The Restated Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on January 20, 1995.
4. The Certificate of Designations, Powers, Preferences and Rights of
Series A Convertible Preferred Stock of the Corporation was filed with the
Secretary of State of the State of Delaware on August 13, 1996.
5. The Certificate of Designations, Powers, Preferences and Rights of
Series B Convertible Preferred Stock of the Corporation was filed with the
Secretary of State of the State of Delaware on August 30, 1996.
6. The Certificate of Amendment to the Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
June 11, 1997.
7. The Certificate of Amendment to Certificate of Designations, Powers,
Preferences and Rights of Series B Convertible Preferred Stock of the
Corporation was filed with the Secretary of State of the State of Delaware on
January 27, 1998.
8. The Certificate of Designations, Powers, Preferences and Rights of
Series C Convertible Preferred Stock of the Corporation was filed with the
Secretary of State of the State of Delaware on January 27, 1998.
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9. The Amended Certificate of Designations, Powers, Preferences and
Rights of Series C Convertible Preferred Stock of the Corporation was filed with
the Secretary of State of the State of Delaware on August 7, 1998.
10. The Certificate of Designations, Powers, Preferences and Rights of
Series D Convertible Preferred Stock of the Corporation was filed with the
Secretary of State of the State of Delaware on August 7, 1998.
11. The Certificate of Amendment to Restated Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on February 11, 1999.
12. The Certificate of Designations, Powers, Preferences and Rights of
Series E Convertible Preferred Stock of the Corporation was filed with the
Secretary of State of the State of Delaware on February 11, 1999.
13. The Amendment to Certificate of Designations, Powers, Preferences
and Rights of Series B Convertible Preferred Stock of the Corporation was filed
with the Secretary of State of the State of Delaware on February 11, 1999.
14. The Amendment to Certificate of Designations, Powers, Preferences
and Rights of Series C Convertible Preferred Stock of the Corporation was filed
with the Secretary of State of the State of Delaware on February 11, 1999.
15. The Amendment to Certificate of Designations, Powers, Preferences
and Rights of Series D Convertible Preferred Stock of the Corporation was filed
with the Secretary of State of the State of Delaware on February 11, 1999.
16. Pursuant to Sections 242 and 245 of the DGCL, this Restated
Certificate of Incorporation of the Corporation restates in its entirety the
Certificate of Incorporation, as in effect, as follows:
FIRST. NAME. The name of the corporation is INTELLIGENT INFORMATION
INCORPORATED.
SECOND. ADDRESS; REGISTERED AGENT. The address of the registered office of
the Corporation in the State of Delaware is 1013 Centre Road, City of
Wilmington, County of New Castle, State of Delaware 19805, and its registered
agent at such address is The Prentice-Hall Corporation System, Inc.
THIRD. NATURE OF BUSINESS; PURPOSES. The nature of the business and
purposes to be conducted or promoted by the Corporation are to engage in, carry
on and conduct any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
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FOURTH. NUMBER OF SHARES. The total number of shares of stock which the
Corporation shall have authority to issue is 25,000,000 shares of Common Stock,
par value $.01 per share ("Common Stock"), and 20,000 shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock").
A statement of the designations and the powers, preferences and rights of
such classes of stock and the qualifications, limitations or restrictions
thereof, the fixing of which by the Certificate of Incorporation it desired, and
the authority of the Board of Directors to fix, by resolution or resolutions,
the designations and the powers, preferences and rights of such classes of stock
or the qualifications, limitations or restrictions thereof, which are not fixed
hereby, are as follows:
PART I. PROVISIONS APPLICABLE TO ALL SERIES OF PREFERRED STOCK.
(a) Shares of Preferred Stock may be issued from time to time in one or
more series. The preferences and relative participating, optional and other
special rights of each series and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other series
already outstanding; the terms of each series shall be as specified in Part II
of this Article FOURTH and in the resolution or resolutions hereinafter referred
to; and the Board of Directors of the Corporation is hereby expressly granted
authority to fix, by resolution or resolutions adopted prior to the issuance of
any shares of a particular series of Preferred Stock, the designations,
preferences and relative participating, optional and other special rights, or
the qualifications, limitations or restrictions thereof, of such series,
including, but without limiting the generality of the foregoing, the following:
(i) The rate and times at which, and the terms and conditions on
which, dividends on the Preferred Stock of such series shall be paid;
(ii) The right, if any, of holders of Preferred Stock of such series
to convert the same into, or exchange the same for, other classes of stock
of the Corporation and the terms and conditions of such conversion or
exchange;
(iii) The redemption price or prices and the time at which, and the
terms and conditions on which, Preferred Stock of such series may be
redeemed;
(iv) The rights of the holders of Preferred Stock of such series
upon the voluntary or involuntary liquidation, distribution or sale of
assets, dissolution or winding up of the Corporation;
(v) The voting power, if any, of the Preferred Stock of such series;
and
(vi) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such series.
(b) All shares of each series shall be identical in all respects to the
other shares in such series. The rights of the Common Stock of the Corporation
shall be subject to the
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preferences and relative participating, optional and other special rights of the
Preferred Stock of each series as fixed herein and from time to time by the
Board of Directors as aforesaid.
PART II. PROVISIONS APPLICABLE TO SPECIFIC SERIES OF PREFERRED STOCK. The
Preferred Stock shall have the following designations, powers, preferences and
rights:
A. SERIES B CONVERTIBLE PREFERRED STOCK
1. Designation; Number of Shares. The designation of this Series
of Preferred Stock shall be "Series B Convertible Preferred Stock," par value
$.01 per share (the "Series B Preferred Stock"). The total number of shares of
Series B Preferred Stock that may be issued shall be 1,705 shares. The Series B
Preferred Stock shall have an initial stated value of $879.66 per share (the
"Series B Stated Value"). In the event of any stock split, stock dividend,
combination or other recapitalization transaction by which the Corporation
increases or decreases its outstanding Series B Preferred Stock, the Series B
Stated Value per share of Series B Preferred Stock shall be adjusted to reflect
such recapitalization.
2. Voting Rights.
(a) Except to the extent provided in Section 2(b) below and
as expressly provided by the DGCL, the holders of Series B Preferred Stock shall
not be entitled to vote on any matter as to which the holders of the Common
Stock are entitled to vote. Holders of Series B Preferred Stock, however, shall
be entitled to receive notice of every meeting of the stockholders of the
Corporation.
(b) The holders of Series B Preferred Stock shall be
entitled to vote as a class upon the following matters, which matters shall
require the approval of the holders of a majority of the outstanding shares of
Series B Preferred Stock:
(i) the merger, consolidation, division, mandatory
share exchange, recapitalization or liquidation of all or substantially all of
the assets of the Corporation;
(ii) the sale of assets of the Corporation valued at
more than $100,000;
(iii) the amendment of the By-laws or Certificate of
Incorporation of the Corporation;
(iv) the redemption or repurchase by the Corporation of
any securities issued by the Corporation;
(v) a change in powers, preferences or rights of any
class or series of securities of the Corporation that could adversely affect the
Series B Preferred Stock; and
(vi) a distribution on the Corporation's Common Stock
in shares of its capital stock other than Common Stock.
3. [Intentionally Omitted.]
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4. Conversion Rights of Series B Preferred Stock.
(a) Optional Conversion.
(i) A holder of record of any share or shares of
Series B Preferred Stock shall have the right, at any time, at such holder's
option, to convert, without the payment of any additional consideration, each
share of Series B Preferred Stock held by such holder into that number of fully
paid and non-assessable shares of Common Stock as is determined by multiplying 1
by the Series B Conversion Factor (as defined below).
(ii) Upon the optional conversion of any shares of
Series B Preferred Stock, such shares of Series B Preferred Stock shall resume
the status of authorized and unissued shares of the Preferred Stock, par value
$0.01 per share, of the Corporation, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors.
(iii) If a holder of shares of Series B Preferred Stock
desires to exercise the optional conversion right pursuant to this subsection
4(a), such holder shall give written notice to the Corporation of such holder's
election to convert a stated number of shares of Series B Preferred Stock into
shares of Common Stock, at the conversion rate then in effect, which notice
shall be accompanied by the certificate or certificates representing such shares
of Series B Preferred Stock that shall be converted into Common Stock. The
notice shall also contain a statement of the name or names in which the
certificate or certificates for Common Stock shall be issued. If such
certificate or certificates are to be issued to any person or persons other than
the registered holder or holders of such certificate or certificates, or if such
certificate or certificates are registered in the name or names of any person or
persons other than the person or persons signing the notice, the signatures on
the notice must be guaranteed by a participant in the Security Transfer Agents
Medallion Program or the New York Stock Exchange Medallion Signature Guarantee
Program. Promptly after receiving the aforesaid notice and certificate or
certificates representing the Series B Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to such holder of Series B
Preferred Stock, or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock issuable upon conversion
of such Series B Preferred Stock, and the certificates representing shares of
Series B Preferred Stock surrendered for conversion shall be canceled by the
Corporation. If the number of shares represented by the certificate or
certificates surrendered for conversion shall exceed the number of shares to be
converted, the Corporation shall issue and deliver to the person entitled
thereto a certificate representing the balance of any unconverted shares.
(b) Mandatory Conversion.
(i) Upon the first closing of a Qualified Public
Offering (as hereinafter defined) of the Common Stock of the Corporation or a
Qualified Sale of the Corporation (as hereinafter defined), each share of Series
B Preferred Stock held by such holder shall immediately be converted into that
number of fully paid and non-assessable shares of Common Stock as is determined
by multiplying 1 by the Series B Conversion Factor (as defined below).
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(ii) A "Qualified Public Offering" is hereby defined as
a public offering in which the aggregate proceeds (net of any underwriter's
discount) to the Corporation exceed $10,000,000 under which the shares of Common
Stock into which each share of Series B Preferred Stock is to be converted
(after all adjustments in accordance with this Section 4 have been made) are
valued in the aggregate in excess of $l,759.32 and pursuant to which the Common
Stock is listed on a national stock exchange or included for quotation on the
Nasdaq National Market of the Nasdaq Stock Market, Inc.
(iii) A "Qualified Sale" is hereby defined as a merger,
consolidation, division, mandatory share exchange, sale of stock or other
transaction resulting in the stockholders of the Corporation prior to the
transaction owning less than 50% of the voting stock of the Corporation
immediately after the transaction, in which transaction the shares of the
Corporation into which each share of Series B Preferred Stock is to be converted
(after all adjustments in accordance with this Section 4 have been made) are
valued in the aggregate in excess of $l,759.32. A "Qualified Sale" and a
"Qualified Public Offering" sometimes shall be referred to herein collectively
as a "Qualifying Event").
(iv) The Corporation shall give each holder notice of
the occurrence of a Qualifying Event within a reasonable time of the initial
filing of a registration statement with respect to a Qualified Public Offering,
or within a reasonable time after the execution of a definitive agreement with
respect to a Qualified Sale, as the case may be. At any time at or after the
closing of the Qualifying Event, the Corporation shall deliver to each holder of
Series B Preferred Stock such number of shares of Common Stock into which such
holder's shares are then convertible upon surrender by such holder of
certificates representing the shares of Series B Preferred Stock held by such
holder or presentation of an affidavit of loss certificate together with an
indemnity satisfactory to the Corporation.
(c) Series B Conversion Factor. The initial conversion
factor shall be 1, subject to adjustment in accordance with the provisions of
this Section 4(c). The conversion factor in effect from time to time, as
adjusted pursuant to this Section 4(c), is referred to herein as the "Series B
Conversion Factor."
(i) Each adjustment to the Series B Conversion Factor
shall be calculated to the nearest four decimal places.
(ii) In the event that: (A) the Corporation shall, at
any time, pay a dividend in, or make a distribution on its Common Stock or any
other equity securities (other than Series B Preferred Stock) in, shares of
Common Stock; (B) the Corporation shall, at any time, by subdivision of its
shares of outstanding Common Stock, by reclassification, stock split or
otherwise, subdivide its outstanding shares of Common Stock into a greater
number of shares; (C) the Corporation shall, at any time, combine its
outstanding shares of Common Stock into a lesser number of shares, by
reclassification, reverse stock split, or otherwise (for purposes of this
Section 4(c)(ii), the events described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"); then the Series B Conversion Factor then
in effect shall be adjusted to a number determined by multiplying the Series B
Conversion Factor in effect immediately prior to such Capital Transaction by the
following fraction:
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X
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Y
wherein:
X = the number of shares of Common Stock outstanding
immediately after to such Capital Transaction; and
Y = the number of shares of Common Stock outstanding
immediately prior to such Capital Transaction.
(iii) The "Series B Conversion Price" shall be defined
as the fraction obtained by dividing the initial Series B Stated Value per share
by the Series B Conversion Factor in effect at the time such calculation is
made. The Series B Conversion Price shall initially be equal to $879.66 and
shall be subject to adjustment from time to time as hereinafter provided in
subsection (iv) below. Upon each adjustment of the Series B Conversion Price,
the Series B Conversion Factor shall be recalculated so that it is equal to the
fraction obtained by dividing the Series B Stated Value per share by the Series
B Conversion Price that is a result of the calculation set forth in subsection
(iv) below.
(iv) If the Corporation shall after the date hereof
issue or sell any Common Stock (other than Common Stock into which the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock is convertible, or options to purchase shares of Common Stock
granted or to be granted pursuant to any stock option plan adopted by the
Corporation and its stockholders, or Common Stock issuable upon exercise of
warrants delivered in connection with the purchase of Series C Preferred Stock)
without consideration or for a consideration per share less than the Series B
Conversion Price in effect immediately prior to the issuance of such Common
Stock, the Series B Conversion Price in effect immediately prior to such
issuance shall forthwith (except as provided below in Section 3(d)(v)) be
reduced to that price that is equal to the fraction obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Series B Conversion Price in effect immediately prior to such
issuance or sale, plus (y) the consideration, if any, received or deemed to be
received, by the Corporation upon such issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
The provisions of this Section 4(c)(iv) shall not apply under any of the
circumstances for which an adjustment is provided in Section 4(c)(ii) above.
(v) For the purposes of any adjustment of the Series B
Conversion Price pursuant to this Section 4, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock
for cash, the consideration received therefor shall be deemed to be the amount
of cash paid therefor without deduction of any discounts, commissions or other
expenses allowed, paid or incurred
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by the Corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.
(B) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash received therefor shall be deemed to be the fair value thereof as
determined by the Board of Directors of the Corporation without deduction for
any discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(C) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, the issuance of any securities
(other than the Series B Preferred Stock) by their terms convertible into or
exchangeable for Common Stock or the granting of any options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(w) The aggregate number of shares of
Common Stock initially deliverable upon exercise of such options or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were granted or issued, as the case may be, and for a
consideration equal to the consideration, if any (determined in the same manner
provided in subdivisions (A) and (B) above of this Section 4(c)(v) with respect
to cash consideration and consideration other than cash), received by the
Corporation upon the grant or issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(x) The aggregate number of shares of
Common Stock initially deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options were granted, and
for a consideration equal to the consideration received by the Corporation for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the same manner as provided
in subdivision (w) above);
(y) On any change in the number of
shares of Common Stock deliverable upon exercise of such options or rights or
conversion of or exchange for such convertible or exchangeable securities, other
than a change resulting from anti-dilution provisions thereof not more favorable
to the holder thereof than those contained herein, the Series B Conversion Price
shall forthwith be readjusted to such Series B Conversion Price as would have
obtained had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities not covered prior to
such change been made upon the basis of such changed terms; and
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(z) On the expiration of such options
or rights, the termination of such right to convert or exchange or the
expiration of the options or rights related to such convertible or exchangeable
securities, the Series B Conversion Price shall forthwith be readjusted to such
Series B Conversion Price as would have obtained had the readjustment been made
upon the issuance of such options. rights, securities or options or rights
related to such securities for only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(d) Notice of Change in Series B Conversion Factor. Whenever
the Series B Conversion Factor is adjusted as provided in Section 4(c), the
Corporation shall forthwith compute the adjusted Series B Conversion Factor in
accordance with this Section 4 and prepare a certificate signed by the President
or any Vice President and the Secretary, the Treasurer, any Assistant Secretary
or Assistant Treasurer of the Corporation setting forth the adjusted Series B
Conversion Factor, the method of calculation thereof in reasonable detail and
the facts requiring such adjustment and upon which such adjustment is based,
which certificate shall be conclusive, final and binding evidence of the
correctness of the adjustment, and shall mail a notice stating that the Series B
Conversion Factor has been adjusted, the facts requiring such adjustment and
upon which such adjustment is based and setting forth the adjusted Series B
Conversion Factor, to the holders of record of the outstanding shares of the
Series B Preferred Stock at or prior to the time the Corporation mails an
interim statement if any, to its stockholders covering the fiscal quarter period
during which the facts requiring such adjustment occurred, but in any event
within 45 days of the end of such fiscal quarter period.
(e) No Fractional Shares. Notwithstanding anything herein to
the contrary, no fractional shares of Common Stock shall be issued to any holder
of Series B Preferred Stock on conversion of such holder's Series B Preferred
Stock. With respect to any fraction of a share of Common Stock called for upon
any conversion after completion of the calculation of the aggregate number of
shares of Common Stock to be issued to such holder, the Corporation shall pay to
such holder an amount in cash equal to any fractional share to which such holder
would be entitled, multiplied by the current market value of a share, as
determined by the Board of Directors of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon conversion of shares of Series B Preferred Stock
as herein provided, such number of shares of Common Stock as shall be issuable
from time to time upon the conversion of all of the shares of Series B Preferred
Stock at the time issued and outstanding.
5. Redemption at the Option of Holder.
(a) Each holder of Series B Preferred Stock shall have the
right, beginning the date such holder receives the Corporation's audited
financial statements for the year ending December 31, 2003, but in no event
later than June 30, 2004, and continuing thereafter until exercised, to require
such holder's shares of Series B Preferred Stock to be redeemed by the
Corporation, in whole or in part, for cash at their Series B Stated Value,
without any dividends.
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(b) Any holder of record of any share of the Series B
Preferred Stock may exercise such holder's right to receive the payment of cash
due under the provisions of this Section 5 on a date specified by such holder
(the "Series B Redemption Date"), upon no less than ten days' prior written
notice of such date to the Corporation. The amount payable pursuant to Section
5(a) shall be paid in cash or by wire or check on the Series B Redemption Date.
From and after payment on the Series B Redemption Date (A) all rights of the
holders of any shares of Series B Preferred Stock shall cease and terminate; and
(B) the shares of Series B Preferred Stock shall no longer be deemed
outstanding.
6. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding
up (either voluntary or involuntary) of the Corporation (a "Liquidation"), the
holders of the Series B Preferred Stock shall be entitled to receive, before any
distribution or payments are made upon any Common Stock or any other security
subordinate to the Series B Preferred Stock, after payment by the Corporation of
all sums due all creditors, and pari passu with the holders of the Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock and
proportionate to their relative ownership interests in the Corporation, to be
paid out of the assets of the Corporation available for distributions to its
stockholders, the Series B Stated Value per share for each outstanding share of
Series B Preferred Stock. If, upon a Liquidation, the assets available for
distribution to the holders of Series B Preferred Stock shall be insufficient to
pay such holders their liquidation preference in full, then such holders shall
share ratably in the distribution of such assets in proportion to the respective
sums which would otherwise be payable upon such distribution if all sums so
payable to the holders of Series B Preferred Stock were paid in full.
(b) A merger or consolidation involving the Corporation and
a sale, lease or transfer of all or substantially all of the assets of the
Corporation shall, at the option of holders of a majority of the Series B
Preferred Stock, be deemed a Liquidation, unless in connection with such
transaction, each holder of Series B Preferred Stock receives a preferred stock
having terms and conditions which are no less favorable than the terms and
conditions of the Series B Preferred Stock.
7. Notices. Any notice required herein to be given to a holder of
the Series B Preferred Stock shall be deemed to be given if deposited in the
United States mail, first class postage prepaid, and addressed to the holder of
record at such holder's address appearing on the books of the Corporation.
8. Replacement. Upon receipt of evidence of the ownership and the
loss, theft, destruction or mutilation of any certificate evidencing one or more
shares of Series B Preferred Stock, and an agreement of the holder to indemnify
reasonably satisfactory to the Corporation, the Corporation will (at its
expense) execute and deliver in replacement of such certificates a new
certificate representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate.
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B. SERIES C CONVERTIBLE PREFERRED STOCK.
1. Designation; Number of Shares. The designation of said series
shall be Series C Convertible Preferred Stock (the "Series C Preferred Stock").
The number of shares of Series C Preferred Stock shall be 2,194.
2. Dividend Rights. The holders of the outstanding shares of
Series C Preferred Stock shall be entitled to receive, and shall be paid
whenever funds are legally available therefor, dividends in an amount at least
equal to the amount of any dividends declared or to be paid with respect to that
number of shares of Common Stock into which the shares of Series C Preferred
Stock are convertible on the date of such dividend and which shall be paid prior
and in preference to any such dividend as may be declared from time to time with
respect to the Common Stock and pari passu with the holders of the Series D
Preferred Stock and Series E Preferred Stock. No dividends may be paid with
respect to the Common Stock of the Corporation until all dividends declared or
accrued on all outstanding shares of the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock have been set apart and paid.
3. Conversion of Series C Preferred Stock.
(a) Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof into that number of fully paid
and nonassessable shares of Common Stock as is determined by multiplying 500 by
the Series C Conversion Factor (as defined below). Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of the surrender of the shares of Series C Preferred Stock to be converted in
accordance with the procedures described in Sections 3(b) through 3(d) below.
(b) The rights of conversion herein provided shall be
exercised by any holder of shares of Series C Preferred Stock by giving written
notice that such holder elects to convert a stated number of shares of Series C
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares to be so converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holder or holders of the
Series C Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued.
(c) Promptly after the receipt of the written notice
referred to in Section 3(b) and surrender of the certificate or certificates for
the share or shares of the Series C Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to
such holder, registered in such name or names as such holder may direct, subject
to compliance with applicable laws to the extent such designation shall involve
a transfer, a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares of Series C
Preferred Stock. To the extent permitted by law, such conversion shall be deemed
to have been effected as of the close of business on the date on which the
certificate or certificates for such share or shares shall have been surrendered
as
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aforesaid, and at such time the rights of the holders of such share or shares of
Series C Preferred Stock shall cease, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
(d) The initial conversion factor for the Series C Preferred
Stock shall be 1, subject to adjustment in accordance with the provisions of
this Section 3(d). The conversion factor in effect from time to time, as
adjusted pursuant to this Section 3(d), is referred to herein as the "Series C
Conversion Factor."
(i) Each adjustment to the Series C Conversion Factor
shall be calculated to the nearest four decimal places.
(ii) In the event that: (A) the Corporation shall, at
any time, pay a dividend in, or make a distribution on its Common Stock or any
other equity securities (other than Series C Preferred Stock) in, shares of
Common Stock; (B) the Corporation shall, at any time, by subdivision of its
shares of outstanding Common Stock, by reclassification, stock split or
otherwise, subdivide its outstanding shares of Common Stock into a greater
number of shares; (C) the Corporation shall, at any time, combine its
outstanding shares of Common Stock into a lesser number of shares, by
reclassification, reverse stock split, or otherwise (for purposes of this
Section 3(d)(ii), the events described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"); then the Series C Conversion Factor then
in effect shall be adjusted to a number determined by multiplying the Series C
Conversion Factor in effect immediately prior to such Capital Transaction by the
following fraction:
X
---
Y
wherein:
X = the number of shares of Common Stock outstanding immediately
after such Capital Transaction; and
Y = the number of shares of Common Stock outstanding immediately
prior to such Capital Transaction.
(iii) With respect to each share of Series C Preferred
Stock, the "Series C Conversion Price" shall be defined as the fraction obtained
by dividing the purchase price paid to the Corporation (the "Series C Stated
Value") for that share by the Series C Conversion Factor in effect at the time
such calculation is made. Upon each adjustment of the Series C Conversion Price
pursuant to subsection (iv) below, the Series C Conversion Factor for each share
of Series C Preferred Stock shall be recalculated so that it is equal to the
fraction obtained by dividing the Series C Stated Value for that share by the
Series C Conversion Price that is a result of the calculation set forth in
subsection (iv) below.
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13
(iv) If the Corporation shall after the date hereof
issue or sell any Common Stock (other than Common Stock into which the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock is convertible, or options to purchase shares of Common Stock
granted or to be granted pursuant to any stock option plan adopted by the
Corporation and its stockholders, or Common Stock issuable upon exercise of
warrants delivered in connection with the purchase of Series C Preferred Stock),
without consideration or for a consideration per share less than the Series C
Conversion Price in effect immediately prior to the issuance of such Common
Stock, the Series C Conversion Price in effect immediately prior to such
issuance shall forthwith (except as provided below in Section 3(d)(v)) be
reduced to that price that is equal to the fraction obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Series C Conversion Price in effect immediately prior to such
issuance or sale, plus (y) the consideration, if any, received or deemed to be
received, by the Corporation upon such issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
The provisions of this Section 3(d)(iv) shall not apply under any of the
circumstances for which an adjustment is provided in subsection (ii) above.
(v) For the purposes of any adjustment of the Series C
Conversion Price pursuant to this Section 3, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock
for cash, the consideration received therefor shall be deemed to be the amount
of cash paid therefor without deduction of any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash received therefor shall be deemed to be the fair value thereof as
determined by the Board of Directors of the Corporation without deduction for
any discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(C) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, the issuance of any securities
(other than the Series C Preferred Stock) by their terms convertible into or
exchangeable for Common Stock or the granting of any options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(w) The aggregate number of shares of
Common Stock initially deliverable upon exercise of such options or rights to
subscribe for Common
- 13 -
14
Stock shall be deemed to have been issued at the time such options or rights
were granted or issued, as the case may be, and for a consideration equal to the
consideration, if any (determined in the same manner provided in subdivisions
(A) and (B) above of this Section 3(d)(v) with respect to cash consideration and
consideration other than cash), received by the Corporation upon the grant or
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(x) The aggregate number of shares of
Common Stock initially deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options were granted, and
for a consideration equal to the consideration received by the Corporation for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the same manner as provided
in subdivision (w) above);
(y) On any change in the number of
shares of Common Stock deliverable upon exercise of such options or rights or
conversion of or exchange for such convertible or exchangeable securities, other
than a change resulting from anti-dilution provisions thereof not more favorable
to the holder thereof than those contained herein, the Series C Conversion Price
shall forthwith be readjusted to such Series C Conversion Price as would have
obtained had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities not covered prior to
such change been made upon the basis of such changed terms; and
(z) On the expiration of such options
or rights, the termination of such right to convert or exchange or the
expiration of the options or rights related to such convertible or exchangeable
securities, the Series C Conversion Price shall forthwith be readjusted to such
Series C Conversion Price as would have obtained had the readjustment been made
upon the issuance of such options, rights, securities or options or rights
related to such securities for only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(e) Whenever the Series C Conversion Factor is adjusted as
provided in Section 3(d), the Corporation shall forthwith compute the adjusted
Series C Conversion Factor in accordance with this Section 3 and prepare a
certificate signed by the President or any Vice President and the Secretary, the
Treasurer, any Assistant Secretary or Assistant Treasurer of the Corporation
setting forth the adjusted Series C Conversion Factor, the method of calculation
thereof in reasonable detail and the facts requiring such adjustment and upon
which such
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15
adjustment is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment, and shall mail a notice stating
that the Series C Conversion Factor has been adjusted, the facts requiring such
adjustment and upon which such adjustment is based setting forth the adjusted
Series C Conversion Factor, to the holders of record of the outstanding shares
of the Series C Preferred Stock at or prior to the time the Corporation mails an
interim statement, if any, to its stockholders covering the fiscal quarter
period during which the facts requiring such adjustment occurred, but in any
event within 45 days of the end of such fiscal quarter period.
(f) Notwithstanding anything herein to the contrary, no
fractional shares of Common Stock shall be issued to any holder of Series C
Preferred Stock on conversion of such holder's Series C Preferred Stock. With
respect to any fraction of a share of Common Stock called for upon any
conversion after completion of the calculation of the aggregate number of shares
of Common Stock to be issued to such holder, the Corporation shall pay to such
holder an amount in cash equal to any fractional share to which such holder
would be entitled, multiplied by the current market value of a share, as
determined by the Board of Directors of the Corporation.
(g) The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely for issuance
upon conversion of shares of Series C Preferred Stock as herein provided, such
number of shares of Common Stock as shall be issuable from time to time upon the
conversion of all of the shares of Series C Preferred Stock at the time issued
and outstanding.
4. Liquidation Rights. In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of shall be entitled
to receive, before any distribution or payments are made upon the Corporation (a
"Liquidation"), the holders of the Series C Preferred Stock any Common Stock or
any other security subordinate to the Series C Preferred Stock, after payment by
the Corporation of all sums due all creditors, and pari passu with the holders
of the Series B Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock and proportionate to their relative ownership interests in the
Corporation, to be paid out of the assets of the Corporation available for
distribution to its stockholders, an amount equal to the Series C Stated Value
for each outstanding share of Series C Preferred Stock. If, upon a Liquidation,
the assets available for distribution to the holders of Series C Preferred Stock
shall be insufficient to pay such holders their liquidation preference in full,
then such holders shall share ratably in the distribution of such assets in
proportion to the respective sums which would otherwise be payable upon such
distribution if all sums so payable to the holders of Series C Preferred Stock
were paid in full.
5. Voting Rights. Except to the extent otherwise expressly
provided by the DGCL, the holders of shares of Series C Preferred Stock shall
not have any right to vote on any matter submitted to the shareholders of the
Corporation for a vote.
6. Pre-emptive Purchase Rights. In the event of any offering of
shares of Common Stock or other securities of the Corporation convertible into
or exercisable for Common Stock other than pursuant to an underwritten public
offering (excluding (i) issuances of shares of Common Stock pursuant to
conversion of the shares of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock, (ii) shares issuable
pursuant to warrants outstanding on the date hereof or options granted under the
Corporation's
- 15 -
16
1995 Incentive Stock Plan or (iii) other securities outstanding as of the date
hereof), the Corporation shall send written notice thereof to the holders of
Series C Preferred Stock not less than forty-five (45) days prior to such public
or private offering, which notice shall set forth all material terms of the
proposed transaction, including, without limitation, the manner of sale and the
per share sale price or the amount and type of other consideration to be
received by the Corporation. In the event that the Corporation offers shares or
other securities where the value of such shares or other securities is based
upon a valuation of the Corporation that is equal to or greater than $47.5
million, then the holders of Series E Preferred Stock shall have the first
right, by sending irrevocable written notice thereof to the Corporation within
twenty (20) days after receipt of the Corporation's notice, to purchase up to
Ten Million Dollars ($10,000,000) of such shares or other securities being
offered by the Corporation at the same price offered to the public or in the
private offering (or, if the sale is not for cash, at the fair market value of
the property or other consideration received by the Corporation (as determined
by an independent third party appraiser selected by a majority vote of the
shares held by the holders of the Series D Preferred Stock, Series B Preferred
Stock and Series E Preferred Stock)), of which up to Two Million Dollars
($2,000,000) may be allocated and transferred, in the sole discretion of the
holders of the Series E Preferred Stock, to Banque Paribas or its affiliates,
and the holders of Series C Preferred Stock shall have the right, by sending
irrevocable written notice thereof to the Company within thirty (30) days after
receipt of the Company's notice, to purchase their pro rata portion of any
remaining shares or other securities in the offering on the same basis as the
holders of Series E Preferred Stock. In the event that the Corporation offers
shares or other securities where the value of such shares or other securities is
based upon a valuation of the Corporation that is less than $47.5 million, then
the holders of Series C Preferred Stock shall have the right, by sending
irrevocable written notice thereof to the Corporation within twenty (20) days
after receipt of the Corporation's notice, to purchase at the same price sold to
the public or in the private offering (or, if the sale is not for cash, at the
fair market value of the property or other consideration received by the
Corporation (as determined by an independent third party appraiser selected by a
majority vote of the shares held by the holders of the Series B Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock)), such number of shares
of Common Stock or other securities as is necessary to maintain such holder's
respective percentage ownership of Common Stock on a fully diluted basis, as it
existed immediately prior to such offering. A closing for the purchase of Common
Stock or other securities pursuant to this Section 6 shall occur on the later of
(i) the date on which such public or private offering occurs and (ii) such later
date as may be agreed to by the holders of Series C Preferred Stock who have
exercised their rights hereunder and the Corporation, at a time and place
specified by such holders in a notice provided to the Corporation at least ten
(10) days prior to such closing. In connection with such closing, the
Corporation and such holders shall provide such customary closing certificates
and opinions as such holders or the Corporation, as appropriate, shall
reasonably request.
7. Status of Converted or Redeemed Stock. In case any shares of
Series C Preferred Stock shall be converted pursuant to the terms hereof, the
shares so converted shall resume the status of authorized but unissued shares of
Preferred Stock and shall no longer be designated as Series C Preferred Stock.
- 16 -
17
C. SERIES D CONVERTIBLE PREFERRED STOCK.
1. Designation; Number of Shares. The designation of this Series
of Preferred Stock shall be "Series D Convertible The total number of shares of
Series D Preferred Stock that may be issued shall Preferred Stock," par value
$0.01 per share (the "Series D Preferred Stock"). be 843 shares. The Series D
Preferred Stock shall have an initial stated value of $1,187.00 per share (the
"Series D Stated Value"). In the event of any stock split, stock dividend,
combination or other recapitalization transaction by which the Corporation
increases or decreases its outstanding Series D Preferred Stock, the Series D
Stated Value per share of Series D Preferred Stock shall be adjusted to reflect
such recapitalization.
2. Voting Rights.
(a) The holder of each share of Series D Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series D Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled to notice of
any shareholders' meeting in accordance with the By-laws of this corporation,
and shall be entitled to vote, together with holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series D Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
(b) The holders of Series D Preferred Stock shall also be
entitled to vote as a class upon the following matters, which matters shall
require the approval of the holders of a majority of the outstanding shares of
Series D Preferred Stock:
(i) the merger, consolidation, division, mandatory
share exchange, recapitalization, liquidation or sale of all or substantially
all of the assets of the Corporation;
(ii) the amendment of the By-laws or Certificate of
Incorporation of the Corporation in a way that adversely affects the rights,
preferences or privileges of the holders of the Series D Preferred Stock, or the
rights and protections accorded to the directors of the Corporation;
(iii) the payment or making of any dividends or
distributions on or redemptions of any equity securities (except with respect to
the redemption of any equity interests held by Intelligent Investment Partners,
Inc. and its assigns, in accordance with that certain Term Sheet dated May 28,
1998), provided, however, the Corporation may redeem equity securities from
departed or terminated employees;
(iv) the incurrence of funded indebtedness, capitalized
lease obligations or guarantees of third party debt, in each case involving an
amount in excess of $1,000,000;
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18
(v) the engagement in any transaction which involves
dealings between the Company and insiders and affiliates (including the
authorization or issuance of stock options); and
(vi) the issuance of an equity security senior to or
pari passu in liquidation preference with the Series D Preferred Stock.
3. Dividends.
(a) The holders of record of shares of the Series D
Preferred Stock shall be entitled to receive, when and if declared out of funds
legally available therefor, an annual, cumulative cash dividend (the "Series D
Preferred Dividend"), from the date of the issuance of the Series D Preferred
Stock, at the annual rate of 10% of the Series D Stated Value per share of
Series D Preferred Stock. The Series D Preferred Dividend shall accrue and
accumulate (without compounding) beginning upon issuance of the Series D
Preferred Stock and shall cease to accrue on and after the date of the earlier
of (i) the conversion or redemption of such shares, or (ii) the Sale (as
hereinafter defined) of the Corporation or a Public Offering (as hereinafter
defined). If a Sale or Public Offering occurs in either case where the value of
the Corporation is equal to or greater than $110 Million, all accrued Series D
Preferred Dividends shall be forfeited by the holders of the Series D Preferred
Stock.
(b) Except as set forth in Section 3(a) above, unless
earlier paid, any and all Series D Preferred Dividends that have accrued shall
be payable in full at the beginning of the Put Option Period (as hereinafter
defined) or upon an earlier Sale or Public Offering in either case where the
value of the Corporation is less than $110 Million.
(c) If dividends are declared and paid on the Corporation's
Common Stock, then the Series D Preferred Stock shall receive dividends pari
passu with the holders of the Series C Convertible Preferred Stock and Series E
Convertible Preferred Stock on the number of shares of Common Stock into which
the Series D Preferred Stock would be converted on the day such Common Stock
dividends are declared.
(d) A "Sale" shall mean (i) the merger, consolidation,
division, mandatory share exchange, sale of stock or other transaction resulting
in the stockholders of the Corporation prior to the transaction owning less than
50% of the voting stock of the Corporation after the transaction or (ii) a sale
of all or substantially all of the assets of the Corporation. A "Public
Offering" shall mean an underwritten public offering pursuant to an effective
Registration Statement under the Securities Act of 1933, as amended, covering
the offer and sale by the Corporation of its Common Stock (by such a
registration statement or statements being declared effective by the Securities
and Exchange Commission and such Securities being registered under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (regardless
of whether the Corporation is subject to the filing requirements of Section
15(d) of the Exchange Act).
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19
4. Conversion Rights of Series D Preferred Stock.
(a) Optional Conversion.
(i) A holder of record of any share or shares of
Series D Preferred Stock shall have the right, at any time, at such holder's
option, to convert, without the payment of any additional consideration, each
share of Series D Preferred Stock held by such holder into that number of fully
paid and non-assessable shares of Common Stock as is determined by multiplying 1
by the Series D Conversion Factor (as defined below).
(ii) Upon the optional conversion of any shares of
Series D Preferred Stock, such shares of Series D Preferred Stock shall resume
the status of authorized and unissued shares of the Series D Preferred Stock,
par value $0.01 per share, of the Corporation, without designation as to series
until such shares are once more designated as part of a particular series by the
Board of Directors.
(iii) if a holder of shares of Series D Preferred Stock
desires to exercise the optional conversion right pursuant to this subsection
4(a), such holder shall give written notice to the Corporation of such holder's
election to convert a stated number of shares of Series D Preferred Stock into
shares of Common Stock, at the conversion rate then in effect, which shall be
accompanied by the certificate or certificates representing such shares of
Series D Preferred Stock that shall be converted into Common Stock. The notice
shall also contain a statement of the name or names in which the certificate or
certificates for Common Stock shall be issued. If such certificate or
certificates are to be issued to any person or persons other than the registered
holder or holders of such certificate or certificates, or if such certificate or
certificates are registered in the name or names of any person or persons other
than the person or persons signing the notice, the signatures on the notice must
be guaranteed by a participant in the Security Transfer Agents Medallion Program
or the New York Stock Exchange Medallion Signature Guarantee Program. Promptly
after receiving the aforesaid notice and certificate or certificates
representing the Series D Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to such holder of Series D Preferred Stock,
or to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Common Stock issuable upon conversion of such Series D
Preferred Stock, and the certificates representing shares of Series D Preferred
Stock surrendered for conversion shall be canceled by the Corporation. If the
number of shares represented by the certificate or certificates surrendered for
conversion shall exceed the number of shares to be converted, the Corporation
shall issue and deliver to the person entitled thereto a certificate
representing the balance of any unconverted shares.
(b) Mandatory Conversion.
(i) Immediately prior to the first closing of a Qualified
Public Offering (as defined below) of the Common Stock of the Corporation, each
share of Series D Preferred Stock held by such holder shall immediately be
converted into that number of fully paid and non-assessable shares of Common
Stock as is determined by multiplying 1 by the Series D Conversion Factor (as
defined below).
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(ii) A "Qualified Public Offering" is hereby defined as a
Public Offering in which the pre-money valuation of the Corporation is no less
than $82.5 Million and the aggregate proceeds (net of any underwriter's
discount) to the Corporation exceed $20 Million.
(iii) The Corporation shall give each holder notice of the
occurrence of a Qualified Public Offering within a reasonable time of the
initial filing of a registration statement. At any time at or after the closing
of the Qualified Public Offering, the Corporation shall deliver to each holder
of Series D Preferred Stock such number of shares of Common Stock into which
such holder's shares are then convertible upon surrender by such holder of
certificates representing the shares of Series D Preferred Stock held by such
holder or presentation of an affidavit of loss certificate together with an
indemnity satisfactory to the Corporation.
(c) Series D Conversion Factor. The initial conversion
factor for the Series D Preferred Stock shall be 500, subject to adjustment in
accordance with the provisions of this Section 4(c). The conversion factor in
effect from time to time, as adjusted to this Section 4(c), is referred to
herein as the "Series D Conversion Factor".
(i) Each adjustment to the Series D Conversion Factor
shall be calculated to the nearest four decimal places.
(ii) In the event that: (A) the Corporation shall, at
any time, pay a dividend in, or make a distribution on its Common Stock or any
other equity securities in, shares of Common Stock; (B) the Corporation shall,
at any time, by subdivision of its shares of outstanding Common Stock, by
reclassification, stock split or otherwise, subdivide its outstanding shares of
Common Stock into a greater number of shares; (C) the Corporation shall, at any
time, combine its outstanding shares of Common Stock into a lesser number of
shares, by reclassification, reverse stock split or otherwise (for purposes of
this Section 4(c)(ii), the events described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"), then the Series D Conversion Factor then
in effect shall be adjusted to a number determined by multiplying the Series D
Conversion Factor in effect immediately prior to such Capital Transaction by the
following fraction:
X
---
Y
wherein:
X = the number of shares of Common Stock outstanding
immediately after such Capital Transaction; and
Y = the number of shares of Common Stock outstanding
immediately prior to such Capital Transaction.
(iii) The "Series D Conversion Price" shall be defined
as the fraction obtained by dividing the initial Series D Stated Value per share
by the Series D Conversion Factor in effect at the time such calculation is
made. The Series D Conversion Price
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21
shall initially be equal to $2.374 and shall be subject to adjustment from time
to time as hereinafter provided in subsection (iv) below. Upon each adjustment
of the Series D Conversion Price, the Series D Conversion Factor shall be
recalculated so that it is equal to the fraction obtained by dividing the Series
D Stated Value per share by the Series D Conversion Price that is a result of
the calculation set forth in subsection (iv) below.
(iv) If the Corporation shall after the date hereof
issue or sell any Common Stock (other than Common Stock into which the Seris B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or
the Series E Preferred Stock is convertible or Common Stock issuable upon
exercise of warrants outstanding on the date hereof or options granted or to be
granted to employees or consultants of the Corporation pursuant to any stock
option plan adopted by the Corporation and its stockholders), without
consideration or for a consideration per share less than the Series D Conversion
Price in effect immediately prior to the issuance of such Common Stock, the
Series D Conversion Price in effect immediately prior to such issuance shall
forthwith (except as provided below in Section 4(c)(v)) be reduced to that price
that is equal to the fraction obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Series D Conversion Price in effect immediately prior to such
issuance or sale, plus (y) the consideration, if any, received or deemed to be
received, by the Corporation upon such issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
The provisions of this Section 4(c)(iv) shall not apply under any of the
circumstances for which an adjustment is provided in Section 4(c)(ii) above.
(v) For the purposes of any adjustment of the Series D
Conversion Price pursuant to this Section 4, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock
for cash, the consideration received therefor shall be deemed to be the amount
of cash paid therefor without deduction of any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash received therefor shall be deemed to be the fair value thereof as
determined by the Board of Directors of the Corporation without deduction for
any discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(C) In the case of the issuance of options to
purchase or rights to subscribe for exchangeable for Common Stock or the
granting of any options to purchase or Common Stock, the issuance of any
securities by their terms convertible into or rights to subscribe for such
convertible or exchangeable securities:
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22
(w) The aggregate number of shares of
Common Stock initially deliverable upon exercise of such options or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were granted or issued, as the case may be, and for a
consideration equal to the consideration, if any (determined in the same manner
provided in subdivisions (A) and (B) above of this Section 4(c)(v) with respect
to cash consideration and consideration other than cash), received by the
Corporation upon the grant or issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(x) The aggregate number of shares of
Common Stock initially deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options were granted, and
for a consideration equal to the consideration received by the Corporation for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each cash to be determined in the same manner as provided
in subdivision (w) above);
(y) On any change in the number of
shares of Common Stock deliverable upon exercise of such options or rights or
conversion of or exchange for such convertible or exchangeable securities, other
than a change resulting from anti-dilution provisions thereof not more favorable
to the holder thereof than those contained herein, the Series D Conversion Price
shall forthwith be readjusted to such Series D Conversion Price as would have
been obtained had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities not covered prior to
such change been made upon the basis of such changed terms; and
(z) On the expiration of such options
or rights, the termination of such right to convert or exchange or the
expiration of the options or rights related to such convertible or exchangeable
securities, the Series D Conversion Price shall forthwith be readjusted to such
Series D Conversion Price as would have obtained had the readjustment been made
upon the issuance of such options, rights, securities or options or rights
related to such securities for only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(d) Notice of Change in Series D Conversion Factor. Whenever
the Series D Conversion Factor is adjusted as Series D Conversion Factor in
accordance with this Section 4 and prepare a provided in Section 4(c), the
Corporation shall forthwith compute the adjusted certificate signed by the
President or Chief Executive Officer and the Secretary, the Treasurer, any
Assistant Secretary or Assistant Treasurer of the Corporation setting forth the
adjusted Series D Conversion Factor, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment, and shall
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23
mail a notice stating that the Series D Conversion Factor has been adjusted, the
facts requiring such adjustment and upon which such adjustment is based and
setting forth the adjusted Series D Conversion Factor, to the holders of record
of the outstanding shares of the Series D Preferred Stock at or prior to the
time the Corporation mails an interim statement, if any, to its stockholders
covering the fiscal quarter period during which the facts requiring such
adjustment occurred, but in any event within 45 days of the end of such fiscal
quarter period.
(e) No Fractional Shares. Notwithstanding anything herein to
the contrary, no fractional shares of Common Stock shall be issued to any holder
of Series D Preferred Stock on conversion of such holder's Series D Preferred
Stock. With respect to any fraction of a share of Common Stock called for upon
any conversion after completion of the calculation of the aggregate number of
shares of Common Stock to be issued to such holder, the Corporation shall pay to
such holder an amount in cash equal to any fractional share to which such holder
would be entitled, multiplied by the current market value of a share, as
determined by the Board of Directors of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon conversion of shares of Series D Preferred Stock
as herein provided, such number of shares of Common Stock as shall be issuable
from time to time upon the conversion of all of the shares of Series D Preferred
Stock at the time issued and outstanding.
5. Redemption at the Option of Holder. Each holder of Series D
Preferred Stock shall have the right beginning the date such holder's receipt of
the Corporation's audited financial statements for the year ending December 31,
2003, but in no event later than June 30, 2004 (such date constituting the
beginning of the Put Option Period), to require such holder's shares of Series D
Preferred Stock to be redeemed by the Corporation, in whole or in part, in
accordance with the terms and subject to the conditions of that certain Put
Option Agreement dated as of August 11, 1998, as amended, between the
Corporation and the holders of the Series D Preferred Stock and the other
parties thereto.
6. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding
up (either voluntary or involuntary) of the Corporation (a "Liquidation"), the
holders of the Series D Preferred Stock shall be entitled to receive, before any
distribution or payments are made upon any Common Stock or any other security
subordinate to the Series D Preferred Stock, after payment by the Corporation of
all sums due all creditors, and pari passu with the holders of the Series B
Preferred Stock, the Series C Preferred Stock and the Series E Preferred Stock
and proportionate to their relative ownership interests in the Corporation, to
be paid out of the assets of the Corporation available for distributions to its
stockholders, at the stockholders option, the Series D Stated Value per share
for each outstanding share of Series D Preferred Stock together with any accrued
but unpaid Series D Preferred Dividends or, at the Series D Preferred
stockholders' option, the consideration such holders would receive if their
Series D Preferred Stock were converted into Common Stock, provided such
consideration is paid pari passu with other holders of Common Stock. If upon
Liquidation, the assets available for distribution to the holders of Series D
Preferred Stock shall be insufficient to pay such holders their liquidation
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24
preference in full, then such holders shall share ratably in the distribution of
such assets in proportion to the respective sums which would otherwise be
payable upon such distribution if all sums so payable to the holders of Series D
Preferred Stock were paid in full.
(b) A recapitalization, merger or consolidation involving
the Corporation, or a sale, lease or transfer of all or substantially all of the
assets of the Corporation shall, at the option of the holders of a majority of
the Series D Preferred Stock, be deemed a Liquidation.
(c) In case the Corporation shall consolidate with or merge
into any other entity and shall not be the continuing or surviving corporation
in such consolidation or merger and the holders of the Series D Preferred Stock
do not receive either cash or stock that is immediately tradable in a liquid
public market (subject to reasonable pooling restrictions and lockup
restrictions not in excess of 90 days) then, and in each such case, proper
provision shall be made so that each share of Series D Preferred Stock then
outstanding shall be converted into, or exchanged for, one share of preferred
stock of the acquiring corporation entitling the holder thereof to all of the
rights, powers, privileges and preferences with respect to the acquiring
corporation to which the holder of a share of Series D Preferred Stock is
entitled with respect to the Corporation, and being subject with respect to the
acquiring corporation to the qualifications, limitations and restrictions to
which a share of Series D Preferred Stock is subject with respect to the
Corporation.
7. Notices. Any notice required herein to be given to a holder of
the Series D Preferred Stock shall be deemed to be given if deposited in the
United States mail, first class postage prepaid, and addressed to the holder of
record at such holder's address appearing on the books of the Corporation.
8. Replacement. Upon receipt of evidence of the ownership and the
loss, theft, destruction or mutilation of any certificate evidencing one or more
shares of Series D Preferred Stock, and an agreement of the holder to indemnify
reasonably satisfactory to the Corporation, the Corporation will (at its
expense) execute and deliver in replacement of such certificate a new
certificate representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate.
D. SERIES E CONVERTIBLE PREFERRED STOCK.
1. Designation; Number of Shares. The designation of this Series
of Preferred Stock shall be "Series E Convertible Preferred Stock," par value
$0.01 per share (the "Series E Preferred Stock"). The total number of shares of
Series E Preferred Stock that may be issued shall be 9,643.2 shares. The Series
E Preferred Stock shall have an initial stated value of $1,555.50 per share (the
"Series E Stated Value"). In the event of any stock split, stock dividend,
combination or other recapitalization transaction by which the Corporation
increases or decreases its outstanding Series E Preferred Stock, the Series E
Stated Value per share of Series E Preferred Stock shall be adjusted to reflect
such recapitalization.
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2. Voting Rights.
(a) The holder of each share of Series E Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series E Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled to notice of
any shareholders' meeting in accordance with the By-laws of the Corporation, and
shall be entitled to vote, together with the holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series E Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
(b) The holders of Series E Preferred Stock shall also be
entitled to vote as a class upon the following matters, which matters shall
require the approval of the holders of a majority of the outstanding shares of
Series E Preferred Stock:
(i) the merger, consolidation, division, mandatory
share exchange, recapitalization, liquidation or sale of all or substantially
all of the assets of the Corporation;
(ii) the amendment of the By-laws or the Amended and
Restated Certificate of Incorporation of the Corporation in a way that adversely
affects the rights, preferences or privileges of the holders of the Series E
Preferred Stock or the rights and protections accorded to the directors of the
Corporation;
(iii) the payment or making of any dividends or
distributions on or redemptions of any equity securities, provided, however, the
Corporation may redeem equity securities from departed or terminated employees
and in accordance with the rights of any other holder of Preferred Stock of the
Corporation;
(iv) the incurrence of funded indebtedness, capitalized
lease obligations or guarantees of third party debt, in each case involving an
amount in excess of One Million Dollars ($1,000,000);
(v) the engagement in any transaction which involves
dealings between the Corporation and insiders and affiliates (including the
authorization or issuance of stock options); and
(vi) the issuance of an equity security senior to or
pari passu with respect to voting rights, dividends, conversion rights or
liquidation preference with the Series E Preferred Stock.
3. Dividends.
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(a) The holders of record of shares of the Series E
Preferred Stock shall be entitled to receive, when and if dividend (the "Series
E Preferred Dividend"), from the date of the issuance of declared out of funds
legally available therefor, an annual, cumulative cash the Series E Preferred
Stock in the case of the first issuance thereof and from the date which is
twelve (12) months after the date of the issuance of any subsequent Series E
Preferred Stock in the case of such subsequent issuance, at the annual rate of
10% of the Series E Stated Value per share of Series E Preferred Stock. The
Series E Preferred Dividend shall accrue and accumulate (without compounding)
beginning on the dates specified in the preceding sentence and shall cease to
accrue on and after the date of the earlier of (i) the conversion or redemption
of such shares or (ii) the Sale (as hereinafter defined) of the Corporation or a
Public Offering (as hereinafter defined). If a Sale or Public Offering occurs in
either case where the value of the Corporation is equal to or greater than One
Hundred Fifty Two Million Dollars ($152,000,000), all accrued Series E Preferred
Dividends shall be forfeited by the holders of the Series E Preferred Stock.
(b) Except as set forth in Section 3(a) above, unless
earlier paid, any and all Series E Preferred Dividends that have accrued shall
be payable in full at the beginning of the Put Option Period (as hereinafter
defined) or upon an earlier Sale or Public Offering in either case where the
value of the Corporation is less than One Hundred Fifty Two Million Dollars
($152,000,000).
(c) If dividends are declared and paid on the Corporation's
Common Stock, then the Series E Preferred Stock shall receive dividends pari
passu with the holders of the Series C Preferred Stock and Series D Preferred
Stock on the number of shares of Common Stock into which the Series E Preferred
Stock would be converted on the day such Common Stock dividends are declared.
(d) A "Sale" shall mean (i) the merger, consolidation,
division, mandatory share exchange, sale of stock or other transaction resulting
in the stockholders of the Corporation prior to the transaction owning less than
50% of the voting stock of the Corporation after the transaction or (ii) a sale
of all or substantially all of the assets of the Corporation. A "Public
Offering" shall mean an underwritten public offering pursuant to an effective
Registration Statement under the Securities Act of 1933, as amended, covering
the offer and sale by the Corporation of its Common Stock (by such a
registration statement or statements being declared effective by the Securities
and Exchange Commission and such Securities being registered under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (regardless
of whether the Corporation is subject to the filing requirements of Section
15(d) of the Exchange Act).
4. Conversion Rights of Series E Preferred Stock.
(a) Optional Conversion.
(i) A holder of record of any share or shares of
Series E Preferred Stock shall have the right, at any time, at such holder's
option, to convert, without the payment of any additional consideration, each
share of Series E Preferred Stock held by such
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27
holder into that number of fully paid and non-assessable shares of Common Stock
as is determined by multiplying 1 by the Series E Conversion Factor (as defined
below)
(ii) Upon the optional conversion of any shares of
Series E Preferred Stock, such shares of Series E Preferred Stock shall resume
the status of authorized and unissued shares of the Preferred Stock, par value
$0.01 per share, of the Corporation, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors.
(iii) If a holder of shares of Series E Preferred Stock
desires to exercise the optional conversion right pursuant to this subsection
4(a), such holder shall give written notice to the Corporation of such holder's
election to convert a stated number of shares of Series E Preferred Stock into
shares of Common Stock, at the conversion rate then in effect, which shall be
accompanied by the certificate or certificates representing such shares of
Series E Preferred Stock that shall be converted into Common Stock. The notice
shall also contain a statement of the name or names in which the certificate or
certificates for Common Stock shall be issued. If such certificate or
certificates are to be issued to any person or persons other than the registered
holder or holders of such certificate or certificates, or if such certificate or
certificates are registered in the name or names of any person or persons other
than the person or persons signing the notice, the signatures on the notice must
be guaranteed by a participant in the Security Transfer Agents Medallion Program
or the New York Stock Exchange Medallion Signature Guarantee Program. Promptly
after receiving the aforesaid notice and certificate or certificates
representing the Series E Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to such holder of Series E Preferred Stock,
or to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Common Stock issuable upon conversion of such Series E
Preferred Stock, and the certificates representing shares of Series E Preferred
Stock surrendered for conversion shall be canceled by the Corporation. If the
number of shares represented by the certificate or certificates surrendered for
conversion shall exceed the number of shares to be converted, the Corporation
shall issue and deliver to the person entitled thereto a certificate
representing the balance of any unconverted shares.
(b) Mandatory Conversion.
(i) Immediately prior to the first closing of a
Qualified Public Offering (as hereinafter defined) of the Common Stock of the
Corporation, each share of Series E Preferred Stock held by such holder shall
immediately be converted into that number of fully paid and non-assessable
shares of Common Stock as is determined by multiplying 1 by the Series E
Conversion Factor (as defined below).
(ii) A "Qualified Public Offering" is hereby defined as
a Public Offering in which the pre-money valuation of the Corporation is no less
than One Hundred Twenty-Nine Million Dollars ($129,000,000) and the aggregate
proceeds (net of any underwriter's discount) to the Corporation exceed Twenty
Million Dollars ($20,000,000).
(iii) The Corporation shall give each holder notice of
the occurrence of a Qualified Public Offering within a reasonable time of the
initial filing of a registration statement. At any time at or after the closing
of the Qualified Public Offering, the
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Corporation shall deliver to each holder of Series E Preferred Stock such number
of shares of Common Stock into which such holder's shares are then convertible
upon surrender by such holder of certificates representing the shares of Series
E Preferred Stock held by such holder or presentation of an affidavit of loss
certificate together with an indemnity satisfactory to the Corporation.
(c) Series E Conversion Factor. The initial conversion
factor for the Series E Preferred Stock shall be 500, subject to adjustment in
accordance with the provisions of this Section 4(c). The conversion factor in
effect from time to time, as adjusted to this Section 4(c), is referred to
herein as the " Series E Conversion Factor".
(i) Each adjustment to the Series E Conversion Factor
shall be calculated to the nearest four decimal places.
(ii) In the event that: (A) the Corporation shall, at
any time, pay a dividend in, or make a distribution on its Common Stock or any
other equity securities in, shares of Common Stock; (B) the Corporation shall,
at any time, by subdivision of its shares of outstanding Common Stock, by
reclassification, stock split or otherwise, subdivide its outstanding shares of
Common Stock into a greater number of shares; (C) the Corporation shall, at any
time, combine its outstanding shares of Common Stock into a lesser number of
shares, by reclassification, reverse stock split or otherwise (for purposes of
this Section 4(c)(ii), the event described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"), then the Series E Conversion Factor then
in effect shall be adjusted to a number determined by multiplying the Series E
Conversion Factor in effect immediately prior to such Capital Transaction by the
following fraction:
X
---
Y
wherein:
X = the number of shares of Common Stock outstanding
immediately after such Capital Transaction; and
Y = the number of shares of Common Stock outstanding
immediately prior to such Capital Transaction.
(iii) The " Series E Conversion Price" shall be defined
as the fraction obtained by dividing the initial Series E Stated Value per Share
by the Series E Conversion Factor in effect at the time such calculation is
made. The Series E Conversion Price shall initially be equal to $3.111 and shall
be subject to adjustment from time to time as hereinafter provided in subsection
(iv) below. Upon each adjustment of the Series E Conversion Price, the Series E
Conversion Factor shall be recalculated so that it is equal to the fraction
obtained by dividing the Series E Stated Value per share by the Series E
Conversion Price that is a result of the calculation set forth in subsection
(iv) below.
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(iv) If the Corporation shall after the date hereof
issue or sell any Common Stock (other than Common Stock into which the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or
the Series E Preferred Stock is convertible or Common Stock issuable upon
exercise of warrants outstanding on the date hereof or options granted or to be
granted to employees or consultants of the Corporation pursuant to any stock
option plan adopted by the Corporation and its stockholders), without
consideration or for a consideration per share less than the Series E Conversion
Price in effect immediately prior to the issuance of such Common Stock, the
Series E Conversion Price in effect immediately prior to such issuance shall
forthwith (except as provided below in Section 4(c)(v)) be reduced to that price
that is equal to the fraction obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Series E Conversion Price in effect immediately prior to such
issuance or sale, plus (y) the consideration, if any, received or deemed to be
received, by the Corporation upon such issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
The provisions of this Section 4(c)(iv) shall not apply under any of the
circumstances for which an adjustment is provided in Section 4(c)(ii) above.
(v) For the purposes of any adjustment of the Series E
Conversion Price pursuant to this Section 4, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock
for cash, the consideration received therefor shall be deemed to be the amount
of cash paid therefor without deduction of any discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash received therefor shall be deemed to be the fair value thereof as
determined by the Board of Directors of the Corporation without deduction for
any discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(C) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, the issuance of any securities
by their terms convertible into or exchangeable for Common Stock or the granting
of any options to purchase or rights to subscribe for such convertible or
exchangeable securities:
(w) The aggregate number of shares of
Common Stock initially deliverable upon exercise of such options or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were granted or issued, as the case may be, and for a
consideration equal to the consideration, if any (determined in the same manner
provided in subdivisions (A) and (B) above of this Section 4(c)(v) with
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respect to cash consideration and consideration other than cash), received by
the Corporation upon the grant or issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(x) The aggregate number of shares of
Common Stock initially deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options were granted, and
for a consideration equal to the consideration received by the Corporation for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each cash to be determined in the same manner as provided
in subdivision (w) above);
(y) On any change in the number of
shares of Common Stock deliverable upon exercise of such options or rights or
conversion of or exchange for such convertible or exchangeable securities, other
than a change resulting from anti-dilution provisions thereof not more favorable
to the holder thereof than those contained herein, the Series E Conversion Price
shall forthwith be readjusted to such Series E Conversion Price as would have
been obtained had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities not covered prior to
such change been made upon the basis of such changed terms; and
(z) On the expiration of such options
or rights, the termination of such right to convert or exchange or the
expiration of the options or rights related to such convertible or exchangeable
securities, the Series E Conversion Price shall forthwith be readjusted to such
Series E Conversion Price as would have been obtained had the readjustment been
made upon the issuance of such options, rights, securities or options or rights
related to such securities for only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(d) Notice of Change in Series E Conversion Factor.
Whenever the Series E Conversion Factor is adjusted as provided in Section 4(c),
the Corporation shall forthwith compute the adjusted Series E Conversion Factor
in accordance with this Section 4 and prepare a certificate signed by the
President or Chief Executive Officer and the Secretary, the Treasurer, any
Assistant Secretary or Assistant Treasurer of the Corporation setting forth the
adjusted Series E Conversion Factor, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment, and shall mail a notice stating
that the Series E Conversion Factor has been adjusted, the facts requiring such
adjustment and upon which such adjustment is based and setting forth the
adjusted Series E Conversion Factor, to the holders of record of the outstanding
shares of the Series E Preferred Stock at or prior to the time the Corporation
mails an interim statement, if any, to its
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stockholders covering the fiscal quarter period during which the facts requiring
such adjustment occurred, but in any event within forty-five (45) days of the
end of such fiscal quarter period.
(e) No Fractional Shares. Notwithstanding anything herein to
the contrary, no fractional shares of Common such holder's Series E Preferred
Stock. With respect to any fraction of a share Stock shall be issued to any
holder of Series E Preferred Stock on conversion of Common Stock called for
upon any conversion after completion of the calculation of the aggregate number
of shares of Common Stock to be issued to such holder, the Corporation shall pay
to such holder an amount in cash equal to any fractional share to which such
holder would be entitled, multiplied by the current market value of a share, as
determined by the Board of Directors of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon conversion of shares of Series E Preferred Stock
as herein provided, such number of shares of Common Stock as shall be issuable
from time to time upon the conversion of all of the shares of Series E Preferred
Stock at the time issued and outstanding.
5. Redemption at the Option of Holder. Each holder of Series E
Preferred Stock shall have the right at any time after such holder's receipt of
the Corporation's audited financial statements for the year ending December 31,
2003, but in no event later than June 30, 2004 (such date constituting the
beginning of the Put Option Period), to require such holder's shares of Series E
Preferred Stock to be redeemed by the Corporation, in whole or in part, in
accordance with the terms and subject to the conditions of that certain Put
Option Agreement dated February 12, 1999 between the Company and the holders of
the Series E Preferred Stock and the other parties thereto.
6. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding
up (either voluntary or involuntary) of the Corporation (a "Liquidation"), the
holders of the Series E Preferred Stock shall be entitled to receive, before any
distribution or payments are made upon any Common Stock or any other security
subordinate to the Series E Preferred Stock, after payment by the Corporation of
all sums due all creditors, and pari passu with the holders of the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock
and proportionate to their relative ownership interests in the Corporation, to
be paid out of the assets of the Corporation available for distributions to its
stockholders, an amount equal to the Series E Stated Value per share for each
outstanding share of Series E Preferred Stock plus accrued and unpaid dividends.
If, upon Liquidation, the assets available for distribution to the holders of
Series E Preferred Stock shall be insufficient to pay such holders their
liquidation preference in full, then such holders shall share ratably in the
distribution of such assets in proportion to the respective sums which would
otherwise be payable upon such distribution if all sums so payable to the
holders of Series E Preferred Stock were paid in full.
(b) A recapitalization, merger or consolidation involving
the Corporation, or a sale, lease or transfer of all or substantially all of the
assets of the Corporation
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32
shall, at the option of the holders of a majority of the Series E Preferred
Stock, be deemed a Liquidation.
7. Notices. Any notice required herein to be given to a holder of
the Series E Preferred Stock shall be deemed to be given if deposited in the
United States mail, first class postage prepaid, and addressed to the holder of
record at such holder's address appearing on the books of the Corporation.
8. Replacement. Upon receipt of evidence of the ownership and the
loss, theft, destruction or mutilation of any certificate evidencing one or more
shares of Series E Preferred Stock, and an agreement of the holder to indemnify
reasonably satisfactory to the Corporation, the Corporation will (at its
expense) execute and deliver in replacement of such certificate a new
certificate representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate.
PART III. PROVISIONS APPLICABLE TO COMMON STOCK.
(a) After the requirements with respect to preferential
dividends upon the Preferred Stock of all classes and series thereof shall have
been met and after the Corporation shall have complied with all requirements, if
any, with respect to the setting aside of sums as a sinking fund or redemption
or purchase account for the benefit of any class or series thereof, then, and
not otherwise, the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of Directors.
(b) After distribution in full of the preferential amounts
to be distributed to the holders of all classes and series thereof of Preferred
Stock then outstanding in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the Corporation
available for distribution to its stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(c) Each holder of Common Stock shall have one vote in
respect of each share of such stock held by him.
FIFTH. ELECTION OF DIRECTORS. Members of the Board of
Directors may be elected either by written ballot or by voice vote.
SIXTH. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. In
furtherance and not in limitation of the powers conferred by the General
Corporation Law of the State of Delaware, the Board of Directors may from time
to time make, alter or repeal the by-laws of the Corporation.
SEVENTH. COMPROMISE OR ARRANGEMENT. Whenever a compromise or
arrangement is proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or
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receivers appointed for this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
EIGHTH. LIABILITY OF DIRECTORS. No director of the Corporation
shall have any personal liability to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director of the Corporation,
except (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit.
NINTH. BOOKS OF CORPORATION. The books of the Corporation may
be kept (subject to any provision contained in the General Corporation Law of
the State of Delaware) outside the State of Delaware at such place as may be
designated from time to time by the Board of Directors or the by-laws of the
Corporation.
17. The foregoing Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 245 of the DGCL.
IN WITNESS WHEREOF, INTELLIGENT INFORMATION INCORPORATED has
caused this Restated Certificate of Incorporation to be executed in its name by
its Chief Executive Officer this 16th day of February, 1999.
INTELLIGENT INFORMATION INCORPORATED
By: /s/ Robert M. Unnold
------------------------------
Robert M. Unnold,
Chief Executive Officer
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