1
Exhibit 3.1
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LEXENT INC.
---------------------------------
Under Sections 228 and 242 of the
General Corporation Law of
the State of Delaware
---------------------------------
It is HEREBY CERTIFIED that:
1. The name of the corporation (hereinafter called the "Corporation") is
Lexent Inc.
2. The amended and restated certificate of incorporation of the Corporation
is hereby amended by striking out the number "4,800,000" appearing in the first
clause of Section 6(c) of Article III thereof and by substituting in lieu of
said number the number "5,800,000."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on February 17, 2000
/s/ Kevin M. O'Kane
---------------------
Kevin M. O'Kane
Chief Operating Officer
2
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "LEXENT INC.", FILED IN THIS OFFICE ON THE TWENTY-SEVENTH DAY OF JANUARY,
A.D. 2000, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[STATE OF DELAWARE
SECRETARY OF STATE SEAL] /s/ Edward J. Freel
----------------------------------------
Edward J. Freel, Secretary of State
2850935 8100 AUTHENTICATION: 0222806
001042197 DATE: 01-28-00
3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/27/2000
001042197 - 2850935
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LEXENT INC.
---------------------------------
Under Sections 228 and 242 of the
General Corporation Law of
the State of Delaware
---------------------------------
It is HEREBY CERTIFIED that:
1. The name of the corporation (hereinafter called the "Corporation") is
Lexent Inc.
2. The amended and restated certificate of incorporation of the
Corporation is hereby amended by (1) striking out Section 5(f) of Article III
thereof and by substituting in lieu of said Section the following new Section:
"(f) Notwithstanding anything contained herein to the contrary, in
determining the Liquidation Amount for the purposes of this Section 5 only,
in the event any Common Stock or any option or other security exercisable
or convertible into, or exchangeable for, Common Stock, or any right to
acquire any such options or other securities (each such share of Common
Stock, option, security or right, an "Incentive Security") is issued,
granted or awarded pursuant to any Corporation incentive compensation plan,
the Liquidation Amount shall be increased (or decreased in accordance with
clause (i) or (ii) hereof, as the case may be) by MULTIPLYING the
Liquidation Amount immediately prior to such issuance, grant or award by
the sum of one plus the quotient of the number of shares of Common Stock
awarded or for which such Incentive Security is (directly or indirectly)
exercisable, convertible or exchangeable, divided by the total amount of
Common Stock on a fully diluted basis (excluding any Common Stock issued
or issuable upon conversion of Series A Preferred Stock) outstanding
immediately prior to such issuance, grant or award; provided that:
4
(i) on any change in the number of shares of Common Stock
deliverable upon the exercise, conversion or exchange of any such
Incentive Security (other than a change resulting from the
antidilution provisions thereof), the Liquidation Amount shall
forthwith be readjusted to such Liquidation Amount as would have
been obtained had the adjustment made upon the issuance of such
Incentive Securities (or such portion thereof as may then be
outstanding) been made upon the basis of such change; and
(ii) on the expiration, forefeiture or termination of any
such Incentive Securities, the Liquidation Amount shall forthwith
be readjusted to such Liquidation Amount as would have been
obtained had the adjustment made upon the issuance of such
Incentive Securities been made upon the basis of the issuance of
only that portion of such Incentive Securities as were actually
exercised or converted into, or exchanged for, shares of Common
Stock prior to such expiration, forfeiture or termination; and
provided further that the provisions of this Section 5(f) are intended
to permit increases to the Liquidation Amount only in respect of
Incentive Securities representing a maximum 2,288,000 shares (as
adjusted equitably for stock dividends, stock splits, combinations,
etc.) of Common Stock and, accordingly, nothing contained herein shall
permit any further increase to the Liquidation Amount."; and
(2) striking out the number "2,288,000" appearing in the first clause of
Section 6(c) of Article III thereof and by substituting in lieu of said
number the number "4,800,000."
4. The amendment of the certificate of incorporation herein certified
has been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on January 20, 2000
/s/ Kevin M. O'Kane
----------------------------------------
Kevin M. O'Kane
Chief Operating Officer
5
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "NATIONAL NETWORK TECHNOLOGIES INC.", CHANGING ITS NAME FROM "NATIONAL
NETWORK TECHNOLOGIES INC." TO "LEXENT INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIRST DAY OF OCTOBER, A.D. 1999, AT 9 O'CLOCK A.M.
[STATE OF DELAWARE SECRETARY OF STATE SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2850935 8100 AUTHENTICATION: 0114894
99151494 DATE: 12-02-99
6
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/21/1999
991447119 - 2850935
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
NATIONAL NETWORK TECHNOLOGIES INC.
---------------------------------
Under Sections 228 and 242 of the
General Corporation Law of
the State of Delaware
---------------------------------
It is HEREBY CERTIFIED that:
1. The name of the corporation (hereinafter called the "Corporation") is
National Network Technologies Inc.
2. The amended and restated certificate of incorporation of the
Corporation is hereby amended by striking out Article I thereof and by
substituting in lieu of said Article the following new Article:
"ARTICLE I
The name of the corporation is Lexent Inc. (the "Corporation")."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on October 21, 1999
/s/ Kevin O'Kane
----------------------------------------
Kevin O'Kane, Secretary
7
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "NATIONAL NETWORK TECHNOLOGIES INC.", FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF AUGUST, A.D. 1998, AT 11 O'CLOCK A.M.
/s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
[STATE OF DELAWARE SECRETARY OF STATE SEAL]
2850935 8100 AUTHENTICATION: 0114893
991514964 DATE: 12-02-99
8
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:00 AM 08/17/1998
981321269 - 2850935
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL NETWORK TECHNOLOGIES INC.
The undersigned, Hugh J. O'Kane, Jr. and Kevin M. O'Kane, being the
President and Secretary, respectively, of NATIONAL NETWORK TECHNOLOGIES INC.
(the "Corporation"), a corporation organized and existing under the laws of the
State of Delaware, on behalf of the Corporation, hereby certify as follows:
FIRST
The Corporation was organized under the name "National Network Services,
Corp." on January 26, 1998. The Corporation thereafter changed its name to
National Network Technologies Inc. The Corporation filed an Amended and
Restated Certificate of Incorporation on July 20, 1998 (the "Amended and
Restated Certificate of Incorporation").
SECOND
Section 5(f) of Article III of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
(a) Notwithstanding anything contained herein to the contrary, in
determining the Liquidation Amount for the purposes of this Section 5 only, in
the event any option, convertible or exchangeable security or contract right
(each, an "Incentive Option") is issued, granted or awarded pursuant to any
Corporation incentive compensation plan, the Liquidation Amount shall be
increased (but in no event decreased) by MULTIPLYING the Liquidation Amount
immediately prior to such issuance by the sum of one plus the quotient of the
number of capital securities for which such Incentive Option is convertible or
exercisable divided by the total amount of Common stock on a fully diluted
basis (excluding any Common Stock issued or issuable upon conversion of Series
A Preferred Stock) outstanding immediately prior to such issuance, grant or
award; provided that:
(i) on any change in the number of shares or exercise price of Common
Stock deliverable upon exercise of any such Incentive Options, other than a
change resulting from the antidilution provisions thereof, the Liquidation
Amount shall forthwith be readjusted to such Liquidation Amount as would have
obtained had the adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or rights related to
such securities not converted prior to such change been made upon the basis of
such change; and
(ii) on the expiration or forfeiture of any such Incentive Options, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such Incentive Options, the Liquidation Amount
shall forthwith be readjusted to such Liquidation Amount as would have been
obtained had the adjustment made upon the issuance of such Incentive Options or
rights related to such securities been made upon the basis of the issuance of
only the number of shares of Common Stock.
9
actually issued upon the exercise of such Incentive Options, upon the
conversion or exchange of such securities, or upon the exercise of the
Incentive Options related to such Incentive Options and subsequent
conversion or exchange thereof.
THIRD
This Amendment to the Amended and Restated Certificate of Incorporation
was duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been signed by the
duly authorized officers of this Corporation this 17th day of August, 1998.
NATIONAL NETWORK TECHNOLOGIES INC.
By: /s/ Hugh O'Kane
------------------------------
Hugh O'Kane
President
Attest:
/s/ Kevin O'Kane
- ----------------------
Kevin O'Kane
Vice President and Secretary
10
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"HUGH O'KANE ELECTRIC CO. INC.", A NEW YORK CORPORATION WITH AND INTO
"NATIONAL NETWORK TECHNOLOGIES INC." UNDER THE NAME OF "NATIONAL NETWORK
TECHNOLOGIES INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE
STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-SECOND DAY OF
JULY, A.D. 1998, AT 1 O'CLOCK P.M.
[STATE OF DELAWARE SECRETARY OF STATE SEAL]
/s/ Edward J. Freel
___________________________________
Edward J. Freel, Secretary of State
2850935 8100M AUTHENTICATION: 0114892
991514964 DATE: 12-02-99
11
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:00 PM 07/22/1998
981284387 - 2850935
CERTIFICATE OF MERGER
of
HUGH O'KANE ELECTRIC CO. INC.
(A NEW YORK CORPORATION)
into
NATIONAL NETWORK TECHNOLOGIES INC.
(A DELAWARE CORPORATION)
____________________________
Under Section 252 of the General Corporation Law
of the State of Delaware
_____________________________
Pursuant to the provisions of Section 252 of the General Corporation Law
of the State of Delaware (the "DGCL"), National Network Technologies Inc., a
Delaware corporation ("NNTI"), into which Hugh O'Kane Electric Co. Inc., a New
York Corporation ("O'Kane"), will merge with NNTI surviving, hereby certifies
as follows:
FIRST: The names of the constituent corporation are Hugh O'Kane Electric
Co. Inc., a New York corporation, and National Network Technologies Inc., a
Delaware corporation.
SECOND: An Agreement and Plan of Merger dated as of June 23, 1998,
between O'Kane and NNTI (referred to herein together as the "Corporations") has
been approved, adopted, certified, executed and acknowledged by each of the
Corporations in accordance with Section 252(c) of the DGCL.
THIRD: The name of the surviving corporation is National Network
Technologies Inc.
FOURTH: The Certificate of Incorporation of NNTI was filed with the
Department of State of the State of Delaware on January 26, 1998 under the name
"National Network Services, Corp." A Certificate of Amendment to the
Certificate of Incorporation of NNTI was filed on January 30, 1998, pursuant to
which NNTI's name was changed to "National Network Technologies Inc." The
Certificate of Incorporation of NNTI was further amended and restated and an
Amended and Restated Certificate of Incorporation was filed on July 20, 1998,
and this shall remain the Certificate of Incorporation for the surviving
corporation.
1
12
FIFTH: The executed Agreement and Plan of Merger is on file at the office
of NNTI located at 88 White Street, New York, New York 10013.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
NNTI, on request and without cost, to any stockholder of either of the
Corporations.
SEVENTH: The authorized capital stock of O'Kane on the date hereof
(immediately prior to the merger effected hereby) consists of 200 shares of
Common Stock, no par value.
IN WITNESS WHEREOF, NNTI has caused this Certificate of Merger to be
executed on its behalf by its officer thereunto duly authorized, and the
undersigned affirms its contents as true under penalty of perjury on July 20,
1998.
NATIONAL NETWORK TECHNOLOGIES INC.
(a Delaware corporation)
By /s/ Kevin O'Kane
______________________________
Kevin O'Kane
Vice President
2
13
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"NATIONAL NETWORK TECHNOLOGIES INC.", FILED IN THIS OFFICE ON THE TWENTIETH DAY
OF JULY, A.D. 1998, AT 1 O'CLOCK P.M.
[STATE OF DELAWARE
SECRETARY OF STATE SEAL] /s/ Edward J. Freel, Secretary of State
---------------------------------------
Edward J. Freel, Secretary of State
2850935 8100 AUTHENTICATION: 0114891
991514964 DATE: 12-02-99
14
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:00 PM 01/20/1998
981280293 - 2850935
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
NATIONAL NETWORK TECHNOLOGIES INC.
The undersigned, Hugh J. O'Kane, Jr. and Kevin M. O'Kane, being the
President and Secretary, respectively, of National Networks Technologies Inc., a
corporation organized and existing under the laws of the State of Delaware, on
behalf of said corporation, hereby certify as follows:
FIRST: The corporation (hereinafter, the "Corporation") was organized under
the name "National Network Services, Corp." on January 26, 1998. The Corporation
thereafter changed its name to National Network Technologies Inc.
SECOND: The Certificate of Incorporation of the Corporation as in effect on
the date hereof is hereby amended to read in its entirety as set forth on
Exhibit A hereto.
THIRD: This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, we have executed this Certificate this 23rd day of
June, 1998.
/s/ Hugh J. O'Kane, Jr.
-----------------------
President
Attest: /s/ Kevin M. O'Kane
-------------------
Secretary
15
EXHIBIT A
ARTICLE I
The name of the corporation is National Network Technologies Inc. (the
"Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE III
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 50,000,000, consisting of (a) 44,461,542
shares of Common Stock, par value $.001 per share (the "Common Stock"), and (b)
5,538,458 shares of Preferred Stock, par value $.001 per share (the ("Preferred
Stock"), consisting of 5,538,458 shares of Series A Convertible Preferred
Stock, par value $.001 per share (the "Series A Preferred Stock").
The designations, powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof in respect of the Series A Preferred Stock and the Common
Stock are as follows:
SERIES A PREFERRED STOCK
1. Dividends.
(a) The holders of Series A Preferred Stock shall be entitled to receive,
out of funds legally available for that purpose, dividends at the rate of 6% of
the Base Amount for each 12-month period (or portion thereof) ending December
31, calculated on the basis of a year of 360 days comprised of twelve 30-day
months. The "Base Amount" shall be $2.07639 per share of Series A Preferred
Stock in respect of which the dividend is being calculated. Dividends on a share
of Series A Preferred Stock shall be cumulative from the Original Issuance Date
of such share, and shall be payable (i) when and if declared, (ii) upon the
conversion of such share into Common Stock, (iii) upon a Liquidation or (iv)
upon the redemption of such share, whichever shall be the first to occur.
Dividends on the Series A Preferred Stock shall be payable in cash, if payable
at a time specified in clause (i), (iii) or (iv), or in shares of Common Stock
(pursuant to the terms of Section 5) if payable at the time specified in clause
(ii) unless the holders of 75% of the Series A Preferred Stock then outstanding
shall then agree with the Corporation in writing that such dividends shall be
paid in each at such time. If the assets of the Corporation shall be
16
insufficient to pay the holders of Series A Preferred Stock in cash the full
accrued and unpaid dividends to which they shall be entitled, at a time when
such dividends are required to be paid in cash, the holders of Series A
Preferred Stock shall share in any such payment of dividends on a pro rata
basis in accordance with the total dividends that each such holder would have
received had there been such sufficient assets. After payment of all dividends
owing to holders of Series A Preferred Stock, such holders shall share ratably
(on an as-converted basis) in any dividends thereafter paid on the Common Stock.
(b) In the event the Corporation shall fail to pay in full all accrued
dividends when due on all shares of Series A Preferred Stock, then the
Corporation shall not thereafter declare or pay or set apart for payment any
dividend or other distribution upon shares of Common Stock, or any other stock
ranking on a parity with or junior to the Series A Preferred Stock as to
dividends, until and unless such accrued but unpaid dividends have been paid in
full.
2. Liquidation.
Upon a Liquidation, after payment or provision for payment of the debts
and other liabilities of the Corporation and all amounts which the holders of
any class of capital stock ranking senior to the Series A Preferred Stock shall
be entitled to receive upon such Liquidation, the proceeds the stockholders
shall be entitled to receive, out of the remaining assets of the Corporation
will be allocated as follows:
(a) if such proceeds exceed $43 million:
(i) first, to the holders of Series A Preferred Stock an amount per
share equal to the Liquidation Amount;
(ii) second, to the holders of Common Stock, $43 million minus the
aggregate Liquidation Amount;
(iii) third, to the holders of Series A Preferred Stock the greater of
(x) an amount sufficient to assure a 20% IRR on the Original Issuance Price of
each share of Series A Preferred Stock held by such holders and (y) such
holders' pro rata portion of the remaining proceeds, which pro rata portion
shall be determined based on the number of shares of Common Stock into which
such holder's shares of Series A Preferred Stock are then convertible pursuant
to Section 5; and
(iv) if the proceeds are divided as set forth in Section
Z(a)(iii)(x), then fourth, to the holders of Common Stock the remaining
proceeds; or
(b) if such proceeds are $43 million or less:
(i) first, to the holders of Series A Preferred Stock, the aggregate
Liquidation Amount; and
(ii) second, to the holders of Common Stock, the remaining proceeds.
If, upon any Liquidation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
Series A Preferred Stock the full
-2-
17
Liquidation Amount to which they shall be entitled, the holders of Series A
Preferred Stock shall share in any distribution of assets in accordance with
such full Liquidation Amount (pro rata in accordance with the total Liquidation
Amount that each such holder would have received had there been such sufficient
assets.)
3. Redemption
(a) Subject to Section 3(d) below, each holder of Series A Preferred Stock
shall have the right to require the Corporation to redeem shares of Series A
Preferred Stock held by such holder pursuant to the terms hereof.
(i) Each holder of Series A Preferred Stock may elect to have its
shares of Series A Preferred Stock redeemed under this Section
3(a) in the following amounts: (x) on or after the fifth
anniversary of the Original Issuance Date, the first 1/3 of the
then outstanding Series A Preferred Stock then held by such
holder, (y) on or after the sixth anniversary of the Original
Issuance Date, the next 1/3 of such Series A Preferred Stock
(calculated on the basis of the number of shares of Series A
Preferred Stock held by such holder on the fifth anniversary of
the Original Issuance Date) and (z) on or after the seventh
anniversary of the Original Issuance Date, the remaining Series A
Preferred Stock. In the event any holder of Series A Preferred
Stock elects to have all or part of its shares of Series A
Preferred Stock redeemed (such amount, a "Redeemable Amount")
pursuant to this Section 3(a)(i) and gives notice as required
below, such holder shall be required to sell to the Corporation
and the Corporation shall be obligated to redeem such Redeemable
Amount in accordance with the terms of this Section 3(a)(i).
(ii) Notwithstanding anything to the contrary contained in clause(i),
if the Board does not actively support a Qualified Public
Offering within 180 days after a request therefor by the holders
of at least 75% of the then outstanding Series A Preferred Stock,
which request is made at a time both (A) after the third
anniversary of the Original Issuance Date and (B) when the market
value of the Corporation, as determined by an independent
appraiser reasonably acceptable to at least 85% of the members of
the Board, exceeds $125 million, each holder of Series A
Preferred Stock shall have the right to require the Corporation
to redeem immediately all shares of its Series A Preferred Stock.
If requested by the holders of at least 75% of the then
outstanding Series A Preferred Stock, the Board shall select a
reputable independent appraiser reasonably acceptable to at least
85% of the members of the Board. If such Board members are not
able to agree upon such appraiser, which shall be an investment
banking firm of national reputation not then engaged by the
Corporation, within ten (10) business days after such request by
the holders of at least 75% of the then outstanding Series A
Preferred Stock, then the appraiser will be selected by an
arbitrator located in the City of New York, New York selected by
the American Arbitration Association (or if such organization
ceases to exist, an arbitrator chosen by a court of competent
jurisdiction.) The arbitrator shall select the investment banking
firm (within ten (10) days after his appointment) from a list,
jointly prepared by the Corporation and the requesting holders,
of not more than six investment banking firms of national
standing in the United States, of which no more than three may be
named by the Corporation and no more than three may be named by
the requesting holders. The arbitrator may consider, within the
ten-day period allotted, arguments from the parties regarding
which investment banking firm to choose, but the selection by the
-3-
18
arbitrator shall be made in its sole discretion from the list of six. The
Board and the requesting holders shall submit to the investment banking
firm their respective determinations of the market value of the
Corporation, and any supporting arguments and other data as they may
desire, within ten (10) days of the appointment of the investment banking
firm, and the investment banking firm, shall as soon as practicable
thereafter, make its own determination of such market value based on the
public sale of the Corporation's securities without regard to any
discounting, including, without limitation, any discount for the fact that
the securities being valued may be held by a minority stockholder of the
Corporation. The determination by such investment banking firm shall be
final and binding upon the parties. The Corporation shall pay the fees and
expenses of the investment banking firm and arbitrators (if any) used to
determine the valuation amount. If required by any such investment banking
firm or arbitrator, the Corporation shall execute a retainer and engagement
letter containing reasonable terms and conditions, including, without
limitation, customary provisions concerning the rights of indemnification
and contribution by the Corporation in favor of such investment banking
firm or arbitrator and its officers, directors, partners, employees, agents
and affiliates.
Each holder electing redemption of its Series A Preferred Stock pursuant to
Section 3(a)(i) or (ii) will provide the Company written notice of such election
at least 30 days prior to the fifth anniversary of the Original Issuance Date or
the forty-third month after the Original Issuance Date, as the case may be, and
the Corporation shall redeem such shares of Series A Preferred Stock at the
offices of the Corporation within 90 days. If the assets of the Corporation
available for redemption of Series A Preferred Stock shall be insufficient to
permit the payment of the full price required to be paid under this Section 3,
then the holders of Series A Preferred Stock shall (in addition to their rights
under Section 3(d) below) share ratably in any such redemption based on the
respective number of shares that such holders own.
(b) The price (the "Redemption Price") at which each share of Series A
Preferred Stock is to be redeemed by the Corporation pursuant to this Section 3
shall be equal to the greater of (i) the Liquidation Amount of such share on the
date of such redemption or (ii) the Fair Market Value of such shares of Series A
Preferred Stock. On and after any date that the Corporation redeems shares of
Series A Preferred stock pursuant to this Section 3, all rights in respect of
the shares of Series A Preferred Stock to be redeemed, except the right to
receive the Redemption Price, shall cease and terminate, and such shares shall
no longer be deemed to be outstanding, whether or not the certificates
representing such shares have been received by the Corporation. The conversion
of any shares of Series A Preferred Stock into Common Stock shall have no effect
on the Redemption Price payable in connection with the redemption of the shares
of Series A Preferred Stock not so converted.
(c) The number of shares of Series A Preferred Stock deemed to be held by
the holders of the Series A Preferred Stock and to be redeemed pursuant to the
terms of this Section 3 shall be adjusted on the same basis that the number of
shares of Common Stock into which such shares of Series A Preferred Stock are
convertible pursuant to the terms of Section 5 hereof is adjusted in accordance
with the provisions of such Section 5; provided, however, that for purposes of
calculating the Liquidation Amount only in connection with determining the
Redemption Price pursuant to clause (i) of Section 3(b) above, the Base Amount
shall be adjusted, as necessary, so that the proportionate aggregate Liquidation
Amount shall be based on the number of shares of Series A Preferred Stock issued
on the Original Issuance Date subject to adjustment pursuant to
-4-
19
stock splits, reverse splits or other recapitalizations of only such shares of
Series A Preferred Stock.
(d) If the Corporation fails to redeem that portion of the Series A
Preferred Stock when due in accordance with clause (x) of Section 3(a)(i), the
entire Redeemable Amount (not theretofore redeemed) shall thereafter accrue
dividends at the rate of 10% per annum. If the Corporation fails to redeem that
portion of the Series A Preferred Stock when due in accordance with clause (y)
of Section 3(a)(i), all Redeemable Series A Preferred Stock shall thereafter
accrue dividends at the rate of 15% per annum. If the Corporation fails to
redeem that portion of the Series A Preferred Stock when due in accordance with
clause (z) of Section 3(a)(i), the entire Redeemable Amount (not theretofore
redeemed) shall thereafter accrue dividends at the rate of 20% per annum.
(e) For the purposes of this Section 3, "Fair Market Value" means, as of
any date of determination, the fair value of each share of Series A Preferred
Stock, determined as provided herein, without regard to any discount, including,
without limitation, any discount for the fact (i) that such share is held by a
minority stockholder of the Corporation, (ii) that there is no market for the
Corporation's equity securities or (iii) that if there were a public market for
such equity securities, such shares would be "restricted" as defined under Rule
144 promulgated under the Securities Act of 1933. At any time that the Fair
Market Value per share of Series A Preferred Stock shall be required to be
determined hereunder, the Board shall make a good faith determination (the
"Board's Determination") of the fair value of each share of Series A Preferred
Stock and provide to the holder with respect to whose shares of Series A
Preferred Stock such determination is being made a written notice thereof, which
notice shall set forth supporting data in respect of such calculation (the
"Determination Notice"). The holder shall have 30 days following his or its
receipt of the Determination Notice within which to deliver to the Corporation a
written notice (the "Objection Notice") of his or its objection, if any, to the
Board's Determination, which Objection Notice shall set forth the holder's good
faith determination (the "Holder's Determination") of the fair market value of
each share of Series A Preferred Stock. The failure by the holder to deliver the
Objection Notice within such 30-day period shall constitute the holder's
acceptance of the Determination Notice. Upon the timely delivery of an Objection
Notice, the Corporation and the Holder shall attempt in good faith to arrive at
an agreement with respect to the Fair Market Value per share of Series A
Preferred Stock, which agreement shall be set forth in writing within 30 days
following delivery of the Objection Notice. If the Corporation and the Holder
are unable to reach an agreement within such 30-day period, the matter shall be
referred for determination to a regionally or nationally recognized investment
banking or valuation firm (the "Valuer") reasonably acceptable to the
Corporation and the holder. The Corporation and the holder will cooperate with
each other in good faith to select such Valuer. The Valuer may select the
Board's Determination or the Holder's Determination as the Fair Market Value per
share of Series A Preferred Stock or may select any other number or value. The
Valuer's selection will be (i) furnished to the Corporation and the holder in
writing and (ii) conclusive and binding upon the Corporation and the holder. The
fees and expenses of the Valuer shall be split equally by the Corporation and
the holder with respect to whose share(s) such determination relates.
(f) Any communication or notice relating to redemption given pursuant to
this Section 3 shall be sent by first-class certified mail, return receipt
requested, postage prepaid, to the holders of record of shares of Series A
Preferred Stock, at their respective addresses as the same shall
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appear on the books of the Corporation, or to the Corporation at the address of
its principal, or registered office, as the case may be. At any time on or
after the Redemption Date, the holders of record of shares of Series A Preferred
Stock being redeemed in accordance with this Section 3 shall be entitled to
receive the Redemption Price upon actual delivery to the Corporation or its
agents of the certificates representing the shares to be redeemed.
4. Voting Rights.
(a) In addition to the rights provided by law or in the Corporation's
By-laws, each share of Series A Preferred Stock shall entitle the holder
thereof to such number of votes as shall equal the number of shares of Common
Stock into which such share of Series A Preferred Stock is then convertible
pursuant to Section 5 at the record date for the determination of shareholders
entitled to vote or, if no record date is established, at the date such vote is
taken. The holders of Series A Preferred Stock shall be entitled to vote on all
matters as to which holders of Common Stock shall be entitled to vote, in the
same manner and with the same effect as such holders of Common stock, voting
together with the holders of Common Stock as one class.
(b) In addition to the other rights specified in this Section 4, until
such time as fewer than one-third of the shares of Series A Preferred Stock
issued and outstanding on the Original Issuance Date are outstanding, the
holders of seventy-five percent of the shares of Series A Preferred Stock form
time to time outstanding, voting separately as one class, shall at all times
have the special and exclusive right to elect three directors to the Board. In
any election of directors by the Series A Preferred Stock pursuant to this
Section 4(b), each holder of Series A Preferred Stock shall be entitled to one
vote for each share of Series A Preferred Stock held. The Corporation shall take
all actions necessary to effectuate the terms and provisions of this Section
4(b). The special and exclusive voting rights of the holders of Series A
Preferred Stock contained in this Section 4(b) may be exercised either at a
special meeting of the holders of Series A Preferred Stock called as provided
below, or at any annual or special meeting of the shareholders of the
Corporation, or by written consent of such holders in lieu of a meeting. The
directors to be elected pursuant to this Section 4(b) shall serve for a term
extending from the date of their election and qualification until their
respective successors have been elected and qualified. If at any time any
directorship to be filled by the holders of Series A Preferred Stock pursuant to
this Section 4(b) has been vacant for a period of 10 days, the Secretary of the
Corporation shall, upon the written request of any holder of Series A Preferred
Stock, call a special meeting of the holders of Series A Preferred Stock for the
purpose of electing a director to fill such vacancy. Such meeting shall be held
at the earliest practicable date, and at such place, as is specified in or
determined in accordance with the By-laws of the Corporation. If such meeting
shall not be called by the Secretary of the Corporation within 10 days after
personal service of such written request on him or her, then any holder of
Series A Preferred Stock may designate in writing one of their members to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
shareholders and shall be held at such place as specified in such notice. Any
holder of Series A Preferred Stock so designated shall have access to the stock
books of the Corporation relating to Series A Preferred Stock for the purpose of
calling a meeting of the stockholders pursuant to these provisions. At any
meeting held for the purpose of electing directors as provided in this Section
4(b), the presence, in person or by proxy, of the holders of record of shares
representing at least seventy-five percent of the voting power of the Series A
Preferred
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Stock then outstanding shall be required to constitute a quorum of the Series A
Preferred Stock for such election. A vacancy in the directorship to be elected
by the holders of Series A Preferred Stock pursuant to this Section 4(b) may be
filled only by vote or written consent in lieu of a meeting of the holders of
at least seventy-five percent of the voting power of the Series A Preferred
Stock.
(c) Until such time as fewer than one-third of the shares of Series A
Preferred Stock issued and outstanding on the Original Issuance Date are
outstanding, the Corporation shall not, without the affirmative consent or
approval of the holders of seventy-five percent of the shares of Series A
Preferred Stock from time to time outstanding:
(i) in any manner authorize, create, designate, issue or sell
any class or series of capital stock (including any shares of treasury
stock) or rights, options, warrants or other securities convertible into or
exercisable or exchangeable for capital stock or any debt security which by
its terms is convertible into or exchangeable for any equity security or
has any other equity feature or any security that is a combination of debt
and equity, which, in each case, as to the payment of dividends,
distribution of assets or redemptions, including, without limitation,
distributions to be made upon a Liquidation, is pari passu with or is
senior to the Series A Preferred Stock or which in any manner adversely
affects the holders of the Series A Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other special
rights, or the qualifications, limitations or restrictions, of the Series A
Preferred Stock;
(iii) reclassify the shares of any class or series of capital
stock into shares of any class or series of capital stock (A) ranking,
either as to payment of dividends, distributions of assets or redemptions,
including, without limitation, distributions to be made upon a Liquidation,
senior to or on a parity with the Series A Preferred Stock, or (B) which in
any manner adversely affects the rights of the holders of the Series A
Preferred Stock in their capacity as such; or
(iv) take any action to cause any amendment, alteration or repeal
of any of the provisions of (A) the Amended and Restated Certificate of
Incorporation or (B) the By-laws of the Corporation, if such amendment,
alteration or repeal would have an adverse effect on the rights of the
holders of the Series A Preferred Stock.
(v) approve or authorize any Liquidation or any recapitalization
or reorganization of the Corporation or a material subsidiary thereof;
(vi) approve or authorize the sale of all or substantially all of
the assets of the Corporation or any material subsidiary thereof;
(vii) approve or authorize any offering (public or otherwise) of
any securities by the Corporation, other than under or in connection with
Board-approved stock-based incentive or compensation plans for the benefit
of directors, officers and/or key employees of the Corporation as permitted
hereby;
(viii) approve or authorize the commencement of any substantial new
business by
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the Corporation or any material subsidiary thereof;
(ix) approve or authorize the payment of any dividend or other
distribution upon shares of capital stock other than the Series A
Preferred Stock;
(x) approve or authorize the payment of any single capital expenditure in
excess of $500,000 during any 12-month period;
(xi) approve or authorize the incurrence of any indebtedness or the
issuance of any guarantee of any obligation of any other person or entity
(other than a subsidiary) if the aggregate amount of the principal amount
of such indebtedness and the principal amount of the indebtedness so
guaranteed shall exceed $3,000,000 (not including, in any case,
indebtedness to redeem capital stock of the Corporation or its
predecessors or otherwise repay loans made to the Corporation by
Stockholders of the Corporation, which obligations are, in each case,
outstanding as of the Original Issuance Date);
(xii) approve or authorize any change to any promissory note of the
Company, its predecessor or any subsidiary issued to any of Denis O'Kane,
Kevin O'Kane or Hugh O'Kane, Jr.; or
(xiii) approve any new stock option or stock issuance plan for the
benefit of employees or consultants of the Corporation or its
subsidiaries, provided that the Board may establish a plan or plans to
provide stock-based compensation and incentives if the aggregate number of
shares of Common Stock available for issuance in respect of awards granted
thereunder does not exceed 2,288,000 in the aggregate.
5. Conversion.
(a) Upon the terms set forth in this Section 5, each holder of each share of
Series A Preferred Stock shall have the right, at such holder's option, at any
time and from time to time, to convert such share into the number of fully paid
and nonassessable shares of Common Stock equal to the quotient obtained by
dividing (A) the Liquidation Amount (which for the purposes of this Section 5
shall be subject to adjustment pursuant to Section 5(f) below) by (B) the
Conversion Price (as defined below), as last adjusted and then in effect, by
surrender of the certificate representing such share. The conversion price per
share at which shares of Common Stock shall be issuable upon conversion of
shares of Series A Preferred Stock (the "Conversion Price") shall be the Base
Amount as adjusted pursuant to Section 5(e) below. The holder of any shares of
Series A Preferred Stock may exercise the conversion right pursuant to this
Section 5(a) by delivering to the Corporation the certificate for the shares to
be converted, duly endorsed or assigned in blank or to the Corporation (if
required by it), accompanied by written notice stating that the holder elects to
convert such shares and stating the name or names (with address) in which the
certificate or certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected on the date when such delivery
is made or upon the consummation of a Qualified Public Offering as provided
below, if applicable (the "Conversion Date").
(b) Upon the consummation of a Qualified Public Offering and upon the terms
set forth in this Section 5, each share of Series A Preferred Stock shall
automatically be converted to that
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number of fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing (A) the Liquidation Amount (which for the
purposes of this Section 5 shall be subject to adjustment pursuant to Section
5(f) below) by (B) the Conversion Price, as last adjusted and then in effect.
(c) As promptly as practicable after the conversion of any shares of
Series A Preferred Stock into Common Stock under Section 5(a) or 5(b) above,
the Corporation shall issue and deliver to or upon the written order of such
holder, to the place designated by such holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is entitled,
and a cash amount in respect of any fractional interest in a share of Common
Stock as provided in Section 5(d) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed
to have become a stockholder of record on the Conversion Date unless the
transfer books of the Corporation are closed on that date, in which event such
person shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open, but the Conversion Price
shall be that in effect on the Conversion Date, and the rights of the holder of
the shares of Series A Preferred Stock so converted shall cease on the
Conversion Date. Upon conversion of only a portion of the number of shares
covered by a certificate representing shares of Series A Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or upon
the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Series A Preferred Stock representing the unconverted
portion of the certificate so surrendered.
(d) No fractional shares of Common Stock or scrip shall be issued upon
conversion of shares of Series A Preferred Stock. The number of full shares of
Common Stock issuable upon conversion of Series A Preferred Stock shall be
computed on the basis of the aggregate number of shares of such Series A
Preferred Stock to be converted. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any such shares, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the product of (i) the price of one share of Common Stock
as determined in good faith by the Board and (ii) such fractional interest. The
holders of fractional interests shall not be entitled to any rights as
stockholders of the Corporation in respect of such fractional interests.
(e) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) If the Corporation shall, at any time or from time to time
after the Original Issuance Date, issue any shares of Common Stock
(or be deemed to have issued shares of Common Stock as provided
herein), other than Excluded Stock, without consideration or for a
consideration per share less than the Conversion Price for such Series
A Preferred Stock, in effect immediately prior to the issuance of such
Common Stock, then the Conversion Price, as in effect immediately
prior to each such issuance, shall forthwith be lowered to a price
equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding on a fully-diluted basis
immediately prior to such issuance, multiplied by the Conversion
Price in effect immediately prior to such issuance, and (y) the
consideration received by the Corporation upon such issuance; by
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(B) the total number of shares of Common Stock outstanding on a
fully-diluted basis immediately after the issuance of such Common
Stock.
(ii) For the purposes of any adjustment of the Conversion Price
pursuant to clause (i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or placement fees payable by the
Corporation to any broker, investment banker, underwriter or placement
agent 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 shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Corporation,
irrespective of any accounting treatment.
(C) In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities
except for options to acquire Excluded Stock:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in Sections
(e)(ii)(1) and 5(e)(ii)(2) above), if any, received by the Corporation
upon the issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock covered
thereby;
(2) the aggregate maximum number of shares of Common Stock
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, options, or rights were
issued 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 manner provided in Sections
5(e)(ii)(1) and 5(e)(ii)(2) above);
(3) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights
or conversions of or exchanges for such securities, other than a
change resulting from the antidilution provisions thereof, the
Conversion Price shall forthwith be readjusted to the
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Conversion Price as would have been obtained had the adjustment made upon
the issuance of such options, rights or securities not converted prior to
such change or options or rights related to such securities not converted
prior to such change been made upon the basis of such change; and
(4) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Conversion Price shall forthwith be readjusted to the
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 been made upon the basis of the issuance of 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 and
subsequent conversion or exchange thereof.
(D) No further adjustment of the Conversion Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual issuance of
Common Stock on the exercise of any such rights or options or any
conversion or exchange of any such securities.
(iii) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of Series A
Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(iv) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(v) In the event of any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or
as a result of a stock dividend or subdivision, split-up or combination of
shares), or any consolidation or merger of the Corporation, each share of
Series A Preferred Stock shall after such reorganization, reclassification,
consolidation, or merger be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or of the corporation
resulting from such consolidation or surviving such merger to which the holder
of the number of shares of Common Stock deliverable (immediately prior to the
time of such reorganization, reclassification, consolidation or merger) upon
conversion of such share of Series A Preferred Stock would have been entitled
upon such
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reorganization, reclassification, consolidation or merger. The provisions of
this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(vi) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 0.1% in such
Conversion Price; provided, that any adjustments not required to be made by
virtue of this sentence shall be carried forward and taken into account in any
subsequent adjustment. All calculations under Sections 5(c)(i) through 5(e)(v)
above shall be made to the nearest one hundredth (1/100) of a cent or the
nearest one tenth (1/10) of a share, as the case may be.
(vii) In any case in which the provisions of this Section 5(e) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event the shares of
capital stock issuable upon such conversion by reason of the adjustment
required by such event in addition to the shares of capital stock issuable upon
such conversion before giving effect to such adjustments, and (B) paying to
such holder any amount in cash in lieu of a fractional share of capital stock
pursuant to Section 5(d) above; provided, however, that the Corporation shall
deliver to such holder an appropriate instrument evidencing such holder's right
to receive such additional shares and such cash.
(viii) Whenever the Conversion Price shall be adjusted as provided in
Section 5(e)(iv), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its chief
executive officer, showing in detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by first class
certified mail, return receipt requested and postage prepaid, to each holder of
Series A Preferred Stock affected by the adjustment at such holder's address
appearing on the Corporation's records. Where appropriate, such copy may be
given in advance and may be included as part of any notice required to be
mailed under the provisions of Section 5(e)(ix) below.
(ix) If the Corporation shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5(e), the Corporation
shall give notice to each holder of shares of Series A Preferred Stock, in the
manner set forth in Section 5(e)(vii) above, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of Series A
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 30
days prior to the taking of such proposed action. Failure to give such
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notice, or any defect therein, shall not affect the legality or validity of
any such action.
(x) The Corporation shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of Series A
Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series A Preferred Stock.
(xi) Without duplication of any other adjustment provided for in this
Section 5, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities other than shares of Common Stock,
provision shall be make so that each holder of Series A Preferred Stock
shall receive upon conversion thereof, in addition to the shares of Common
Stock receivable thereupon, the number of securities of the Corporation
which it would have received had its shares of Series A Preferred Stock
been converted into shares of Common Stock on the date of such event and
had such holder thereafter, during the period from the date of such event
to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to
the sum of all other adjustments called for during such period under this
Section 5 with respect to the rights of such holder of Series A Preferred
Stock.
(f) Notwithstanding anything contained herein to the contrary, in
determining the Liquidation Amount for the purposes of this Section 5 only, in
the event any option, convertible or exchangeable security or contract right
(each, an "Incentive Option") is issued, granted or awarded pursuant to any
Corporation incentive compensation plan, the Liquidation Amount shall be
increased (but in no event decreased) by dividing the Liquidation Amount
immediately prior to such issuance by the fraction equal to one minus the
quotient of the number of capital securities for which such Incentive Option is
convertible or exercisable divided by the total amount of Common Stock (on a
fully diluted basis) outstanding immediately prior to such issuance, grant or
award; provided that:
(i) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such Incentive Options,
other than a change resulting from the antidilution provisions thereof,
the Liquidation Amount shall forthwith be readjusted to such Liquidation
Amount as would have obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to such change or
options or rights related to such securities not converted prior to such
change been made upon the basis of such change; and
(ii) on the expiration or forfeiture of any such Incentive Options,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such Incentive Options, the
Liquidation Amount shall forthwith be readjusted to such Liquidation
Amount as would have been obtained had the adjustment made upon the
issuance of such Incentive Options or rights related to such securities
been made upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such Incentive Options,
upon the conversion or exchange of such securities, or upon the exercise
of the Incentive Options related to such Incentive Options and subsequent
conversion or exchange thereof.
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6. Definitions.
As used herein, the following terms shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change of Control" shall mean any transaction or any event after the
Original Issuance Date as a result of which (i) any one or more Persons acquires
or for the first time controls or is able to vote (directly or through nominees
or beneficial ownership) after the Original Issuance Date 40% or more of any
class of stock of the Corporation outstanding at the time having power
ordinarily to vote for directors of the Corporation or (ii) the control of more
than 40% of the number of shares of Common Stock held by Persons on the Original
Issuance Date has been transferred (including transfers by and among such
Persons) since the Original Issuance Date in the aggregate. For purpose of this
paragraph (b), "Common Stock" shall include shares of Common Stock issuable upon
exercise of warrants, options and other rights to acquire Common Stock
outstanding on the Original Issuance Date, whether or not at the time exercised
or exercisable.
(c) "Excluded Stock" means (i) up to 2,288,000 shares (as adjusted
equitably for stock dividends, stock splits, combinations, etc.) of Common
Stock available for issuance in respect of awards granted to directors,
officers and employees of the Corporation or its subsidiaries under stock-based
compensation and incentive plans approved by the Board, and (ii) shares of
Common Stock issued upon conversion of shares of Series A Preferred Stock,
including in the case of both (i) and (ii), any additional shares of Common
Stock as may be issued by virtue of antidilution provisions, if any, applicable
to such options, warrants or shares, as the case may be.
(d) "IRR" means, with respect to shares of Series A Preferred Stock, the
pre-tax, compounded annual internal rate of return realized thereon (i)
assuming all such shares were purchased by one Person on the Original Issuance
Date at a price equal to the Original Issuance Price and all such shares were
held continuously by such Person from the dates of issuance through the date of
the Liquidation and (ii) including, as a return on the shares of Series A
Preferred Stock, any cash dividends, distributions or redemptions made by the
Corporation in respect of such shares during such period (other than tax
distributions).
(e) "Liquidation" means (i) any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation
of the Corporation in another jurisdiction, (ii) any merger of the Corporation
with or into another corporation which such corporation survives the merger,
(iii) a Change of Control or (iv) a sale of all or substantially all of the
assets of the Corporation.
(f) "Liquidation Amount" means as to each share of Series A Preferred
Stock the Base Amount plus all accrued and unpaid dividends thereon through the
date of payment of such amount to the holder thereof.
(g) "Original Issuance Date" means the date of original issuance of the
first share of the Series A Preferred Stock.
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(h) "Original Issuance Price" means $2.07639 per share of Series A
Preferred Stock as issued on the Original Issuance Date.
(i) "Qualified Public Offering" shall mean an underwritten public offering
of shares of Common Stock registered pursuant to the Securities Act of 1933, as
amended, that is approved by the holders of Series A Preferred Stock pursuant
to Section 4(c) hereof.
COMMON STOCK
Each holder of shares of Common Stock shall be entitled to one vote for
each share of Common Stock held on all matters as to which holders of Common
Stock shall be entitled to vote. Except for and subject to those rights
expressly granted to the holders of the Series A Preferred Stock, or except as
may be provided by the laws of the State of Delaware, the holders of Common
Stock shall have exclusively all other rights of stockholders including, but
not by way of limitation, (a) the right to receive dividends, when and as
declared by the Board of Directors of the Corporation out of assets legally
available therefor, and (b) in the event of any distribution of assets upon a
Liquidation or otherwise, the right to receive ratably and equally all the
assets and funds of the Corporation remaining after the payment to the holders
of shares of the holders of the Series A Preferred Stock of the specific
amounts which they are entitled to receive, respectively, upon such Liquidation
as herein provided.
ARTICLE IV
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, and the directors need not be elected
by ballot unless required by the by-laws of the Corporation.
ARTICLE V
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized to make, amend and repeal the By-Laws of the Corporation.
ARTICLE VI
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this provision
shall not adversely affect any right
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or protection of a director of the Corporation existing at the time of such
repeal or modification.
ARTICLE VII
The address of the Corporation's registered office in the State of Delaware
is 15 East North St., Dover, Delaware. The Corporation's registered agent at
such address is XL Corporate Services, Inc.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the 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 the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the 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 the
Corporation, as the case may be, to be summoned in such matter as the said court
directs. If a majority in number representing 3/4 in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the 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 or creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
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