1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF CAREERBUILDER, INC.
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Company shall have
authority to issue is 32,991,295 shares consisting of five classes of stock:
21,000,000 shares of Common Stock ($.001 par value per share); 1,562,500 shares
of Class A Convertible Preferred Stock ($.001 par value per share); 2,151,420
shares of Class B Convertible Preferred Stock ($.001 par value per share);
3,188,889 shares of Class C Convertible Preferred Stock ($.001 par value per
share); 2,045,785 shares of Class D Convertible Preferred Stock ($.001 par value
per share); 1,024,351 shares of Class E Convertible Preferred Stock ($.001 par
value per share) and 2,018,350 shares of Class F Convertible Preferred Stock
($.001 par value per share). Except as other provided by law or as set forth in
this Amendment, each of the outstanding shares shall have one vote for the
pupose of electing directors and for all other purposes, including but not
limited to an equal participation in any dividends or other distribution by the
Company. All other relative rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A attached hereto and incorporated
herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matter contained in such Amendment have duly adopted such Amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its authorized officer, this 26th day of January, 1999.
CAREERBUILDER, INC.
By: /s/ Robert J. McGovern
-------------------------------------
Robert J. McGovern
President
2
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be six classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares, the Class E Convertible Preferred Stock shall consist of 1,024,351
shares and the Class F Convertible Preferred Stock shall consist of 2,018,350
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock shall sometimes be referred to herein
collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock consenting
or voting (as the case may be) as a single class, given in writing or by vote at
a meeting, increase the maximum number of directors constituting the Board of
Directors to a number in excess of seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders
3
of the Common Stock, acting as a separate class, shall be entitled to elect two
directors of the Corporation. So long as Thomson U.S. Inc. ("TTC Ventures")
owns, beneficially or of record, at least two percent (2%) of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class D Convertible Preferred Stock (as
adjusted in accordance with subparagraph 6F or 6G), acting as a separate class,
shall be entitled to appoint one director of the Corporation (the "Class D
Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. So
long as ADP, Inc. ("ADP") owns beneficially or of record, at least two percent
(2%) of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with the Class D Director,
the "Class D Directors") and such Other Class D Director shall be nominated and
appointed by ADP on behalf of the holders of Class D Convertible Preferred
Stock. At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class D
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class D Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class D Convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class C Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class C Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class C
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class B Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class B
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class B Convertible Preferred Stock, and the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class A Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class A Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class A
Convertible Preferred Stock. A vacancy in any directorship elected by the
holders of the Class A Convertible Preferred Stock, Class B Convertible
Preferred Stock or Class C Convertible Preferred Stock shall be filled only by
vote or written consent of the holders of the Class A Convertible Preferred
Stock, Class B Convertible Preferred Stock or Class C Convertible Preferred
Stock respectively; a vacancy in the directorship allocated to the holders of
Class D Convertible Preferred Stock shall be filled only by the appointment by
or written consent of TTC Ventures; a vacancy in the other directorship
allocated to the holders of Class D Convertible Preferred Stock and nominated by
ADP shall be filled only by the appointment by or written consent of ADP; and a
vacancy in any directorship elected by the holders of the Common Stock shall be
filled only by vote or written consent of the holders of the Common Stock.
4
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Corporation to attend each meeting of the Board of Directors of
the Corporation and each meeting of any Committee thereof. Each of GE Capital
Equity Investments, Inc. ("GECE") and General Electric Pension Trust ("GEPT")
shall have the right to assign an observer to the Board of Directors of the
Corporation to attend each meeting of the Board of Directors of the Corporation
and each meeting of any Committee thereof. Each person so designated by GECE and
GEPT as an observer on its respective behalf shall be sent all materials
provided to members of the Corporation's Board of Directors at the same time and
in the same manner as the Corporation's Board of Directors.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.0224 per share (the
"Class A Accruing Dividends"). The holders of the Class B Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0532 per share (the "Class B Accruing
Dividends"). The holders of the Class C Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.1008 per share (the "Class C Accruing Dividends").
The holders of the Class D Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.2499 per share (the "Class D Accruing Dividends"). The holders
of the Class E Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.3451 per share (the "Class E Accruing Dividends"). The holders of the Class F
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.3850 per share
(the "Class F Accruing Dividends"). The Class A Accruing Dividends, the Class B
Accruing Dividends, and the Class C Accruing Dividends, the Class D Accruing
Dividends, the Class E Accruing Dividends and the Class F Accruing Dividends are
sometimes referred to herein collectively as the "Accruing Dividends." Accruing
Dividends shall accrue from day to day, whether or not earned or declared, and
shall be cumulative. No dividend shall be paid on the Preferred Stock, other
than Accruing Dividends, or on the Common Stock, other than pursuant to Section
5D herein.
5
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock, Class E Convertible Preferred Stock and
Class F Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Preferred Stock, to be paid an
amount equal to $0.76, $1.44, $3.57, $4.93 and $5.45 per share, respectively,
plus, in the case of each share of Class B Convertible Preferred Stock, an
amount equal to all Class B Accruing Dividends unpaid thereon (whether or not
declared) and any other dividends declared but unpaid thereon, in the case of
each share of Class C Convertible Preferred Stock, an amount equal to all Class
C Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
unpaid thereon (whether or not declared) and any other dividends declared but
unpaid thereon, in the case of each share of Class E Convertible Preferred
Stock, an amount equal to all Class E Accruing Dividends unpaid thereon (whether
or not declared) and any other dividends declared but unpaid thereon, in the
case of each share of Class F Convertible Preferred Stock, an amount equal to
all Class F Accruing Dividends unpaid thereon (whether or not declared) and any
other dividends declared but unpaid thereon, computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class B Convertible Preferred Stock being sometimes referred to as the "Class B
Liquidation Preference Payment," such amount payable with respect to one share
of Class C Convertible Preferred Stock being sometimes referred to as the "Class
C Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment," such amount payable with respect to one share
of Class E Convertible Preferred Stock being sometimes referred to a the "Class
E Liquidation Preference Payment," such amount payable with respect to one share
of Class F Convertible Preferred Stock being sometimes referred to as the "Class
F Liquidation Preference Payment," and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock being sometimes referred to as the "Classes B, C, D,
E and F Liquidation Preference Payments." If upon such liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the assets
to be distributed among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock, Class
E Convertible Preferred Stock and Class F Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock of the Classes B, C, D, E and F Liquidation Preference Payments,
then the entire assets of the Corporation to be so distributed shall be
6
distributed ratably, on an as-converted basis, among the holders of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock shall have been paid in full the amounts to which
they shall be entitled pursuant to paragraph 4A, the holders of the shares of
Class A Convertible Preferred Stock shall then be entitled, before any
distribution or payment is made upon any stock ranking in liquidation junior to
the Class A Convertible Preferred Stock, to be paid an amount equal to $0.32 per
share plus, in the case of each share, an amount equal to all Class A Accruing
Dividends unpaid thereon (whether or not declared) computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class A Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Classes B, C, D, E and F Liquidation Preference Payments are sometimes
referred to herein collectively as the "Liquidation Preference Payments." If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Class A Convertible Preferred Stock shall be insufficient to permit payment in
full to the holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock, Class F Convertible
Preferred Stock and Class A Convertible Preferred Stock shall have been paid in
full their respective Liquidation Preference Payments, the remaining net assets
of the Corporation available for distribution shall be distributed ratably among
the holders of Preferred Stock and Common Stock (with each share of Preferred
Stock being deemed, for such purpose, to be equal to the number of shares of
Common Stock (including fractions of a share) into which such share of Preferred
Stock is convertible immediately prior to the close of business on the business
day fixed for such distribution). Unless otherwise agreed by holders of at least
two-thirds of the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock, each acting as a separate class, and a majority of
the Class D Convertible Preferred Stock and at least forty percent (40%) of each
of the Class E Convertible Preferred Stock and the Class F Convertible Preferred
Stock then outstanding, each acting as a separate class, the consolidation or
merger of the Corporation into or with any other entity or entities which
results in the exchange of outstanding shares of the Corporation for cash or
marketable securities issued or paid or caused to be issued or paid by any such
entity
7
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock, the Class E Convertible Preferred Stock and
the Class F Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock are outstanding, except where the vote or written
consent of the holders of a greater number of shares of the Corporation is
required by law or by the Certificate of Incorporation, and in addition to any
other vote required by law or the Certificate of Incorporation, without the
approval of the holders of at least a majority of the then outstanding shares of
the Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and at least forty percent (40%) of each
of the Class E Convertible Preferred Stock and the Class F Convertible Preferred
Stock then outstanding, consenting or voting (as the case may be) as separate
classes, given in writing or by vote at a meeting, the Corporation will not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation,
redemption and the payment of dividends, or increase the authorized amount of
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock or the Class F Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock, the Class
E Convertible Preferred Stock and the Class F Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible
8
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock or the Class F Convertible
Preferred Stock or into shares of any other class or series of stock unless the
same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock, the Class
E Convertible Preferred Stock and the Class F Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise.
5B. Notwithstanding any other provisions herein,
consent to any Liquidity Event, unless such action would result in the receipt
of consideration that would result in an annualized rate of return of at least
30% on the initial investment of the holders of each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock, calculated on a class by class basis. As
used in the previous sentence, "consideration" means cash or marketable
securities. For any publicly traded securities, the value shall be deemed to be
the average of the closing prices or closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing of the Liquidity Event. If there is no active public market for the
securities, the value shall be the fair market value of such securities as
mutually determined by the Corporation and the holders of at least a majority of
the voting power of each class of the then outstanding shares of Convertible
Preferred Stock, voting on a class by class basis. In the event that no
agreement can be reached by the parties as to valuation of such consideration,
each of the Corporation and the holders of Convertible Preferred Stock shall
have three (3) days to designate in writing one person or entity, and such
designated persons shall have five (5) days to choose an independent appraiser,
who shall then, within five (5) days, make a determination as to the valuation
of consideration that shall be final and binding upon all parties. All costs
incurred as a result of such appraisal shall be borne by the Corporation;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock, the Class E Convertible Preferred Stock and/or
the Class F Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Preferred Stock, except for (i)
Class A Accruing Dividends, (ii) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock, and (iii)
the purchase of shares of Common Stock from former employees of the Corporation
who acquired such shares directly from the Corporation,
9
if each such purchase is made pursuant to contractual rights held by the
Corporation relating to the termination of employment of such former employee
and the purchase price (except in the case of agreements executed prior to July
12, 1996) does not exceed the original issue price paid by such former employee
to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock except as expressly authorized in paragraph 7 hereof
or pursuant to a purchase offer made on a pro rata basis on such date to all
holders of the shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock, $4.93 in the case of Class E Convertible Preferred Stock and
$5.45 in the case of Class F Convertible Preferred Stock) and (ii) dividing the
result by the Original Purchase Price of such share or, in case an adjustment of
such price has taken place pursuant to the further provisions of this paragraph
6, then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (such price,
or such price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B Conversion
Price," with respect to the Class C Convertible Preferred Stock, the "Class C
Conversion Price," with respect to the Class D Convertible Preferred Stock, the
"Class D Conversion Price," with respect to the Class E Convertible Preferred
Stock, the "Class E Conversion Price" and with respect to the Class F
Convertible Preferred Stock, the "Class F Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be 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 holders of the 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.
10
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of 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.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock. No payment or adjustment shall be made for any cash dividends upon
the Common Stock issued as a result of a conversion. At the time of each
conversion, the Corporation shall pay in cash an amount equal to all dividends,
excluding Accruing Dividends, accrued and unpaid on the shares of Preferred
Stock surrendered for conversion to the date upon which such conversion is
deemed to take place as provided in subparagraph 6B. In case the number of
shares of Preferred Stock represented by the certificate or certificates
surrendered pursuant to subparagraph 6A exceeds the number of shares converted,
the Corporation shall, upon such conversion, execute and deliver to the holder,
at the expense of the Corporation, a new certificate or certificates for the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale or (v) the Class F Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith upon such
issue or sale, the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E
11
Conversion Price and/or the Class F Conversion Price, as the case may be, shall
be reduced to the price determined by dividing (i) an amount equal to the sum of
(a) the number of shares of Common Stock outstanding or deemed outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price, the then existing Class C Conversion Price, the then existing
Class D Conversion Price, the then existing Class E Conversion Price or the then
existing Class F Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding or deemed
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price, the Class E Conversion Price
and/or the Class F Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding. Except
as otherwise provided in this subparagraph or in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
12
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Class B
Conversion Price and/or the Class C Conversion Price and/or the Class D
Conversion Price and/or the Class E Conversion Price and/or the Class F
Conversion Price have been or are to be made pursuant to other provisions of
this subparagraph or subparagraph 6D, no further adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price,
the Class E Conversion Price and/or the Class F Conversion Price shall be made
by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(other than changes under or by reason of provisions designed to protect against
dilution), the Class B Conversion Price, the Class C Conversion Price, the Class
D Conversion Price, the Class E Conversion Price and/or the Class F Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion
Price, the Class E Conversion Price or the Class F Conversion Price, as the case
may be, which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price, the Class C Conversion
13
Price, the Class D Conversion Price, the Class E Conversion Price and/or the
Class F Conversion Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to convert or
exchange such Convertible Securities, the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price, the Class E Conversion Price
and/or the Class F Conversion Price then in effect hereunder shall forthwith be
increased to the Class B Conversion Price, Class C Conversion Price, the Class D
Conversion Price, the Class E Conversion Price or Class F Conversion Price, as
the case may be, which would have been in effect at the time of such termination
or expiration had such Option or Convertible Securities, to the extent
outstanding immediately prior to such termination or expiration, never been
issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the
14
account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price, the Class E Conversion Price or the Class F
Conversion Price in the case of the issuance from and after the date of filing
of these terms of the Preferred Stock of up to an aggregate of 2,100,000 shares
(appropriately adjusted to reflect the occurrence of any event described in
subparagraphs 6F or 6G) (the "Reserved Shares") of Common Stock to directors,
officers, employees or consultants of the Corporation in connection with their
service as directors of the Corporation, less the number of shares issued
pursuant to subscriptions, warrants, options, convertible securities, or other
rights outstanding on the date hereof, their employment by the Corporation or
their retention as consultants by the Corporation (provided that the number of
Reserved Shares may be increased with the approval of a majority of the Board of
Directors.
6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares (by reverse stock split or otherwise), the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.
In the case of any such subdivision, no further adjustment shall be made
pursuant to subparagraph 6D by reason thereof.
6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
15
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for deter-mining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of
16
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be required to assure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion Price in
effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Preferred Stock which
is being converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value $.001 per share, as constituted on the date
of filing of these terms of the Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon conversion
of shares of Preferred Stock shall include only shares designated as Common
Stock of the Corporation on the date of filing of this instrument, or in case of
any reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subparagraph 6G.
17
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $30,000,000 and (B) the price paid by the public
for such shares shall be at least $7.00 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible; at least $6.03 per
share for (i) each share of Class F Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class F Convertible Preferred
Stock is convertible, then effective upon the closing of the sale of such shares
by the Corporation pursuant to such public offering or immediately prior to the
occurrence of such Liquidity Event, as the case may be, all outstanding shares
of Preferred Stock (in the case of a public offering) or such class of Preferred
Stock (in the case of a Liquidity Event) shall automatically convert to shares
of Common Stock on the basis set forth in this paragraph 6. Holders of shares of
Preferred Stock so converted may deliver 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 such holders) during its usual business hours,
the certificate or certificates for the shares so converted. As promptly as
practicable thereafter, the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder may be entitled pursuant to
subparagraph 6C. Until such time as a holder of shares of Preferred Stock shall
surrender his or its certificates therefor as provided above, such certificates
shall be deemed to represent the shares of Common Stock to which such holder
shall be entitled upon the surrender thereof.
VII. Redemption. The shares of Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock, the Class E Convertible Preferred Stock and the Class F
Convertible Preferred Stock shall be redeemed as follows:
7A. Mandatory Redemption. On September 11, 2002, and
on each of the next two anniversaries thereafter (the "Redemption Dates," and
each a "Redemption Date"), the Corporation shall redeem any outstanding shares
of Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D
18
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock then Outstanding to be
Redeemed
September 11, 2002 33-1/3% of all the shares of
Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock,
Class E Convertible Preferred
Stock and Class F Convertible
Preferred Stock outstanding on
September 11, 2002
September 11, 2003 50% of all the shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock outstanding on September
11, 2003
September 11, 2004 100% of all the shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock outstanding on September
11, 2004
7B. Redemption Price and Payment. The shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock to be redeemed on any Redemption Date shall be
redeemed by paying for each share in cash an amount equal to $0.76, $1.44,
$3.57, $4.93 and $5.45 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price." Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the "Redemption
Notice") shall be given by the Corporation by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, to each holder
of record (at the close of business on the business day next preceding the day
on which the Redemption Notice is given) of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock notifying such holder of the redemption and specifying the
Redemption Price, such Redemption Date, the number of shares of Class B
Convertible
19
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and/or Class F Convertible
Preferred Stock to be redeemed from such holder (computed on a pro rata basis in
accordance with the number of such shares held by all holders thereof) and the
place where said Redemption Price shall be payable. The Redemption Notice shall
be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock (except the
right to receive the Redemption Price) shall cease with respect to the shares to
be redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable to them if the
full number of shares to be redeemed on such Redemption Date were actually
redeemed. The shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock required to be redeemed
but not so redeemed shall remain outstanding and entitled to all rights and
preferences provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock redeemed pursuant to
this paragraph 7 or otherwise acquired by the Corporation in any manner
whatsoever shall be canceled and shall not under any circumstances be reissued;
and the Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce accordingly the number of authorized shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock.
20
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock on any Redemption Date if the cost to the
Corporation of such redemption would be greater than one-half of the
Corporation's available average cash (including cash equivalents and to the
extent not prohibited by the Delaware General Corporate Law, marketable
securities) working capital balance for the quarter immediately preceding such
Redemption Date. If a redemption is delayed pursuant to this Paragraph 7E, the
Corporation shall redeem the shares to be so redeemed within 120 days of such
Redemption Date.
VIII Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock and at least a majority of the then outstanding shares of Class D
Convertible Preferred Stock and at least forty percent (40%) of each of the
Class E Convertible Preferred Stock and the Class F Convertible Preferred Stock
then outstanding; provided, however, that so long as TTC Ventures holds at least
two percent (2%) of the outstanding shares of Common Stock of the
Corporation(assuming the conversion of all outstanding Preferred Stock), no
amendment shall be made to the provisions of Section 2C relating to the
representation of the holders of Class D Convertible Preferred Stock without the
consent of TTC Ventures and that so long as ADP holds at least two percent (2%)
of the outstanding shares of Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), no amendment shall be made to
the provisions of the sixth sentence of Section 2C relating to the
representation of the holders of Class D Convertible Preferred Stock without the
consent of ADP; provided further, however, that so long as FBR holds at least
two percent (2%) of the outstanding shares of Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), no amendment shall
be made to the provisions of Section 2D relating to the board observer rights of
the holders of Class E Convertible Preferred Stock without the consent of FBR
and, that so long as GECE and/or GEPT together or individually hold, in the
aggregate, at least 250,000 shares of the Class F Convertible Preferred Stock or
the amount of Common Stock into which such shares of Class F Convertible
Preferred Stock is convertible, no amendment shall be made to the provisions of
Section 2D relating to the board observer rights of the holders of Class F
Convertible Preferred Stock without the consent of GECE and GEPT.
21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CAREERBUILDER, INC.
PURSUANT TO SECTION 242
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company shall remain in the form in which it was most recently filed, except
that the following sentence shall be added as the final sentence to Article
FOURTH: "The following sentence shall be appended as the final sentence to
Article III of the description of other relative rights, preferences and
limitations of the shares of each class of stock attached hereto as Exhibit A:
'Further, no cash dividend shall be paid on the Preferred Stock or Common Stock,
including the Accruing Dividends, until any outstanding indebtedness by the
Corporation to PNC Bank, N.A. or any successor to PNC Bank, N.A. is paid in
full.' "
SECOND: That an appropriate number of stockholders of the Company
entitled to vote on the matter contained in such Amendment have duly adopted
such Amendment in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by its authorized officer, this 29th day of December, 1998.
CAREERBUILDER, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Robert J. McGovern
President
22
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be five classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares and the Class E Convertible Preferred Stock shall consist of 1,024,351
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred shall
sometimes be referred to herein collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders of the Common Stock, acting as a separate
class, shall be entitled to elect two directors of the Corporation. So long as
Thomson U.S. Inc. ("TTC Ventures") owns, beneficially or of record, at least two
percent (2%) of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the Class D
Convertible Preferred Stock (as adjusted in accordance with subparagraph 6F or
6G), acting as a separate class, shall be entitled to appoint one director of
the Corporation (the "Class D Director") and
23
such Class D Director shall be nominated and appointed by TTC Ventures on behalf
of the holders of Class D Convertible Preferred Stock. So long as ADP, Inc.
("ADP") owns beneficially or of record, at least two percent (2%) of the
outstanding Common Stock of the Corporation (assuming the conversion of all
outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with") and such Other
Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class D
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class C
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class C Convertible Preferred Stock, the presence
in person or by proxy (or the written consent) of the holders of a majority of
the shares of Class B Convertible Preferred Stock then outstanding shall
constitute a quorum of the Class B Convertible Preferred Stock for the election
of the director to be elected solely by the holders of the Class B Convertible
Preferred Stock, and the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class A Convertible Preferred Stock. A vacancy in any
directorship elected by the holders of the Class A Convertible Preferred Stock,
Class B Convertible Preferred Stock or Class C Convertible Preferred Stock shall
be filled only by vote or written consent of the holders of the Class A
Convertible Preferred Stock, Class B Convertible Preferred Stock or Class C
Convertible Preferred Stock respectively; a vacancy in the directorship
allocated to the holders of Class D Convertible Preferred Stock shall be filled
only by the appointment by or written consent of TTC Ventures; a vacancy in the
other directorship allocated to the holders of Class D Convertible Preferred
Stock and nominated by ADP shall be filled only by the appointment by or written
consent of ADP; and a vacancy in any directorship elected by the holders of the
Common Stock shall be filled only by vote or written consent of the holders of
the Common Stock.
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Company to attend each meeting of the Board of Directors of the
Company and each meeting of any Committee thereof.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least
24
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.0224 per share (the "Class A Accruing Dividends"). The holders
of the Class B Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.0532 per share (the "Class B Accruing Dividends"). The holders of the Class C
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.1008 per share
(the "Class C Accruing Dividends"). The holders of the Class D Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.2499 per share (the
"Class D Accruing Dividends"). The holders of the Class E Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.3451 per share (the "Class E Accruing
Dividends"). The Class A Accruing Dividends, the Class B Accruing Dividends, and
the Class C Accruing Dividends, the Class D Accruing Dividends and the Class E
Accruing Dividends are sometimes referred to herein collectively as the
"Accruing Dividends." Accruing Dividends shall accrue from day to day, whether
or not earned or declared, and shall be cumulative. No dividend shall be paid on
the Preferred Stock, other than Accruing Dividends, or on the Common Stock.
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock
shall first be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class B Convertible Preferred Stock,
the Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock
and the Class E Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44, $3.57 and $4.93 per share, respectively, plus, in the case of each
share of Class B Convertible Preferred Stock, an amount equal to all Class B
Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class C
Convertible Preferred Stock, an amount equal to all Class C Accruing Dividends
unpaid thereon (whether or not declared), in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), in the case of each share of Class E
Convertible Preferred Stock, an amount equal to all Class E Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes referred to as the "Class B Liquidation Preference Payment,"
such amount payable with respect to one share of Class C Convertible Preferred
Stock being sometimes referred to as the "Class C Liquidation Preference
Payment," such amount payable with respect to one share of Class D Convertible
Preferred Stock being sometimes referred to as the "Class D Liquidation
Preference Payment", such amount payable with respect to one share of Class E
Convertible Preferred Stock being sometimes referred to as the "Class E
Liquidation Preference Payment," and with respect to all shares of
25
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class E Convertible Preferred Stock being
sometimes referred to as the "Classes B, C, D and E Liquidation Preference
Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock shall be insufficient to permit payment in full to the holders
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and Class E Convertible Preferred Stock of
the Classes B, C, D and E Liquidation Preference Payments, then the entire
assets of the Corporation to be so distributed shall be distributed ratably, on
an as-converted basis, among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and
Class E Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock shall have
been paid in full the amounts to which they shall be entitled pursuant to
paragraph 4A, the holders of the shares of Class A Convertible Preferred Stock
shall then be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class A Convertible Preferred Stock,
to be paid an amount equal to $.32 per share plus, in the case of each share, an
amount equal to all Class A Accruing Dividends unpaid thereon (whether or not
declared) computed to the date payment thereof is made available, such amount
payable with respect to one share of Class A Convertible Preferred Stock being
sometimes referred to as the "Class A Liquidation Preference Payment" and with
respect to all shares of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payments." The Class A
Liquidation Preference Payments and the Classes B, C, D and E Liquidation
Preference Payments are sometimes referred to herein collectively as the
"Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class A Convertible
Preferred Stock of the Class A Liquidation Preference Payments, then the entire
remaining assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class A Convertible
Preferred Stock shall have been paid in full their respective Liquidation
Preference Payments, the remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of Common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a separate class, and a majority of the Class D Convertible
Preferred Stock and at least forty
26
percent (40%) of the Class E Convertible Preferred Stock then outstanding, each
acting as a separate class, the consolidation or merger of the Corporation into
or with any other entity or entities which results in the exchange of
outstanding shares of the Corporation for securities or other consideration
issued or paid or caused to be issued or paid by any such entity or affiliate
thereof (other than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or other disposition
by the Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of the provisions of this paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and at least forty percent (40%) of the Class E Convertible
Preferred Stock then outstanding, consenting or voting (as the case may be) as
separate classes, given in writing or by vote at a meeting, the Corporation will
not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends, or increase the
authorized amount of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock or the
Class E Convertible Preferred Stock or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends, or
create or authorize any obligation or security convertible into shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock or the Class E Convertible Preferred Stock or into
shares of any
27
other class or series of stock unless the same ranks junior to the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and the Class E Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; provided, that such
consent shall not be unreasonably withheld for the creation or issuance of an
additional class or series of shares ranking senior to the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends (a "Senior Security"), but
provided further, that if, within a reasonable time of the submission of a
proposal for the issuance of a Senior Security, information comes to light
indicating that such consent was withheld solely or primarily for the purpose of
negotiating the price of an additional investment by the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock,
then such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any other
entity or entities or sell, lease, abandon, transfer or otherwise dispose of all
or substantially all its assets, unless such action would result in an
annualized return to the holders of the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock and
the Class E Convertible Preferred Stock of at least 30%;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock, except for (i) Class A Accruing Dividends, (ii) dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock, and (iii) the purchase of shares of Common Stock from
former employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price (except in the case of agreements executed prior
to July 12, 1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock except as
expressly authorized in paragraph 7 hereof or pursuant to a purchase offer made
pro rata to all holders of the shares of Class B Convertible
28
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock on the basis of the
aggregate number of outstanding shares of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and/or
Class E Convertible Preferred Stock then held by each such holder.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock and $4.93 in the case of Class E Convertible Preferred Stock)
and (ii) dividing the result by the conversion price of the Original Purchase
Price of such share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by the conversion
price as last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price," with respect to the
Class B Convertible Preferred Stock, the "Class B Conversion Price," with
respect to the Class C Convertible Preferred Stock, the "Class C Conversion
Price", with respect to the Class D Convertible Preferred Stock, the "Class D
Conversion Price" and with respect to the Class E Convertible Preferred Stock,
the "Class E Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be 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 holders
of the 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.
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of 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
29
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the
shares of Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this subparagraph 6C, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder surrendering the Preferred Stock for conversion an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, or (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price, as the case may be, shall be reduced to the
price determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Class B Conversion Price, the then existing
Class C Conversion Price, the then existing Class D Conversion Price or the then
existing Class E Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
30
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Class B Conversion Price, the Class C Conversion Price, the Class D
Conversion Price and/or the Class E Conversion Price in effect immediately prior
to the time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed to
be outstanding. Except as otherwise provided in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price and/or the Class E Conversion Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price and/or the Class E Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maxi-mum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Class B Conversion Price and/or the Class C Conversion Price and/or the
Class D Conversion Price
31
and/or the Class E Conversion Price have been or are to be made pursuant to
other provisions of this subparagraph 6D, no further adjustment of the Class B
Conversion Price, the Class C Conversion Price, The Class D Conversion Price
and/or the Class E Conversion Price shall be made by reason of such issue or
sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion Price
or the Class E Conversion Price, as the case may be, which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price then in effect hereunder is thereby reduced; and on the termination or
expiration of any such Option or any such right to convert or exchange such
Convertible Securities, the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price and/or the Class E Conversion Price then in
effect hereunder shall forthwith be increased to the Class B Conversion Price,
Class C Conversion Price, the Class D Conversion Price or Class E Conversion
Price, as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the
32
Corporation, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this
subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price or the Class E Conversion Price in the case
of the issuance from and after the date of filing of these terms of the
Preferred Stock of up to an aggregate of 1,950,000 shares (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G) (the "Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as directors of
the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation (provided that the number of Reserved Shares may
be increased (a) prior to December 31, 1998, with the approval of a majority of
the Board of Directors including the Class B Director, the Class C Director and
the Class D Directors and [(b) after December 31, 1998, with the approval of
either (i) a majority of the Board of Directors including the Class B Director,
the Class C Director and the Class D Directors or (ii) all directors other than
the Class B Director, the Class C Director and the Class D Directors), plus such
number of shares of Common Stock which are repurchased by the Corporation from
such persons after such date pursuant to contractual rights held by the
Corporation and at repurchase prices not exceeding the respective original
purchase prices paid by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the case of any such subdivision, no
further adjustment shall be made pursuant to subparagraph 6D by reason thereof.
33
6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the
Corporation shall give, by delivery in person, certified or registered mail,
return receipt requested, telecopier or telex, addressed to each holder of any
shares of Preferred Stock at the address of such holder as shown on the books of
the Corporation, (a) at least 20 days' prior written notice of the date on which
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution
34
or subscription rights or for deter-mining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Preferred Stock which
is being converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value
35
$.001 per share, as constituted on the date of filing of these terms of the
Preferred Stock, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $15,000,000 and (B) the price paid by the public
for such shares shall be at least $4.32 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver 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 such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
VII. Redemption. The shares of Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred Stock shall be
redeemed as follows:
36
7A. Mandatory Redemption. On September 11, 2002, and
on each of the next two anniversaries thereafter (the "Redemption Dates," and
each a "Redemption Date"), the Corporation shall redeem any outstanding shares
of Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock according to the percentages listed below:
Percentage of Shares of
Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock and
Class E Convertible Preferred
Stock then Outstanding to be
Date of Redeemed
Redemption
September 33-1/3% of all the shares
11, 2002 of Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred and Class E
Convertible Preferred Stock
outstanding on September 11, 2002
September 50% of all the shares of
Class B Convertible Preferred
11, 2003 Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock and
Class E Convertible Preferred
Stock outstanding on September
11, 2003
September 100% of all the shares of
11, 2004 Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred and Class E
Convertible Preferred Stock
outstanding on September 11, 2004
7B. Redemption Price and Payment. The shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to $0.76, $1.44, $3.57 and $4.93 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G), respectively, plus, in the case of each share, an amount equal to all
dividends, excluding Accruing Dividends, declared but unpaid thereon, computed
to such Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption Date to
the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the "Redemption
Notice") shall be given by the Corporation by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, to each holder
of record (at the close of business on the business day next preceding the day
on which the Redemption Notice is given) of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock notifying such holder of
the redemption and specifying the Redemption Price, such Redemption Date, the
number of shares of Class B Convertible Preferred Stock,
37
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and/or
Class E Convertible Preferred Stock to be re-deemed from such holder (computed
on a pro rata basis in accordance with the number of such shares held by all
holders thereof) and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each holder at his address as shown by
the records of the Corporation. From and after the close of business on a
Redemption Date, unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock (except the right to
receive the Redemption Price) shall cease with respect to the shares to be
redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock to be redeemed on such Redemption Date, the holders of such shares shall
share ratably in any funds legally available for redemption of such shares
according to the respective amounts which would be payable to them if the full
number of shares to be redeemed on such Redemption Date were actually redeemed.
The shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock required to be redeemed but not so redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of such shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired by
the Corporation in any manner whatsoever shall be canceled and shall not under
any circumstances be reissued; and the Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on any
Redemption Date if the cost to the Corporation of such redemption would be
greater than one-half of the Corporation's available average cash working
38
capital balance for the quarter immediately preceding such Redemption Date. If a
redemption is delayed pursuant to this Paragraph 7E, the Corporation shall
redeem the shares to be so redeemed within 120 days of such Redemption Date.
VIII Amendments. No provision of these terms of the
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock and at least a majority of the then outstanding
shares of Class D Convertible Preferred Stock and at least forty percent (40%)
of the Class E Convertible Preferred Stock then outstanding; provided, however,
that so long as TTC Ventures holds at least two percent (2%) of the outstanding
shares of Common Stock of the Corporation(assuming the conversion of all
outstanding Preferred Stock), no amendment shall be made to the provisions of
Section 2C relating to the representation of the holders of Class D Convertible
Preferred Stock without the consent of TTC Ventures and that so long as ADP
holds at least two percent (2%) of the outstanding shares of Common Stock of the
Corporation (assuming the conversion of all outstanding Preferred Stock), no
amendment shall be made to the provisions of the sixth sentence of Section 2C
relating to the representation of the holders of Class D Convertible Preferred
Stock without the consent of APD; PROVIDED FURTHER, HOWEVER, THAT SO LONG AS FBR
HOLDS AT LEAST TWO PERCENT (2%) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE
CORPORATION (ASSUMING THE CONVERSION OF ALL OUTSTANDING PREFERRED STOCK), NO
AMENDMENT SHALL BE MADE TO THE PROVISIONS OF SECTION 2C RELATING TO THE BOARD
OBSERVER RIGHTS OF THE HOLDERS OF CLASS E CONVERTIBLE PREFERRED STOCK WITHOUT
THE CONSENT OF FBR.
39
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CAREERBUILDER, INC.
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Company shall
have authority to issue 27,472,945 shares consisting of five
classes of stock: 17,500,000 shares of Common Stock ($.001 par
value per share); 1,562,500 shares of Class A Convertible
Preferred Stock ($.001 par value per share); 2,151,420 shares
of Class B Convertible Preferred Stock ($.001 par value per
share); 3,188,889 shares of Class C Convertible Preferred
Stock ($.001 par value per share); 2,045,785 shares of Class D
Convertible Preferred Stock ($.001 par value per share); and
1,024,351 shares of Class E Convertible Preferred Stock ($.001
par value per share). Except as other provided by law or as
set forth in this Amendment, each of the outstanding shares
shall have one vote for the purpose of electing directors and
for all other purposes, including but not limited to an equal
participation in any dividends or other distribution by the
Company. All other relative rights, preferences and
limitations of the shares of each class of stock are set forth
in Exhibit A attached hereto and incorporated herein by this
reference.
SECOND: That all stockholders of the Company entitled to vote on the
matter contained in such Amendment have duly adopted such Amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
40
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its authorized officer, this 30th day of June, 1998.
CAREERBUILDER, INC.
By: /s/ Robert McGovern
------------------------------------
Robert McGovern
President
41
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be five classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares and the Class E Convertible Preferred Stock shall consist of 1,024,351
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred shall
sometimes be referred to herein collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders of the Common Stock, acting as a separate
class, shall be entitled to elect two directors of the Corporation. So long as
Thomson U.S. Inc. ("TTC Ventures") owns, beneficially or of record, at least two
percent (2%) of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the Class D
Convertible Preferred Stock (as adjusted in accordance with subparagraph 6F or
6G), acting as a separate
42
class, shall be entitled to appoint one director of the Corporation (the "Class
D Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. So
long as ADP, Inc. ("ADP") owns beneficially or of record, at least two percent
(2%) of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with") and such Other
Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class D
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class C
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class C Convertible Preferred Stock, the presence
in person or by proxy (or the written consent) of the holders of a majority of
the shares of Class B Convertible Preferred Stock then outstanding shall
constitute a quorum of the Class B Convertible Preferred Stock for the election
of the director to be elected solely by the holders of the Class B Convertible
Preferred Stock, and the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class A Convertible Preferred Stock. A vacancy in any
directorship elected by the holders of the Class A Convertible Preferred Stock,
Class B Convertible Preferred Stock or Class C Convertible Preferred Stock shall
be filled only by vote or written consent of the holders of the Class A
Convertible Preferred Stock, Class B Convertible Preferred Stock or Class C
Convertible Preferred Stock respectively; a vacancy in the directorship
allocated to the holders of Class D Convertible Preferred Stock shall be filled
only by the appointment by or written consent of TTC Ventures; a vacancy in the
other directorship allocated to the holders of Class D Convertible Preferred
Stock and nominated by ADP shall be filled only by the appointment by or written
consent of ADP; and a vacancy in any directorship elected by the holders of the
Common Stock shall be filled only by vote or written consent of the holders of
the Common Stock.
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Company to attend each meeting of the Board of Directors of the
Company and each meeting of any Committee thereof.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.0224 per share (the
"Class A Accruing Dividends"). The holders of the Class B Convertible Preferred
Stock shall be
43
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The holders of the Class C Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.1008 per share (the "Class C Accruing Dividends"). The holders
of the Class D Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.2499 per share (the "Class D Accruing Dividends"). The holders of the Class E
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.3451 per share
(the "Class E Accruing Dividends"). The Class A Accruing Dividends, the Class B
Accruing Dividends, and the Class C Accruing Dividends, the Class D Accruing
Dividends and the Class E Accruing Dividends are sometimes referred to herein
collectively as the "Accruing Dividends." Accruing Dividends shall accrue from
day to day, whether or not earned or declared, and shall be cumulative. No
dividend shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock
shall first be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class B Convertible Preferred Stock,
the Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock
and the Class E Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44, $3.57 and $4.93 per share, respectively, plus, in the case of each
share of Class B Convertible Preferred Stock, an amount equal to all Class B
Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class C
Convertible Preferred Stock, an amount equal to all Class C Accruing Dividends
unpaid thereon (whether or not declared), in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), in the case of each share of Class E
Convertible Preferred Stock, an amount equal to all Class E Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes
44
referred to as the "Class B Liquidation Preference Payment," such amount payable
with respect to one share of Class C Convertible Preferred Stock being sometimes
referred to as the "Class C Liquidation Preference Payment," such amount payable
with respect to one share of Class D Convertible Preferred Stock being sometimes
referred to as the "Class D Liquidation Preference Payment", such amount payable
with respect to one share of Class E Convertible Preferred Stock being sometimes
referred to as the "Class E Liquidation Preference Payment," and with respect to
all shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock being sometimes referred to as the "Classes B, C, D and E Liquidation
Preference Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock shall be insufficient to permit payment in full to the holders
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and Class E Convertible Preferred Stock of
the Classes B, C, D and E Liquidation Preference Payments, then the entire
assets of the Corporation to be so distributed shall be distributed ratably, on
an as-converted basis, among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and
Class E Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock shall have
been paid in full the amounts to which they shall be entitled pursuant to
paragraph 4A, the holders of the shares of Class A Convertible Preferred Stock
shall then be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class A Convertible Preferred Stock,
to be paid an amount equal to $.32 per share plus, in the case of each share, an
amount equal to all Class A Accruing Dividends unpaid thereon (whether or not
declared) computed to the date payment thereof is made available, such amount
payable with respect to one share of Class A Convertible Preferred Stock being
sometimes referred to as the "Class A Liquidation Preference Payment" and with
respect to all shares of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payments." The Class A
Liquidation Preference Payments and the Classes B, C, D and E Liquidation
Preference Payments are sometimes referred to herein collectively as the
"Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class A Convertible
Preferred Stock of the Class A Liquidation Preference Payments, then the entire
remaining assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class A Convertible
Preferred Stock shall have been paid in full their respective Liquidation
Preference Payments, the remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of Common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a
45
separate class, and a majority of the Class D Convertible Preferred Stock and at
least forty percent (40%) of the Class E Convertible Preferred Stock then
outstanding, each acting as a separate class, the consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and at least forty percent (40%) of the Class E Convertible
Preferred Stock then outstanding, consenting or voting (as the case may be) as
separate classes, given in writing or by vote at a meeting, the Corporation will
not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends, or increase the
authorized amount of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock or the
Class E Convertible Preferred Stock or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends, or
create or authorize any obligation or security convertible into shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
46
Convertible Preferred Stock or the Class E Convertible Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior to the
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, redemption and the payment of dividends, whether
any such creation, authorization or increase shall be by means of amendment to
the Certificate of Incorporation or by merger, consolidation or otherwise;
provided, that such consent shall not be unreasonably withheld for the creation
or issuance of an additional class or series of shares ranking senior to the
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, redemption and the payment of dividends (a
"Senior Security"), but provided further, that if, within a reasonable time of
the submission of a proposal for the issuance of a Senior Security, information
comes to light indicating that such consent was withheld solely or primarily for
the purpose of negotiating the price of an additional investment by the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and/or the Class E Convertible
Preferred Stock, then such consent shall be deemed to have been unreasonably
withheld for purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any other
entity or entities or sell, lease, abandon, transfer or otherwise dispose of all
or substantially all its assets, unless such action would result in an
annualized return to the holders of the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock and
the Class E Convertible Preferred Stock of at least 30%;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock, except for (i) Class A Accruing Dividends, (ii) dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock, and (iii) the purchase of shares of Common Stock from
former employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price (except in the case of agreements executed prior
to July 12, 1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock except as
expressly authorized in paragraph 7 hereof or
47
pursuant to a purchase offer made pro rata to all holders of the shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on the basis
of the aggregate number of outstanding shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and/or Class E Convertible Preferred Stock then held by each such holder.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock and $4.93 in the case of Class E Convertible Preferred Stock)
and (ii) dividing the result by the conversion price of the Original Purchase
Price of such share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by the conversion
price as last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price," with respect to the
Class B Convertible Preferred Stock, the "Class B Conversion Price," with
respect to the Class C Convertible Preferred Stock, the "Class C Conversion
Price", with respect to the Class D Convertible Preferred Stock, the "Class D
Conversion Price" and with respect to the Class E Convertible Preferred Stock,
the "Class E Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be 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 holders
of the 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.
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose
48
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.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the
shares of Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this subparagraph 6C, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder surrendering the Preferred Stock for conversion an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, or (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price, as the case may be, shall be reduced to the
price determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Class B Conversion Price, the then existing
Class C Conversion Price, the then existing Class D Conversion Price or the then
existing Class E Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for
49
Common Stock (such warrants, rights or options being called "Options" and such
convertible or exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding. Except
as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price and/or the Class E Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maxi-mum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Class B
50
Conversion Price and/or the Class C Conversion Price and/or the Class D
Conversion Price and/or the Class E Conversion Price have been or are to be made
pursuant to other provisions of this subparagraph 6D, no further adjustment of
the Class B Conversion Price, the Class C Conversion Price, The Class D
Conversion Price and/or the Class E Conversion Price shall be made by reason of
such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion Price
or the Class E Conversion Price, as the case may be, which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price then in effect hereunder is thereby reduced; and on the termination or
expiration of any such Option or any such right to convert or exchange such
Convertible Securities, the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price and/or the Class E Conversion Price then in
effect hereunder shall forthwith be increased to the Class B Conversion Price,
Class C Conversion Price, the Class D Conversion Price or Class E Conversion
Price, as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
51
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this
subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price or the Class E Conversion Price in the case
of the issuance from and after the date of filing of these terms of the
Preferred Stock of up to an aggregate of 1,950,000 shares (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G) (the "Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as directors of
the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation (provided that the number of Reserved Shares may
be increased (a) prior to December 31, 1998, with the approval of a majority of
the Board of Directors including the Class B Director, the Class C Director and
the Class D Directors and [(b) after December 31, 1998,
52
with the approval of either (i) a majority of the Board of Directors including
the Class B Director, the Class C Director and the Class D Directors or (ii) all
directors other than the Class B Director, the Class C Director and the Class D
Directors), plus such number of shares of Common Stock which are repurchased by
the Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In case
the Corporation shall at any time subdivide (by any stock split, stock dividend
or otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
53
proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D by reason thereof.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder
54
of any shares of Preferred Stock at the address of such holder as shown on the
books of the Corporation, (a) at least 20 days' prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for deter-mining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up and (b) in the case
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes
55
with the timely conversion of such Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph
6, the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Common Stock receivable upon conversion of shares of
Preferred Stock shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $15,000,000 and (B) the price paid by the public
for such shares shall be at least $4.32 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver 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 such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
56
VII. Redemption. The shares of Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and the Class E Convertible Preferred Stock shall be redeemed as
follows:
7A. Mandatory Redemption. On September 11, 2002, and on
each of the next two anniversaries thereafter (the "Redemption Dates," and each
a "Redemption Date"), the Corporation shall redeem any outstanding shares of
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock according to the percentages listed below:
Percentage of Shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible
Preferred Stock then Outstanding to be Redeemed
Date of Redemption
- --------- ---------- -------------------------------------------------------------
September 11, 2002 33-1/3% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred and Class E Convertible Preferred
Stock outstanding on September 11, 2002
September 11, 2003 50% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible
Preferred Stock outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred and Class E Convertible Preferred
Stock outstanding on September 11, 2004
7B. Redemption Price and Payment. The shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to $0.76, $1.44, $3.57 and $4.93 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G), respectively, plus, in the case of each share, an amount equal to all
dividends, excluding Accruing Dividends, declared but unpaid thereon, computed
to such Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption Date to
the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30
days prior to each Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, to each holder of record
(at the close of business on the business day next preceding the day on which
the Redemption Notice is given) of shares of Class B Convertible Preferred
57
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock notifying such holder of the redemption
and specifying the Redemption Price, such Redemption Date, the number of shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and/or Class E Convertible Preferred Stock
to be re-deemed from such holder (computed on a pro rata basis in accordance
with the number of such shares held by all holders thereof) and the place where
said Redemption Price shall be payable. The Redemption Notice shall be addressed
to each holder at his address as shown by the records of the Corporation. From
and after the close of business on a Redemption Date, unless there shall have
been a default in the payment of the Redemption Price, all rights of holders of
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock (except the right to receive the Redemption Price) shall cease with
respect to the shares to be redeemed on such Redemption Date, and such shares
shall not thereafter be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever. If the funds of the Corporation
legally available for redemption of shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock to be redeemed on such Redemption Date, the holders
of such shares shall share ratably in any funds legally available for redemption
of such shares according to the respective amounts which would be payable to
them if the full number of shares to be redeemed on such Redemption Date were
actually redeemed. The shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock required to be redeemed but not so redeemed shall
remain outstanding and entitled to all rights and preferences provided herein.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock, such funds will be used, at the end of
the next succeeding fiscal quarter, to redeem the balance of such shares, or
such portion thereof for which funds are then legally available, on the basis
set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired.
Any shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under any
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on any
Redemption Date if the cost to the Corporation of such redemption would be
greater than one-half of the Corporation's available average cash working
58
capital balance for the quarter immediately preceding such Redemption Date. If a
redemption is delayed pursuant to this Paragraph 7E, the Corporation shall
redeem the shares to be so redeemed within 120 days of such Redemption Date.
VIII Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock and at least a majority of the then outstanding shares of Class D
Convertible Preferred Stock and at least forty percent (40%) of the Class E
Convertible Preferred Stock then outstanding; provided, however, that so long as
TTC Ventures holds at least two percent (2%) of the outstanding shares of Common
Stock of the Corporation(assuming the conversion of all outstanding Preferred
Stock), no amendment shall be made to the provisions of Section 2C relating to
the representation of the holders of Class D Convertible Preferred Stock without
the consent of TTC Ventures and that so long as ADP holds at least two percent
(2%) of the outstanding shares of common stock of the corporation (assuming the
conversion of all outstanding preferred stock), no amendment shall be made to
the provisions of the sixth sentence of section 2c relating to the
representation of the holders of class d convertible preferred stock without the
consent of apd; PROVIDED FURTHER, HOWEVER, THAT SO LONG AS FBR HOLDS AT LEAST
TWO PERCENT (2%) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE CORPORATION
(ASSUMING THE CONVERSION OF ALL OUTSTANDING PREFERRED STOCK), NO AMENDMENT SHALL
BE MADE TO THE PROVISIONS OF SECTION 2C RELATING TO THE BOARD OBSERVER RIGHTS OF
THE HOLDERS OF CLASS E CONVERTIBLE PREFERRED STOCK WITHOUT THE CONSENT OF FBR.
59
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That at a meeting of the Board of Directors of the Company,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and requesting in writing the consent of the stockholders of said
corporation for consideration thereof. The resolutions setting forth the
proposed amendment are as follows:
RESOLVED, that the name of the Corporation be change to
CareerBuilder, Inc.
FURTHER RESOLVED, that the Board deems it advisable and in the
best interests of the Corporation and its stockholders that
the Certificate of Incorporation, as amended, be further
amended to reflect such name change.
ARTICLE FIRST shall be amended to read as follows:
"The name of the Corporation is CareerBuilder, Inc."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, said amendment was consented to in writing by the stockholders of the
corporation, in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
60
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its President, its authorized officer, this 26th day of February 1998.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: CEO & Chairman
61
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH The aggregate number of shares which the Corporation
shall have authority to issue is 25,948,594 shares consisting of five classes of
stock: 17,000,000 shares of Common Stock ($.001 par value per share); 1,562,500
shares of Class A Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001 par value per
share); 3,188,889 shares of Class C Convertible Preferred Stock ($.001 par value
per share) and 2,045,785 shares of Class D Convertible Preferred Stock ($.001
par value per share). Except as otherwise provided by law or as set forth in
this Amendment, each of the outstanding shares shall have one vote for the
purpose of electing directors and for all other purposes, including but not
limited to an equal participation in any dividends, or other distribution by the
Company. All other relative rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A attached hereto and incorporated
herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
62
IN WITNESS WHEREOF, the Company has caused this certificate of
Amendment to be executed by a duly authorized officer this 22nd day of January,
1998.
NETSTART, INC.
By: /s/ Robert J. McGovern
------------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Gene Austin
---------------------------------
Name: Gene Austin
Title: Secretary
63
EXHIBIT A TO
CERTIFICATE OF AMENDMENT
TERMS OF PREFERRED STOCK
1. Number of Shares. There shall be four classes of Preferred Stock. The
Class A Convertible Preferred Stock shall consist of 1,562,500 shares,
the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C. Convertible Preferred Stock shall consist of
3,188,889 shares and the Class D Convertible Preferred Stock shall
consist of 2,045,785 shares. The Class A. Convertible Preferred Stock,
the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock shall
sometimes be referred to herein collectively as the "Preferred Stock."
2. Voting.
a. 2A. General. Except as may be otherwise
provided in these terms of the Preferred Stock or by law, the Preferred Stock
shall vote together with all other classes and class of stock of the Corporation
as a single class on all actions to be taken by the stockholders of the
Corporation, including, but not limited to actions amending the Certificate of
Incorporation of the Corporation to increase the number of authorized shares of
Common Stock. Each share of Preferred Stock shall entitle the holder thereof to
such number of votes per share on each such action as shall equal the number of
shares of Common Stock (including fractions of a share) into which each share of
Preferred Stock is then convertible.
b. 2B. Board Size. The Corporation shall not,
without the written consent or affirmative vote of the holders of at least two
thirds of the then outstanding shares of Class B Convertible Preferred Stock and
Class D Convertible Preferred Stock consenting or voting (as the case may be) as
a single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of directors to a number in excess of
seven.
c. 2C. Board Seats. So long as the outstanding
Class A Convertible Preferred Stock represents at least 10% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class A. Convertible Preferred Stock,
acting as a separate class, shall be entitled to elect one director of the
Corporation. So long as the outstanding Class B Convertible Preferred Stock
represents at least 5% of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, acting as a separate class, shall be
entitled to elect one director of the Corporation (the "Class B. Director"). So
long as the outstanding Class C Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock),
64
the holders of the Class C Convertible Preferred Stock, acting as a separate
class, shall be entitled to elect one director of the Corporation (the "Class C
Director"). The holders of the Common Stock, acting as a separate class, shall
be entitled to elect two directors of the Corporation. So long as Thomson U.S.
Inc. ("TTC Ventures") owns, beneficially or of record, at least two percent (2%)
of the outstanding Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint one director of the Corporation
(the "Class D Director") and such Class D Director shall be nominated and
appointed by TTC Ventures on behalf of the holders of Class D Convertible
Preferred Stock. So long as ADP, Inc. ("ADP") owns, beneficially or of record,
at least two percent (2%) of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock) and there are
shares of Class D Convertible Preferred Stock outstanding, the holders of the
Class D Convertible Preferred Stock (as adjusted in accordance with subparagraph
6F or 6G), acting as a separate class, shall be entitled to appoint an
additional director of the Corporation (the "Other Class D Director") and such
Other Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director or directors to be elected solely by the holders of the
Class D Convertible Preferred Stock, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class C
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class C Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class C convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock and the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class A
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class A Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred Stock. A
vacancy in any directorship elected by the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock shall be filled only by vote or written consent of the holders
of the Class A Convertible Preferred Stock, Class B Convertible Preferred Stock
or Class C Convertible Preferred Stock respectively; a vacancy in the
directorship allocated to the holders of Class D Convertible Preferred Stock and
nominated by TTC shall be filled only by the appointment by or written consent
of TTC Ventures; a vacancy in the other directorship allocated to the holders of
Class D Convertible Preferred Stock and nominated by ADP shall be filled only by
the appointment by or written consent of ADP; and a vacancy in any directorship
elected by the holders of the Common Stock shall be filled only by vote or
written consent of the holders of the Common Stock.
65
3. Dividends. The holders of the Class A Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
(i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.0224
per share (the "Class A Accruing Dividends"). The holders of the Class
B Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at
the rate per annum of $0.0532 per share (the "Class B Accruing
Dividends"). The holders of the Class C Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
(i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.1008
per share (the 'Class C Accruing Dividends"). The holders of the Class
D Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at
the rate per annum of $0.2499 per share (the "Class D Accruing
Dividends"). The Class A Accruing Dividends, the Class B Accruing
Dividends, and the Class C Accruing Dividends and the Class D Accruing
Dividends are sometimes referred to herein collectively as the
"Accruing Dividends." Accruing Dividends shall accrue from day to day,
whether or not earned or declared, and shall be cumulative. No dividend
shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
4. Liquidation.
a. 4A. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock shall first be entitled, before
any distribution or payment is made upon any stock ranking on liquidation junior
to the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Class D Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44 and $3.57 per share, respectively, plus, in the case of each share
of Class B Convertible Preferred Stock, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other dividends
declared but unpaid thereon, in the case of each share of Class C convertible
Preferred Stock, an amount equal to all Class C Accruing Dividends unpaid
thereon (whether or not declared) and in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes referred to as the "Class B
66
Liquidation Preference Payment," such amount payable with respect to one share
of Class C Convertible Preferred Stock being sometimes referred to as the "Class
C Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment", and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock being sometimes referred to as the "Class B, C and D
Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock of the Classes B, C and D Liquidation Preference Payments, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably, on an as-converted basis, among the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock.
b. 4B. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after the
holders of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock shall have been paid in full the
amounts to which they shall be entitled pursuant to paragraph 4A, the holders of
the shares of Class A. Convertible Preferred Stock shall then be entitled,
before any distribution or payment is made upon any stock ranking on liquidation
junior to the Class A Convertible Preferred Stock, to be paid an amount equal to
$.32 per share plus, in the case of each share, an amount equal to all Class A
Accruing Dividends unpaid thereon (whether or not declared) computed to the date
payment thereof is made available, such amount payable with respect to one share
of Class A convertible Preferred Stock being sometimes referred to as the "Class
A Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Classes B, C and D Liquidation Preference Payments are sometimes
referred to herein collectively as the "Liquidation Preference Payments." If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Class A Convertible Preferred Stock shall be insufficient to permit payment in
full to the holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class A Convertible Preferred Stock.
c. 4C. Upon any such liquidation,
dissolution or winding up of the corporation, immediately after the holders of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class A Convertible Preferred Stock shall have
been paid in full their respective Liquidation Preference Payments, the
remaining net assets of the Corporation available for
67
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a separate class, and a majority of the Class D Convertible
Preferred Stock, acting as a separate class, the consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
d. 4D. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the Liquidation
preference Payments and the place where said Liquidation Preference Payments
shall be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex, not
less than 20 days prior to the payment date stated therein, to the holders of
record of Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation. For purposes hereof, the
Common Stock shall rank on liquidation junior to the Class A Convertible
Preferred Stock, the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock.
5. Registrations. At any time when shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the
Corporation is required by law or by the Certificate of Incorporation,
and in addition to any other vote required by law or the Certificate of
Incorporation, without the approval of the holders of at least a
majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, consenting or voting (as the case may be)
as separate classes, given in writing or by vote at a meeting, the
corporation will not:
a. 5A. Create or authorize the creation of
any additional class or series of shares of stock unless the same ranks junior
to the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Class D Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation,
redemption and the payment of dividends, or increase the authorized amount of
the Class B Convertible Preferred Stock, the Class C Convertible
68
Preferred Stock or the Class D Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock or Class D Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; provided, that such
consent shall not be unreasonably withheld for the creation or issuance of an
additional class or series of shares ranking senior to the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends (a "Senior Security"), but provided further, that if, within a
reasonable time of the submission of a proposal for the issuance of a Senior
Security, information comes to light indicating that such consent was withheld
solely or primarily for the purpose of negotiating the price of an additional
investment by the holders of the Class B Convertible Preferred Stock, the Class
C Convertible Preferred Stock and/or the Class D Convertible Preferred Stock,
then such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
b. 5B. Consent to any liquidation,
dissolution or winding up of the Corporation or consolidate or merge
into or with any other entity or entities or sell, lease, abandon,
transfer or otherwise dispose of all or substantially all its assets,
unless such action would result in an annualized return to the holders
of the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock of at least
30%;
c. 5C. Amend, alter or repeal its
Certificate of Incorporation or By-Laws if the effect would be materially
detrimental or adverse in any manner with respect to the rights of the holders
of the Class B convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock;
d. 5D. Purchase or set aside any sums for
the purchase of, or pay any dividend or make any distribution on, any shares of
stock other than the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, except
for (i) Class A Accruing Dividends, (ii) dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former employees of
the Corporation who acquired such shares directly from the Corporation,
69
if each such purchase is made pursuant to contractual rights held by the
Corporation relating to the termination of employment of such former employee
and the purchase price (except in the case of agreements executed prior to July
12, 1996) does not exceed the original issue price paid by such former employee
to the Corporation for such shares; or
e. 5E. Redeem or otherwise acquire any
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock except as expressly authorized in
paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders
of the shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on the basis of the
aggregate number of outstanding shares of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock and/or Class D Convertible Preferred Stock
then held by each such holder.
Prior to the completion of the sale of up to 2,045,785 shares of Class
D Convertible Preferred Stock as set forth in the Class D Convertible Preferred
Stock Purchase Agreement, dated as of September 11, 1997, as amended, if a vote
concerning any of the matters set forth in this Section 5 results in a tie and
the results of such vote would equally affect each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, the tie-breaking vote shall be cast by the Chief
Executive Officer of the Company. Upon the completion of such sale of the Class
D Convertible Preferred Stock, the provisions of this paragraph shall no longer
remain in effect.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
a. 6A. Right to Convert. Subject to the
terms and conditions of this paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock and $3.57 in the case of Class D Convertible
Preferred Stock) and (ii) dividing the result by the conversion price equal to
the Original Purchase Price of such share or, in case an adjustment of such
price has taken place pursuant to the further provisions of this paragraph 6,
then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (such price,
or such price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B Conversion
Price," with respect to the Class C Convertible Preferred Stock, the "Class C
Conversion Price" and, with respect to the Class D Convertible Preferred Stock,
the "Class D Conversion Price"). Such rights of conversion shall be exercised by
the
70
holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be 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 holders
of the 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.
b. 6B. Issuance of Certificates; Time
Conversion Effected. Promptly after the receipt of the written notice referred
to in subparagraph 6A and surrender of the certificate or certificates for the
share or shares of Preferred Stock to be converted, the Corporation shall issue
and deliver, or cause to be issued and delivered, to the holder, registered in
such name or names as such holder may direct, a certificate or certificates for
the number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of 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.
c. 6C. Fractional Shares; Dividends;
Partial Conversion. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends, excluding Accruing Dividends, accrued
and unpaid on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B. In case the number of shares of Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Preferred Stock
represented by the certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Corporation.
71
d. 6D. Adjustment of Price Upon Issuance of
Common Stock. Except as provided in subparagraph 6E, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares or Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, or (iii)
the Class D Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, the Class B Conversion
Price, the Class C Conversion Price and/or the Class D Conversion Price, as the
case may be, shall be reduced to the price determined by dividing (i) an amount
equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price, the then existing Class C Conversion Price or the then
existing Class D Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
i) 6D(1) Issuance of Rights or
Options. In case at any time the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any warrants or other rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or security convertible into or exchangeable for Common Stock
(such warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Class B Conversion Price, the Class C Conversion Price and/or the Class
D Conversion Price in effect immediately prior to the time of the granting of
such Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Class B Conversion Price, the Class C
72
Conversion Price and/or the Class D Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
ii) 6D(2) Issuance of Convertible
Securities. In case the Corporation shall in any manner issue (whether directly
or by assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for which the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Class B Conversion
Price and/or the Class C Conversion Price and/or the Class D Conversion Price
have been or are to be made pursuant to other provisions of this subparagraph
6D, no further adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made by reason of
such issue or sale.
iii) 6D(3) Change in Option Price or
Conversion Rate. Upon the happening of any of the following events, namely, if
the purchase price provided for in any Option referred to in subparagraph 6D(1),
the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the
rate at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2)
are convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price in effect at the time of
such event shall forthwith be readjusted to the Class B Conversion Price, Class
C Conversion Price or the Class D Conversion Price, as the case may be, which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or
73
conversion rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Class B Conversion Price,
the Class C Conversion Price and/or the Class D Conversion Price then in effect
hereunder is thereby reduced; and on the termination or expiration of any such
Option or any such right to convert or exchange such Convertible Securities, the
Class B Conversion Price, the Class C Conversion Price and/or the Class D
Conversion Price then in effect hereunder shall forthwith be increased to the
Class B Conversion Price, Class C Conversion Price or Class D Conversion Price,
as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
iv) 6D(4) Stock Dividends. In case
the Corporation shall declare a dividend or make any other distribution upon any
stock of the Corporation (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
v) 6D(5) Consideration of Stock. In
case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any shares of Common
Stock Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
vi) 6D(6) Record Date. In case the
Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
74
vii) 6D(7) Treasury Shares. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the disposition of
any such shares shall be considered an issue or sale or Common Stock for the
purpose of this subparagraph 6D.
e. 6E. Certain Issues of Common Stock
Excepted. Anything herein to the contrary notwithstanding, the Corporation shall
not be required to make any adjustment of the Class B Conversion Price, the
Class C Conversion Price or the Class D Conversion Price in the case of the
issuance from and after the date of filing of these terms of the Preferred Stock
of up to an aggregate of 1,950,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G) (the "Reserved
Shares") of Common Stock to directors, officers, employees or consultants of the
Corporation in connection with their service as directors of the Corporation,
their employment by the Corporation or their retention as consultants by the
Corporation (provided that the numbers of Reserved Shares may be increased (a)
prior to December 31, 1998, with the approval of a majority of the Board of
Directors including the Class B Director, the Class C Director, the Class D
Director and the Other Class D Director and (b) after December 31, 1998, with
the approval of either (i) a majority of the Board of Directors including the
Class B Director, the Class C Director, the Class D Director and the Other Class
D Director or (ii) all directors other than the Class B Director, the Class C
Director, the Class D Director and the Other Class D Director), plus such number
of shares of Common Stock which are repurchased by the Corporation from such
persons after such date pursuant to contractual rights held by the Corporation
and at repurchase prices not exceeding the respective original purchase price
paid by such persons to the Corporation therefor.
f. 6F. Subdivision or Combination of Common
Stock. In case the corporation shall at any time subdivide (by any stock split,
stock dividend or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the case of any such subdivision, no
further adjustment shall be made pursuant to subparagraph 6D by reason thereof.
g. 6G. Reorganization or Reclassification.
If any capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as
75
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversions Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
h. 6H. Notice of Adjustment. Upon any
adjustment of the Conversion Price, then and in each such case the Corporation
shall give written notice thereof, by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, addressed to
each holder of shares or Preferred Stock at the address of such holder as shown
on the books of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
i. 6I. Other Notices. In case at any time:
(1) the Corporation shall
declare any dividend upon its Common Stock payable in cash or stock or make any
other distribution to the holders of its Common Stock;
(2) the Corporation shall offer
for subscription pro rata to the holders of its Common Stock any additional
shares for stock of any class or other rights;
(3) there shall be any equal
reorganization or reclassification of the capital stock of the Corporation, or a
consideration or merger of the Corporation with or into another equity or
entities; or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder or any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding
76
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto and such
notice in accordance with the foregoing clause (b) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
J. 6J. Stock to be Reserved. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation.
K. 6K. Non Reissuance of Preferred Stock.
Shares of Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
L. 6L. Issue Tax. The issuance of
certificates for shares of Common Stock upon conversion of Preferred Stock shall
be made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Preferred Stock which is being converted.
M. 6M. Closing of Books. The Corporation
will at no time close its transfer books against the transfer of any Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Preferred Stock in any manner which interferes with the timely
conversion of such Preferred Stock, except as may otherwise be required to
comply with applicable securities laws.
77
N. 6N. Definition of Common Stock. As used
in this paragraph 6, the term Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as constituted
on the date of filing of these terms of the Preferred Stock, and shall also
include any capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares designated as
Common Stock of the Corporation on the date of filing of this instrument, or in
case of any reorganization of reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in subparagraph 6G.
O. 6O. Mandatory Conversion. If at any
time (i) the Corporation shall effect a firm commitment underwritten public
offering of shares of Common Stock in which (A) the aggregate price paid for
such shares by the public shall be at least $15,000,000 and (B) the price paid
by the public for such shares shall be at least $4.32 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraph 6F),
or (ii) a Liquidity Event shall occur in which (a) the holders of shares of any
class of Preferred Stock would receive consideration for all of such shares (as
if converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock is convertible; at least
$5.76 for (i) each share of Class C Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class C Convertible Preferred
Stock is convertible; or at least $6.03 per share for (i) each share of Class D
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class D Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver 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 such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
78
VII. Redemption. The shares of Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On September
11, 2002, and on each of the next two anniversaries thereafter (the "Redemption
Dates," and each a "Redemption Date"), the Corporation shall redeem any
outstanding shares of Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock
according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B Convertible Preferred
Stock, Class C Conver tible Preferred Stock and
Class D Conver tible Preferr ed Stock then Outsta
nding to be Redeemed
September 11, 2002 33-1/3% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2002.
September 11, 2003 50% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2004
B. 7B. Redemption Price and Payment. The
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on any Redemption
Date shall be redeemed by paying for each share in cash an amount equal to
$0.76, $1.44 and $3.57 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but upon thereon, computed to such Redemption Date,
such amount being referred to as the "Redemption Price." Such payment shall be
made in full on the applicable Redemption Date to the holders entitled thereto.
C. 7C. Redemption Mechanics. At least 20
but not more than 30 days prior to each Redemption Date, written notice (the
"Redemption Notice") shall be given by the Corporation by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex, to
each holder of record (at the close of business on the business day next
preceding the day on which the Redemption Notice is given)
79
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date, the number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and/or Class D Convertible Preferred Stock to be redeemed from such holder
(computed on a pro rata basis in accordance with the number of such shares held
by all holders thereof) and the place where said Redemption Price shall be
payable. The Redemption Notice shall be addressed to each holder at his address
as shown by the records of the Corporation. From and after the close of business
on a Redemption Date, unless there shall have been a default in the payment of
the Redemption Price, all rights of holder of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock (except the right to receive the Redemption Price) shall cease
with respect to the shares to be redeemed on such Redemption Date, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of such shares shall share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable to them if the full number of shares to be redeemed on
such Redemption Date were actually redeemed. The shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock and Class D Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
D. 7D. Redeemed or Otherwise Acquired
Shares to be Retired. Any shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock redeemed
pursuant to this paragraph 7 or otherwise acquired by the Corporation in any
manner whatsoever shall be canceled and shall not under any circumstances be
reissued; and the Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce accordingly the number of
authorized shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock.
E. 7E. Delay of Redemption.
Notwithstanding paragraph 7A hereof, the Corporation shall not be required to
redeem any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on any Redemption Date
if the cost to the Corporation of such redemption would be greater than one-half
of the Corporation's available average
80
cash working capital balance for the quarter immediately preceding such
Redemption Date. If a redemption is delayed pursuant to this Paragraph 7E, the
Corporation shall redeem the shares to be so redeemed within 120 days of such
Redemption Date.
VIII. Amendments. No provision of these terms of the Preferred Stock may be
amended, modified or waived without the written consent or affirmative
vote of the holders of at least two-thirds of the then outstanding
shares of Class D Convertible Preferred Stock and Class C Convertible
Preferred Stock and at least a majority of the then outstanding shares
of Class D Convertible Preferred Stock; provided, however, that so long
as TTC Ventures holds at least two percent (2%) of the outstanding
shares of Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock), no amendment shall be made to the
provisions of Section 2C relating to the representation of the holders
of Class D Convertible Preferred Stock without the consent of TTC
Ventures and that so long as ADP holds at least two percent (2%) of the
outstanding shares of Common Stock of the Corporation (assuming
the conversion of all outstanding Preferred Stock), no amendment shall
be made to the provisions of the sixth sentence of Section 2C relating
to the representation of the holders of Class D Convertible Preferred
Stock without the consent of ADP.
81
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Corporation
shall have authority to issue is 24,948,594 shares consisting
of five classes of stock: 16,000,000 shares of Common Stock
($.001 par value per share); 1,562,500 shares of Class A
Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001
par value per share); 3,188,889 shares of Class C Convertible
Preferred Stock ($.001 par value per share) and 2,045,785
shares of Class D Convertible Preferred Stock ($.001 par value
per share). Except as otherwise provided by law or as set
forth in this Amendment, each of the outstanding shares shall
have one vote for the purpose of electing directors and for
all other purposes, including but not limited to an equal
participation in any dividends, or other distribution by the
Company. All other relative rights, preferences and
limitations of the shares of each class of stock are set forth
in Exhibit A attached hereto and incorporated herein by this
reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
82
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be executed by a duly authorized officer this 8th day of September,
1997.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Thomas J. Young
------------------------------
Name: Thomas J. Young
Title: Assistant Secretary
83
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be four classes
of Preferred Stock. The Class A Convertible Preferred Stock shall consist of
1,562,500 shares, the Class B Convertible Preferred Stock shall consist of
2,151,420 shares, the Class C Convertible Preferred Stock shall consist of
3,188,889 shares and the Class D Convertible Preferred Stock shall consist of
2,045,785 shares. The Class A Convertible Preferred Stock, the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock and the
Class D Convertible Preferred Stock shall sometimes be referred to herein
collectively as the "Preferred Stock."
II. Voting.
A. 2A. General. Except as may be
otherwise provided in these terms of the Preferred Stock or by law, the
Preferred Stock shall vote together with all other classes and class of stock of
the Corporation as a single class on all actions to be taken by the stockholders
of the Corporation, including, but not limited to actions amending the
Certificate of Incorporation of the Corporation to increase the number of
authorized shares of Common Stock. Each share of Preferred Stock shall entitle
the holder thereof to such number of votes per share on each such action as
shall equal the number of shares of Common Stock (including fractions of a
share) into which each share of Preferred Stock is then convertible.
B. 2B. Board Size. The
Corporation shall not, without the written consent or affirmative vote of the
holders of at least two-thirds of the then outstanding shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
C. 2C. Board Seats. So long as
the outstanding Class A Convertible Preferred Stock represents at least 10% of
the outstanding Common Stock of the Corporation (assuming the conversion of all
outstanding Preferred Stock), the holders of the Class A Convertible Preferred
Stock, acting as a separate class, shall be entitled to elect one director of
the Corporation. So long as the outstanding Class B Convertible Preferred Stock
represents at least 5% of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, acting as a separate class, shall be
entitled to elect one director of the Corporation (the "Class B Director"). So
long as the outstanding Class C Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class C Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class C Director"). The holders
84
of the Common Stock, acting as a separate class, shall be entitled to elect two
directors of the Corporation. So long as Thomson U.S. Inc. ("TTC Ventures")
owns, beneficially or of record, at least two percent (2%) of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class D Convertible Preferred Stock (as
adjusted in accordance with subparagraph 6F or 6G), acting as a separate class,
shall be entitled to appoint one director of the Corporation (the "Class D
Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. A
seventh director of the Corporation shall be such person, if any, who has
received a majority vote of the holders of each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, each acting as a separate class, and a majority
vote of the holders of the Common Stock, acting as a separate class. At any
meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class D Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class D Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class D Convertible Preferred Stock, the presence in person or by
proxy (or the written consent) of the holders of a majority of the shares of
Class C Convertible Preferred Stock then outstanding shall constitute a quorum
of the Class C Convertible Preferred Stock for the election of the director to
be elected solely by the holders of the Class C Convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock, and the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class A
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class A Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred Stock. A
vacancy in any directorship elected by the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock shall be filled only by vote or written consent of the holders
of the Class A Convertible Preferred Stock, Class B Convertible Preferred Stock
or Class C Convertible Preferred Stock respectively; a vacancy in the
directorship allocated to the holders of Class D Convertible Preferred Stock
shall be filled only by the appointment by or written consent of TTC Ventures;
and a vacancy in any directorship elected by the holders of the Common Stock
shall be filled only by vote or written consent of the holders of the Common
Stock.
III. Dividends. The holders of the Class A
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.0224 per share
(the "Class A Accruing Dividends"). The holders of the Class B Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or
85
(ii) upon any liquidation, dissolution or winding up of the Corporation,
quarterly dividends at the rate per annum of $0.0532 per share (the "Class B
Accruing Dividends"). The holders of the Class C Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor, (i) when
and if declared by at least four members of the Board of Directors, or (ii) upon
any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.1008 per share (the "Class C Accruing
Dividends"). The holders of the Class D Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.2499 per share (the "Class D Accruing Dividends").
The Class A Accruing Dividends, the Class B Accruing Dividends, and the Class C
Accruing Dividends and the Class D Accruing Dividends are sometimes referred to
herein collectively as the "Accruing Dividends." Accruing Dividends shall accrue
from day to day, whether or not earned or declared, and shall be cumulative. No
dividend shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
IV. Liquidation.
A. 4A. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall first
be entitled, before any distribution or payment is made upon any stock ranking
on liquidation junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, to be
paid an amount equal to $0.76, $1.44 and $3.57 per share, respectively, plus, in
the case of each share of Class B Convertible Preferred Stock, an amount equal
to all Class B Accruing Dividends unpaid thereon (whether or not declared) and
any other dividends declared but unpaid thereon, in the case of each share of
Class C Convertible Preferred Stock, an amount equal to all Class C Accruing
Dividends unpaid thereon (whether or not declared) and in the case of each share
of Class D Convertible Preferred Stock, an amount equal to all Class D Accruing
Dividends paid thereon (whether or not declared), and any other dividends
declared but unpaid thereon, computed to the date payment thereof is made
available, such amount payable with respect to one share of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payment," such amount payable with respect to one share of Class C
Convertible Preferred Stock being sometimes referred to as the "Class C
Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment", and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock being sometimes referred to as the "Classes B, C and
D Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders
86
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock of the Classes B, C and D Liquidation
Preference Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably, on an as-converted basis, among the
holders of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock.
B. 4B. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock shall have been paid in
full the amounts to which they shall be entitled pursuant to paragraph 4A, the
holders of the shares of Class A Convertible Preferred Stock shall then be
entitled, before any distribution or payment is made upon any stock ranking on
liquidation junior to the Class A Convertible Preferred Stock, to be paid an
amount equal to $.32 per share plus, in the case of each share, an amount equal
to all Class A Accruing Dividends unpaid thereon (whether or not declared)
computed to the date payment thereof is made available, such amount payable with
respect to one share of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payment" and with respect to
all shares of Class A Convertible Preferred Stock being sometimes referred to as
the "Class A Liquidation Preference Payments." The Class A Liquidation
Preference Payments and the Classes B, C and D Liquidation Preference Payments
are sometimes referred to herein collectively as the "Liquidation Preference
Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class A Convertible Preferred Stock shall be insufficient
to permit payment in full to the holders of Class A Convertible Preferred Stock
of the Class A Liquidation Preference Payments, then the entire remaining assets
of the Corporation to be so distributed shall be distributed ratably among the
holders of Class A Convertible Preferred Stock.
C. 4C. Upon any such liquidation,
dissolution or winding up of the Corporation, immediately after the holders of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class A Convertible Preferred Stock shall have
been paid in full their respective Liquidation Preference Payments, the
remaining net assets of the Corporation available for distribution shall be
distributed ratably among the holders of Preferred Stock and Common Stock (with
each share of Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into which
such share of Preferred Stock is convertible immediately prior to the close of
business on the business day fixed for such distribution). Unless otherwise
agreed by holders of at least two-thirds of the Class B Convertible Preferred
Stock and the Class C Convertible Preferred Stock, each acting as a separate
class, and a majority of the Class D Convertible Preferred Stock, acting as a
separate class, the consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding shares of
the Corporation for securities or other consideration issued or paid or caused
to be issued or paid by any such entity or affiliate thereof (other than a
merger to reincorporate the Corporation in a different jurisdiction), and the
sale, lease,
87
abandonment, transfer or other disposition by the Corporation of all or
substantially all its assets (each such event a "Liquidity Event"), shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of the provisions of this paragraph 4.
D. 4D. Written notice of such
liquidation, dissolution or winding up, stating a payment date, the amount of
the Liquidation Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, not less than 20 days prior to the payment date stated therein, to the
holders of record of Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. For purposes
hereof, the Common Stock shall rank on liquidation junior to the Class A
Convertible Preferred Stock, the Class B Convertible Preferred Stock, the Class
C Convertible Preferred Stock and the Class D Convertible Preferred Stock.
V. Restrictions. At any time when shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the Corporation
is required by law or by the Certificate of Incorporation, and in addition to
any other vote required by law or the Certificate of Incorporation, without the
approval of the holders of at least a majority of the then outstanding shares of
the Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
the Class D Convertible Preferred Stock, consenting or voting (as the case may
be) as separate classes, given in writing or by vote at a meeting, the
Corporation will not:
A. 5A. Create or authorize the
creation of any additional class or series of shares of stock unless the same
ranks junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or increase the authorized
amount of the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock or the Class D Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock or Class D Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be
88
by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; provided, that such consent shall not be
unreasonably withheld for the creation or issuance of an additional class or
series of shares ranking senior to the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock and the Class D Convertible Preferred Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends (a "Senior
Security"), but provided further, that if, within a reasonable time of the
submission of a proposal for the issuance of a Senior Security, information
comes to light indicating that such consent was withheld solely or primarily for
the purpose of negotiating the price of an additional investment by the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock, then such consent shall be
deemed to have been unreasonably withheld for purposes of this subparagraph 5A.
B. 5B. Consent to any liquidation,
dissolution or winding up of the Corporation or consolidate or merge into or
with any other entity or entities or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all its assets, unless such action would result
in an annualized return to the holders of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock of at least 30%;
C. 5C. Amend, alter or repeal its
Certificate of Incorporation or By-Laws if the effect would be materially
detrimental or adverse in any manner with respect to the rights of the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock;
D. 5D. Purchase or set aside any
sums for the purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, except
for (i) Class A Accruing Dividends, (ii) dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former employees of
the Corporation who acquired such shares directly from the Corporation, if each
such purchase is made pursuant to contractual rights held by the Corporation
relating to the termination of employment of such former employee and the
purchase price (except in the case of agreements executed prior to July 12,
1996) does not exceed the original issue price paid by such former employee to
the Corporation for such shares; or
E. 5E. Redeem or otherwise acquire
any shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock except as expressly authorized in
paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders
of the shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D
89
Convertible Preferred Stock on the basis of the aggregate number of outstanding
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and/or Class D Convertible Preferred Stock then held by each such holder.
Prior to the completion of the sale of up to 2,045,785 shares of Class
D Convertible Preferred Stock as set forth in the Class D Convertible Preferred
Stock Purchase Agreement, dated as of September 11, 1997, if a vote concerning
any of the matters set forth in this Section 5 results in a tie and the results
of such vote would equally affect each of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock, the tie- breaking vote shall be cast by the Chief Executive
Officer of the Company. Upon the completion of such sale of the Class D
Convertible Preferred Stock, the provisions of this paragraph shall no longer
remain in effect.
VI. Conversions. The holders of shares of
Preferred Stock shall have the following conversion rights:
A. 6A. Right to Convert. Subject
to the terms and conditions of this paragraph 6, the holder of any share or
shares of Preferred Stock shall have the right, at its option at any time, to
convert any such shares of Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by the Original Purchase
Price of such share (which shall be $0.32 in the case of the Class A Convertible
Preferred Stock, $.76 in the case of Class B Convertible Preferred Stock, $1.44
in the case of Class C Convertible Preferred Stock and $3.57 in the case of
Class D Convertible Preferred Stock) and (ii) dividing the result by the
conversion price of the Original Purchase Price of such share or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Preferred Stock are surrendered for conversion
(such price, or such price as last adjusted, being referred to as the
"Conversion Price," with respect to the Class B Convertible Preferred Stock, the
"Class B Conversion Price," with respect to the Class C Convertible Preferred
Stock, the "Class C Conversion Price" and, with respect to the Class D
Convertible Preferred Stock, the "Class D Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be 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 holders of the 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.
B. 6B. Issuance of Certificates;
Time Conversion Effected. Promptly after the receipt of the written notice
referred to in subparagraph 6A
90
and surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation and the certificate or certificates for such
share or shares shall have been surrendered as aforesaid, and at such time the
rights of the holder of such share or shares of 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.
C. 6C. Fractional Shares;
Dividends; Partial Conversion. No fractional shares shall be issued upon
conversion of Preferred Stock into Common Stock and no payment or adjustment
shall be made upon any conversion on account of any cash dividends on the Common
Stock issued upon such conversion. At the time of each conversion, the
Corporation shall pay in cash an amount equal to all dividends, excluding
Accruing Dividends, accrued and unpaid on the shares of Preferred Stock
surrendered for conversion to the date upon which such conversion is deemed to
take place as provided in subparagraph 6B. In case the number of shares of
Preferred Stock represented by the certificate or certificates surrendered
pursuant to subparagraph 6A exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder, at
the expense of the Corporation, a new certificate or certificates for the number
of shares of Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted. If any fractional share of Common
Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
D. 6D. Adjustment of Price Upon
Issuance of Common Stock. Except as provided in subparagraph 6E, if and whenever
the Corporation shall issue or sell, or is, in accordance with subparagraphs
6D(1) through 6D(7), deemed to have issued or sold, any shares of Common Stock
for a consideration per share less than (i) the Class B Conversion Price in
effect immediately prior to the time of such issue or sale, (ii) the Class C
Conversion Price in effect immediately prior to the time of such issue or sale,
or (iii) the Class D Conversion Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price, as the case may be, shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (a) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Class B Conversion Price, the then existing Class C Conversion Price or
the then existing Class D Conversion Price, as the
91
case may be, and (b) the consideration, if any, received by the Corporation upon
such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
1. 6D(1) Issuance of Rights
or Options. In case at any time the Corporation shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any warrants or
other rights to subscribe for or to purchase, or any options for the purchase
of, Common Stock or any stock or security convertible into or exchangeable for
Common Stock (such warrants, rights or options being called "Options" and such
convertible or exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
2. 6D(2) Issuance of
Convertible Securities. In case the Corporation shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the total amount received or receivable by the
92
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Class B Conversion
Price and/or the Class C Conversion Price and/or the Class D Conversion Price
have been or are to be made pursuant to other provisions of this subparagraph
6D, no further adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made by reason of
such issue or sale.
3. 6D(3) Change in Option
Price or Conversion Rate. Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option referred to in
subparagraph 6D(1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to in
subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for Common
Stock shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price or the Class D Conversion
Price, as the case may be, which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price, the Class C Conversion Price and/or the
Class D Conversion Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to convert or
exchange such Convertible Securities, the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price then in effect hereunder
shall forthwith be increased to the Class B Conversion Price, Class C Conversion
Price or Class D Conversion Price, as the case may be, which would have
been in effect at the time of such termination or expiration had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
termination or expiration, never been issued.
93
4. 6D(4) Stock Dividends.
In case the Corporation shall declare a dividend or make any other distribution
upon any stock of the Corporation (other than the Common Stock) payable in
Common Stock, Options or Convertible Securities, then any Common Stock, Options
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
5. 6D(5) Consideration for
Stock. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
6. 6D(6) Record Date. In
case the Corporation shall take a record of the holders of its Common Stock for
the purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
7. 6D(7) Treasury Shares.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock for the purpose of this subparagraph 6D.
E. 6E. Certain Issues of Common
Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Class B Conversion Price,
the Class C Conversion Price or the Class D Conversion Price in the case of the
issuance from and after the date of filing of these terms of the Preferred Stock
of up to an aggregate of 1,950,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G) (the "Reserved
Shares") of Common Stock to directors, officers,
94
employees or consultants of the Corporation in connection with their service as
directors of the Corporation, their employment by the Corporation or their
retention as consultants by the Corporation (provided that the number of
Reserved Shares may be increased (a) prior to December 31, 1998, with the
approval of a majority of the Board of Directors including the Class B Director,
the Class C Director and the Class D Director and (b) after December 31, 1998,
with the approval of either (i) a majority of the Board of Directors including
the Class B Director, the Class C Director and the Class D Director or (ii) all
directors other than the Class B Director, the Class C Director and the Class D
Director), plus such number of shares of Common Stock which are repurchased by
the Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor.
F. 6F. Subdivision or Combination
of Common Stock. In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased. In the case of any such
subdivision, no further adjustment shall be made pursuant to subparagraph 6D by
reason thereof.
G. 6G. Reorganization or
Reclassification. If any capital reorganization or reclassification of the
capital stock of the Corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization or reclassification, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Preferred Stock shall thereupon have
the right to receive, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
receivable upon the conversion of such share or shares of Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such reorganization or reclassification not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
H. 6H. Notice of Adjustment. Upon
any adjustment of the Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by delivery in person, certified
or registered mail, return receipt
95
requested, telecopier or telex, addressed to each holder of shares of Preferred
Stock at the address of such holder as shown on the books of the Corporation,
which notice shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such calculation is
based.
I. 6I. Other Notices. In case at
any time:
(1) the Corporation
shall declare any dividend upon its Common Stock payable in cash or stock or
make any other distribution to the holders of its Common Stock;
(2) the Corporation
shall offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;
(3) there shall be any
capital reorganization or reclassification of the capital stock of the
Corporation, or a consolidation or merger of the Corpo ration with or into
another entity or entities, or a sale, lease, abandonment, transfer or other
dispo sition of all or substantially all its assets; or
(4) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation; then, in any one or more of said cases, the Corporation shall give,
by delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of any shares of Preferred Stock
at the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
J. 6J. Stock to be Reserved. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of
96
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation.
K. 6K. No Reissuance of Preferred
Stock. Shares of Preferred Stock which are converted into shares of Common Stock
as provided herein shall not be reissued.
L. 6L. Issue Tax. The issuance of
certificates for shares of Common Stock upon conversion of Preferred Stock shall
be made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Preferred Stock which is being converted.
M. 6M. Closing of Books. The
Corporation will at no time close its transfer books against the transfer of any
Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
N. 6N. Definition of Common Stock.
As used in this paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as constituted
on the date of filing of these terms of the Preferred Stock, and shall also
include any capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares designated as
Common Stock of the Corporation on the date of filing of this instrument, or in
case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in subparagraph 6G.
97
O. 6O. Mandatory Conversion. If
at any time (i) the Corpo ration shall effect a firm commitment underwritten
public offering of shares of Common Stock in which (A) the aggregate price paid
for such shares by the public shall be at least $15,000,000 and (B) the price
paid by the public for such shares shall be at least $4.32 per share
(appropriately adjusted to reflect the occurrence of any event described in
subparagraph 6F), or (ii) a Liquidity Event shall occur in which (a) the holders
of shares of any class of Preferred Stock would receive consideration for all of
such shares (as if converted to Common Stock) of at least $1.28 for (i) each
share of Class A Convertible Preferred Stock or (ii) all shares of Common Stock
into which such share of Class A Convertible Preferred Stock is convertible; at
least $3.04 for (i) each share of Class B Convertible Preferred Stock or (ii)
all shares of Common Stock into which such share of Class B Convertible
Preferred Stock is convertible; at least $5.76 for (i) each share of Class C
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class C Convertible Preferred Stock is convertible; or at least $6.03
per share for (i) each share of Class D Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class D Convertible Preferred
Stock is convertible, then effective upon the closing of the sale of such shares
by the Corporation pursuant to such public offering or immediately prior to the
occurrence of such Liquidity Event, as the case may be, all outstanding shares
of Preferred Stock (in the case of a public offering) or such class of Preferred
Stock (in the case of a Liquidity Event) shall automatically convert to shares
of Common Stock on the basis set forth in this paragraph 6. Holders of shares of
Preferred Stock so converted may deliver 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 such holders) during its usual business hours,
the certificate or certificates for the shares so converted. As promptly as
practicable thereafter, the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder may be entitled pursuant to
subparagraph 6C. Until such time as a holder of shares of Preferred Stock shall
surrender his or its certificates therefor as provided above, such certificates
shall be deemed to represent the shares of Common Stock to which such holder
shall be entitled upon the surrender thereof.
VII. Redemption. The shares of Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock and the
Class D Convertible Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On
September 11, 2002, and on each of the next two anniversaries thereafter (the
"Redemption Dates," and each a "Redemption Date"), the Corporation shall redeem
any outstanding shares of Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock
according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B Convertible
Preferred
98
Stock, Class C Convertible Preferred Stock
and Class D Convertible Preferred Stock then
Outstanding to be Redeemed
September 11, 2002 33-1/3% of all the shares of Class B
Convert ible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2002
September 11, 2003 50% of all the shares of Class B
Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B
Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2004
B. 7B. Redemption Price and
Payment. The shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock to be redeemed on any
Redemption Date shall be redeemed by paying for each share in cash an amount
equal to $0.76, $1.44 and $3.57 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price". Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
C. 7C. Redemption Mechanics. At
least 20 but not more than 30 days prior to each Redemption Date, written notice
(the "Redemption Notice") shall be given by the Corporation by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, to each holder of record (at the close of business on the business day
next preceding the day on which the Redemption Notice is given) of shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock notifying such holder of the redemption and
specifying the Redemption Price, such Redemption Date, the number of shares of
99
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and/or
Class D Convertible Preferred Stock to be redeemed from such holder (computed on
a pro rata basis in accordance with the number of such shares held by all
holders thereof) and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each holder at his address as shown by
the records of the Corporation. From and after the close of business on a
Redemption Date, unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock (except the right to receive the Redemption Price) shall cease
with respect to the shares to be redeemed on such Redemption Date, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of such shares shall share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable to them if the full number of shares to be redeemed on
such Redemption Date were actually redeemed. The shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock and Class D Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
D. 7D. Redeemed or Otherwise
Acquired Shares to be Retired. Any shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock and Class D Convertible Preferred
Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under any
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock.
E. 7E. Delay of Redemption.
Notwithstanding paragraph 7A hereof, the Corporation shall not be required to
redeem any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on any Redemption Date
if the cost to the Corporation of such redemption would be greater than one-half
of the Corporation's available average cash working capital balance for the
quarter immediately preceding such Redemption
100
Date. If a redemption is delayed pursuant to this Paragraph 7E, the Corporation
shall redeem the shares to be so redeemed within 120 days of such Redemption
Date.
VIII. Amendments. No provision of these terms of
the Preferred Stock may be amended, modified or waived without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock and at least a majority of the then outstanding
shares of Class D Convertible Preferred Stock; provided, however, that so long
as TTC Ventures holds at least two percent (2%) of the outstanding shares of
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), no amendment shall be made to the provisions of Section 2C
relating to the representation of the holders of Class D Convertible Preferred
Stock without the consent of TTC Ventures.
101
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which Corporation shall
have authority to issue is 21,902,809 shares consisting of
four classes of stock: 15,000,000 shares of Common Stock
($.001 par value per share); 1,562,500 shares of Class A
Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001
par value per share) and 3,188,889 shares of Class C
Convertible Preferred Stock ($.001 par value per share).
Except as otherwise provided by law or as set forth in this
Amendment, each of the outstanding shares shall have one vote
for the purpose of electing directors and for all other
purposes, including but not limited to an equal participation
in any dividends, or other distribution by the Company. All
other relative rights, preferences and limitations of the
shares of each class of stock are set forth in Exhibit A
attached hereto and incorporated herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
102
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be executed by a duly authorized officer this 9th day of January,
1997.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Thomas Young
-----------------------------
Name: Thomas Young
Title: Assistant Secretary
103
TERMS OF PREFERRED STOCK
1. Number of Shares. There shall be three classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, and the Class C Convertible Preferred Stock shall consist of 3,188,889
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, and the Class C Convertible Preferred Stock shall sometimes be
referred to herein collectively as the "Preferred Stock."
2. Voting.D. 2A. General. Except as may be otherwise provided
in these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
B. 2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least
two-thirds of the then outstanding shares of Class B Convertible
Preferred Stock and Class C Convertible Preferred Stock, consenting or
voting (as the case may be) as a single class, given in writing or by
vote at a meeting, increase the maximum number of directors
constituting the Board of Directors to a number in excess of six.
C. 2C. Board Seats. So long as the outstanding Class
A Convertible Preferred Stock represents at least 10% of the
outstanding Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock), the holders of the Class A
Convertible Preferred Stock, voting as a separate class, shall be
entitled to elect one director of the Corporation. So long as the
outstanding Class B Convertible Preferred Stock represents at least 5%
of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, voting as a separate class, shall
be entitled to elect one director of the Corporation (the "Class B
Director"). So long as the outstanding Class C Convertible Preferred
Stock represents at least 5% of the outstanding Common Stock of the
Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class C Convertible Preferred Stock, voting
as a separate class, shall be entitled to elect one director of the
Corporation (the "Class C Director"). The holders of the Common Stock,
voting as a separate class, shall be entitled to elect two directors of
the Corporation. A sixth director of the Corporation shall be such
person, if any, who has received a majority vote of both the holders of
the Class B Convertible Preferred Stock and the Class C Convertible
Preferred Stock, voting as separate classes, and a majority vote of the
holders of the Common Stock, voting as a separate class. At any meeting
(or in a written consent in lieu thereof) held for the purpose of
electing
104
directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class
C Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class C Convertible Preferred
Stock or jointly by the holders of the Class C Convertible Preferred
Stock, the Class B Convertible Preferred Stock, and the Common Stock,
the presence in person or by proxy (or the written consent) of the
holders of a majority of the shares of Class B Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class B
Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class B Convertible Preferred
Stock or jointly by the holders of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, and the Common Stock,
and the presence in person or by proxy (or the written consent) of the
holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A
Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred
Stock. A vacancy in any directorship elected by the holders of the
Class A Convertible Preferred Stock, Class B Convertible Preferred
Stock, or Class C Convertible Preferred Stock shall be filled only by
vote or written consent of the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock, or Class C
Convertible Preferred Stock, respectively; a vacancy in any
directorship elected by the holders of the Common Stock shall be filled
only by vote or written consent of the holders of the Common Stock; and
a vacancy in the directorship elected jointly by the holders of the
Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Common Stock shall be filled only by vote or written
consent of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Common Stock as provided above.
3. Dividends. The holders of the Class A Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0224 per share (the "Class A Accruing
Dividends"). The holders of the Class B Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The holders of the Class C Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.1008 per share (the "Class C Accruing Dividends"). The Class A
Accruing Dividends, the Class B Accruing Dividends, and the Class C Accruing
Dividends are sometimes referred to herein collectively as the "Accruing
Dividends." Accruing Dividends shall accrue from day to day, whether or not
earned or declared, and shall be cumulative. No dividend shall be paid on the
Preferred Stock, other than Accruing Dividends, or on the Common Stock.
105
4. Liquidation.
A. 4A. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of
the shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation
junior to the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock, to be paid an amount equal to $0.76 and
$1.44 per share, respectively, plus, in the case of each share of Class
B Convertible Preferred Stock, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, and in the case of each share of
Class C Convertible Preferred Stock, an amount equal to all Class C
Accruing Dividends unpaid thereon (whether or not declared) and any
other dividends declared but unpaid thereon, computed to the date
payment thereof is made available, such amount payable with respect to
one share of Class B Convertible Preferred Stock being sometimes
referred to as the "Class B Liquidation Preference Payment," such
amount payable with respect to one share of Class C Convertible
Preferred Stock being sometimes referred to as the "Class C Liquidation
Preference Payment," and with respect to all shares of Class B
Convertible Preferred Stock and Class C Convertible Preferred Stock
being sometimes referred to as the "Class B and Class C Liquidation
Preference Payments." If upon such liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock
and Class C Convertible Preferred Stock shall be insufficient to permit
payment in full to the holders of Class B Convertible Preferred Stock
and Class C Convertible Preferred Stock of the Liquidation Preference
Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably, on an as-converted basis,
among the holders of Class B Convertible Preferred Stock and Class C
Convertible Stock.
B. 4B. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, after the
holders of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock shall have been paid in full the amounts to which they
shall be entitled pursuant to paragraph 4A, the holders of the shares
of Class A Convertible Preferred Stock shall then be entitled, before
any distribution or payment is made upon any stock ranking on
liquidation junior to the Class A Convertible Preferred Stock, to be
paid an amount equal to $.32 per share plus, in the case of each share,
an amount equal to all Class A Accruing Dividends unpaid thereon
(whether or not declared) computed to the date payment thereof is made
available, such amount payable with respect to one share of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class
A Convertible Preferred Stock being sometimes referred to as the "Class
A Liquidation Preference Payments." The Class A Liquidation Preference
Payments and the Class B and Class C Liquidation Preference Payments
are sometimes referred to herein collectively as the "Liquidation
Preference Payments." If upon such liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible
106
Preferred Stock shall be insufficient to permit payment in full to the
holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of
the Corporation to be so distributed shall be distributed ratably among
the holders of Class A Convertible Preferred Stock.
C. 4C. Upon any such liquidation, dissolution or
winding up of the Corporation, immediately after the holders of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, and
Class A Convertible Preferred Stock shall have been paid in full their
respective Liquidation Preference Payments, the remaining net assets of
the Corporation available for distribution shall be distributed ratably
among the holders of Preferred Stock and Common Stock (with each share
of Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into
which such share of Preferred Stock is convertible immediately prior to
the close of business on the business day fixed for such distribution).
Unless otherwise agreed by holders of at least two-thirds of the Class
B Convertible Preferred Stock and Class C Convertible Preferred Stock,
voting as separate classes, the consolidation or merger of the
Corporation into or with any other entity or entities which results in
the exchange of outstanding shares of the Corporation for securities or
other consideration issued or paid or caused to be issued or paid by
any such entity or affiliate thereof (other than a merger to
reincorporate the Corporation in a different jurisdiction), and the
sale, lease, abandonment, transfer or other disposition by the
Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of
this paragraph 4.
D. 4D. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the
Liquidation Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or
sent by telecopier or telex, not less than 20 days prior to the payment
date stated therein, to the holders of record of Preferred Stock, such
notice to be addressed to each such holder at its address as shown by
the records of the Corporation. For purposes hereof, the Common Stock
shall rank on liquidation junior to the Class A Convertible Preferred
Stock, the Class B Convertible Preferred Stock, and the Class C
Convertible Preferred Stock.
5. Restrictions. At any time when shares of Class B
Convertible Preferred Stock or Class C Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of both the Class B Convertible
Preferred Stock and Class C Preferred Stock, consenting or voting (as the case
may be) as separate classes, given in writing or by vote at a meeting, the
Corporation will not:
107
A. 5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks
junior to the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation, redemption
and the payment of dividends, or increase the authorized amount of the
Class B Convertible Preferred Stock or the Class C Convertible
Preferred Stock or increase the authorized amount of any additional
class or series of shares of stock unless the same ranks junior to the
Class B Convertible Preferred Stock and the Class C Convertible
Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the
payment of dividends, or create or authorize any obligation or security
convertible into shares of Class B Convertible Preferred Stock or Class
C Convertible Preferred Stock or into shares of any other class or
series of stock unless the same ranks junior to the Class B Convertible
Preferred Stock and the Class C Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Corporation, redemption and the payment of dividends, whether any
such creation, authorization or increase shall be by means of amendment
to the Certificate of Incorporation or by merger, consolidation or
otherwise; provided, that such consent shall not be unreasonably
withheld for the creation or issuance of an additional class or series
of shares ranking senior to the Class B Convertible Preferred Stock and
the Class C Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends (a "Senior
Security"), but provided further, that if, within a reasonable time of
the submission of a proposal for the issuance of a Senior Security,
information comes to light indicating that such consent was withheld
solely or primarily for the purpose of negotiating the price of an
additional investment by the holders of the Class B Convertible
Preferred Stock and/or the Class C Convertible Preferred Stock, then
such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
B. 5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any
other entity or entities or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all its assets, unless such action
would result in an annualized return to the holders of the Class B
Convertible Preferred Stock and the Class C Convertible Preferred Stock
of at least 30%;
C. 5C. Amend, alter or repeal its Certificate of
Incorporation or ByLaws if the effect would be materially detrimental
or adverse in any manner with respect to the rights of the holders of
the Class B Convertible Preferred Stock and/or the Class C Convertible
Preferred Stock;
D. 5D. Purchase or set aside any sums for the
purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Class B Convertible Preferred Stock and
the Class C Convertible Preferred Stock, except for (i) Class A
Accruing Dividends, (ii) dividends or other distributions payable on
the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former
employees of the Corporation who acquired such
108
shares directly from the Corporation, if each such purchase is made
pursuant to contractual rights held by the Corporation relating to the
termination of employment of such former employee and the purchase
price (except in the case of agreements executed prior to July 12,
1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
E. 5E. Redeem or otherwise acquire any
shares of Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock except as expressly authorized in paragraph 7 hereof or
pursuant to a purchase offer made pro rata to all holders of the shares
of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock on the basis of the aggregate number of outstanding
shares of Class B Convertible Preferred Stock and/or Class C
Convertible Preferred Stock then held by each such holder.
6. Conversions. The holders of shares of Preferred
Stock shall have the following conversion rights:
A. 6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to
convert any such shares of Preferred Stock into such number of fully
paid and nonassessable shares of Common Stock as is obtained by (i)
multiplying the number of shares of Preferred Stock so to be converted
by the Original Purchase Price of such share (which shall be $0.32 in
the case of the Class A Convertible Preferred Stock, $.76 in the case
of Class B Convertible Preferred Stock, and $1.44 in the case of Class
C Convertible Preferred Stock) and (ii) dividing the result by the
conversion price of the Original Purchase Price of such share or, in
case an adjustment of such price has taken place pursuant to the
further provisions of this paragraph 6, then by the conversion price as
last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B
Conversion Price," and, with respect to the Class C Convertible
Preferred Stock, the "Class C Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be 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 holders of
the 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.
B. 6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to
in subparagraph 6A and surrender of the certificate or certificates for
the share or shares of Preferred Stock to be converted, the Corporation
shall issue and deliver, or cause to be issued and delivered, to the
holder, registered in such name or names as such holder may direct, a
certificate
109
or certificates for the number of whole shares of Common Stock issuable
upon the conversion of such share or shares of Preferred Stock. To the
extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close
of business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates for
such share or shares shall have been surrendered as aforesaid, and at
such time the rights of the holder of such share or shares of 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.
C. 6C. Fractional Shares; Dividends; Partial
Conversion. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock and no payment or adjustment shall be
made upon any conversion on account of any cash dividends on the Common
Stock issued upon such conversion. At the time of each conversion, the
Corporation shall pay in cash an amount equal to all dividends,
excluding Accruing Dividends, accrued and unpaid on the shares of
Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In
case the number of shares of Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6A
exceeds the number of shares converted, the Corporation shall, upon
such conversion, execute and deliver to the holder, at the expense of
the Corporation, a new certificate or certificates for the number of
shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of
the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional
share, shall pay to the holder surrendering the Preferred Stock for
conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors
of the Corporation.
D. 6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the
Corporation shall issue or sell, or is, in accordance with
subparagraphs 6D(1) through 6D(7), deemed to have issued or sold, any
shares of Common Stock for a consideration per share less than (i) the
Class B Conversion Price in effect immediately prior to the time of
such issue or sale, or (ii) the Class C Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith
upon such issue or sale, the Class B Conversion Price and/or the Class
C Conversion Price, as the case may be, shall be reduced to the price
determined by dividing (i) an amount equal to the sum of (a) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the then existing Class B Conversion Price or the
then existing Class C Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
110
For purposes of this subparagraph 6D, the following
subparagraphs 6D(1) to 6D(7) shall also be applicable:
1. 6D(1) Issuance of Rights or Options. In case at
any time the Corporation shall in any manner grant (whether directly or
by assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation
as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise
of such Options) shall be less than the Class B Conversion Price and/or
the Class C Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price and/or the Class C Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
2. 6D(2) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Class B Conversion
Price and/or the Class C Conversion Price in effect immediately prior
to the time of such issue or sale, then the total maximum number of
shares of Common
111
Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share
as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except
as otherwise provided in subparagraph 6D(3), no adjustment of the Class
B Conversion Price and/or the Class C Conversion Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the
Class B Conversion Price and/or the Class C Conversion Price have been
or are to be made pursuant to other provisions of this subparagraph 6D,
no further adjustment of the Class B Conversion Price and/or the Class
C Conversion Price shall be made by reason of such issue or sale.
3. 6D(3) Change in Option Price or Conversion
Rate. Upon the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in subparagraph
6D(1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subparagraph 6D(1) or 6D(2), or the rate at which Convertible
Securities referred to in subparagraph 6D(1) or 6D(2) are convertible
into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Class B
Conversion Price and/or the Class C Conversion Price in effect at the
time of such event shall forthwith be readjusted to the Class B
Conversion Price or Class C Conversion Price, as the case may be, which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price and/or the Class C Conversion
Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to
convert or exchange such Convertible Securities, the Class B Conversion
Price and/or the Class C Conversion Price then in effect hereunder
shall forthwith be increased to the Class B Conversion Price or Class C
Conversion Price, as the case may be, which would have been in effect
at the time of such termination or expiration had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such termination or expiration, never been issued.
4. 6D(4) Stock Dividends. In case the Corporation
shall declare a dividend or make any other distribution upon any stock
of the Corporation (other than the Common Stock) payable in Common
Stock, Options or Convertible Securities, then any Common Stock,
Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
5. 6D(5) Consideration for Stock. In case any shares
of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions
112
or concessions paid or allowed by the Corporation in connection
therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of
the Corporation.
6. 6D(6) Record Date. In case the Corporation shall
take a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
7. 6D(7) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this subparagraph 6D.
E. 6E. Certain Issues of Common Stock Excepted.
Anything herein to the contrary notwithstanding, the Corporation shall
not be required to make any adjustment of the Class B Conversion Price
or the Class C Conversion Price in the case of the issuance from and
after the date of filing of these terms of the Preferred Stock of up to
an aggregate of 1,540,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6E or 6F) (the
"Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as
directors of the Corporation, their employment by the Corporation or
their retention as consultants by the Corporation (provided that the
number of Reserved Shares may be increased (a) prior to July 12, 1997,
with the approval of a majority of the Board of Directors including the
Class B Director and the Class C Director and (b) after July 12, 1997,
with the approval of either (i) a majority of the Board of Directors
including the Class B Director and the Class C Director or (ii) all
directors other than the Class B Director or the Class C Director),
plus such number of shares of Common Stock which are repurchased by the
Corporation from such persons after such date pursuant to contractual
rights held by the Corporation and at repurchase prices not exceeding
the respective original purchase prices paid by such persons to the
Corporation therefor.
F. 6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split,
stock dividend or otherwise)
113
its outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased. In the case of any
such subdivision, no further adjustment shall be made pursuant to
subparagraph 6D by reason thereof.
G. 6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Preferred Stock, such shares of
stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
H. 6H. Notice of Adjustment. Upon any adjustment of
the Conversion Price, then and in each such case the Corporation shall
give written notice thereof, by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex,
addressed to each holder of shares of Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice
shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such
calculation is based.
I. 6I. Other Notices. In case at any time:
(1) the Corporation shall
declare any dividend upon its Common Stock payable in cash or stock or
make any other distribution to the holders of its Common Stock;
(2) the Corporation shall offer
for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the
Corporation, or a consolidation or merger of the
114
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all
its assets; or
(4) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the
Corporation;
then, in any one or more of said cases, the Corporation shall give, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of any shares of Preferred Stock
at the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
J. 6J. Stock to be Reserved. The Corporation will at
all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding
shares of Preferred Stock. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal
to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation
of any applicable law or regulation, or of any requirement of any
national securities exchange upon which the Common Stock may be listed.
The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of
Common Stock issued and issuable after such action upon conversion of
the Preferred Stock would exceed the total number of shares of Common
Stock then authorized by the Certificate of Incorporation.
K. 6K. No Reissuance of Preferred Stock.
Shares of Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued.
115
L. 6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of
the holder of the Preferred Stock which is being converted.
M. 6M. Closing of Books. The Corporation will at no
time close its transfer books against the transfer of any Preferred
Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
N. 6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as
constituted on the date of filing of these terms of the Preferred
Stock, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares
designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification
of the outstanding shares thereof, the stock, securities or assets
provided for in subparagraph 6G.
O. 6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering
of shares of Common Stock in which (A) the aggregate price paid for
such shares by the public shall be at least $15,000,000 and (B) the
price paid by the public for such shares shall be at least $4.32 per
share (appropriately adjusted to reflect the occurrence of any event
described in subparagraph 6F), or (ii) a Liquidity Event shall occur in
which (a) the holders of shares of any class of Preferred Stock would
receive consideration for all of such shares (as if converted to Common
Stock) of at least four (4) times the original purchase price of such
shares (for example, at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into
which such share of Class A Convertible Preferred Stock is convertible;
at least $3.04 for (i) each share of Class B Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class
B Convertible Preferred Stock is convertible; or at least $5.76 for (i)
each share of Class C Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class C Convertible Preferred
Stock is convertible), then effective upon the closing of the sale of
such shares by the Corporation pursuant to such public offering or
immediately prior to the occurrence of such Liquidity Event, as the
case may be, all outstanding shares of Preferred Stock (in the case of
a public offering) or such class of Preferred Stock (in the case of a
Liquidity Event) shall automatically convert to shares of Common Stock
on
116
the basis set forth in this paragraph 6. Holders of shares of Preferred
Stock so converted may deliver 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 such holders) during
its usual business hours, the certificate or certificates for the
shares so converted. As promptly as practicable thereafter, the
Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which
such holder is entitled, together with any cash dividends and payment
in lieu of fractional shares to which such holder may be entitled
pursuant to subparagraph 6C. Until such time as a holder of shares of
Preferred Stock shall surrender his or its certificates therefor as
provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the
surrender thereof.
7. Redemption. The shares of Class B and Class C
Convertible Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On June 30, 2001, and on
each of the next two anniversaries thereafter (the "Redemption Dates,"
and each a "Redemption Date"), the Corporation shall redeem any
outstanding shares of Class B and Class C Convertible Preferred Stock
according to the percentages listed below:
117
Percentage of Shares of
Class B and Class C Convertible
Preferred Stock then
Date of Redemption Outstanding to be Redeemed
June 30, 2001 33-1/3% of all the shares of Class B and Class
C Convertible Preferred Stock Outstanding on
June 30, 2001
June 30, 2002 50% of all the shares of Class B and Class C
Convertible Preferred Stock outstanding on June
30, 2002
June 30, 2003 100% of all the shares of Class B and Class C
Convertible Preferred Stock outstanding on June
30, 2003
B. 7B. Redemption Price and Payment. The shares of
Class B and Class C Convertible Preferred Stock to be redeemed on any
Redemption Date shall be redeemed by paying for each share in cash an
amount equal to $0.76 and $1.44 per share, respectively, plus, in the
case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such
Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption
Date to the holders entitled thereto.
C. 7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the
"Redemption Notice") shall be given by the Corporation by delivery in
person, certified or registered mail, return receipt requested,
telecopier or telex, to each holder of record (at the close of business
on the business day next preceding the day on which the Redemption
Notice is given) of shares of Class B Convertible Preferred Stock and
Class C Convertible Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date,
the number of shares of Class B Convertible Preferred Stock and/or
Class C Convertible Preferred Stock to be redeemed from such holder
(computed on a pro rata basis in accordance with the number of such
shares held by all holders thereof) and the place where said Redemption
Price shall be payable. The Redemption Notice shall be addressed to
each holder at his address as shown by the records of the Corporation.
From and after the close of business on a Redemption Date, unless there
shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock and
Class C Convertible Preferred Stock (except the right to receive the
Redemption Price) shall cease with respect to the shares to be redeemed
on such Redemption Date, and such shares shall not thereafter be
transferred on the books
118
of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Class B Convertible Preferred
Stock and Class C Convertible Preferred Stock to be redeemed on such
Redemption Date, the holders of such shares shall share ratably in any
funds legally available for redemption of such shares according to the
respective amounts which would be payable to them if the full number of
shares to be redeemed on such Redemption Date were actually redeemed.
The shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock required to be redeemed but not so redeemed
shall remain outstanding and entitled to all rights and preferences
provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of
Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set
forth above.
D. 7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock redeemed pursuant to this paragraph 7 or
otherwise acquired by the Corporation in any manner whatsoever shall be
canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce accordingly the number of
authorized shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock.
E. 7E. Delay of Redemption. Notwithstanding paragraph
7A hereof, the Corporation shall not be required to redeem any shares
of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock on any Redemption Date if the cost to the Corporation
of such redemption would be greater than one-half of the Corporation's
available average cash working capital balance for the quarter
immediately preceding such Redemption Date. If a redemption is delayed
pursuant to this Paragraph 7E, the Corporation shall redeem the shares
to be so redeemed within 120 days of such Redemption Date.
8. Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Preferred Stock.
119
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION as amended
OF
NETSTART, INC.
NETSTART, INC., a corporation organized under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation at a meeting
fully convened and held, adopt the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and
in the best interest of the Company that Article Fourth of the Certificate of
Incorporation dated November 6, 1995 and amended by a Corrected Certificate of
Incorporation, dated December 4, 1995 be, and it hereby is, amended by changing
Article Fourth to read as follows:
FOURTH. The aggregate number of shares which the
Corporation shall have authority to issue is 13, 713,
920 shares consisting of three classes of stock:
10,000,000 shares of Common Stock ($.001 par value
per share); 1,562,500 shares of Class A Convertible
Preferred Stock ($.001 par value per share); and
2,151,420 of shares of Class B Convertible Preferred
Stock ($.001 par value per share). Except as
otherwise provided by law or as set forth in this
Amendment, each of the outstanding shares shall have
one vote for the purpose of electing directors and
for all other purposes, including but not limited to
an equal participation in any dividends, or other
distribution by the corporation. All other relative
rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A
attached hereto and incorporated herein by this
reference.
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
120
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate of
Amendment to be signed by this 11th day of July, A.D. 1996.
/s/ Eugene J. Austin
---------------------------------------
Authorized Officer
121
CLASS A PREFERRED STOCK AND CLASS B PREFERRED STOCK
1. Number of Shares. There shall be two classes of Preferred Stock. The
Class A Convertible Preferred Stock shall consist of 1,562,500 shares, and the
Class B Convertible Preferred Stock shall consist of 2,151,420 shares. The Class
A Convertible Preferred Stock and the Class B Convertible Preferred Stock shall
sometimes be referred to herein collectively as the "Preferred Stock."
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with all other classes and class of stock of the Corporation as a single class
on all actions to be taken by the stockholders of the Corporation, including,
but not limited to actions amending the Certificate of Incorporation of the
Corporation to increase the number of authorized shares of Common Stock. Each
share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
class, increase the maximum number of directors constituting the Board of
Directors to a number in excess of five.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, voting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, voting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). The holders of the Common
Stock, voting as a separate class, shall be entitled to elect two directors of
the Corporation. A fifth director of the Corporation shall be such person, if
any, who has received a majority vote of the holders of the Class B Convertible
Preferred Stock, voting as a separate class, and a majority vote of the holders
of the Common Stock, voting as a separate class. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock or jointly by the holders of the Class B
122
Convertible Preferred Stock and the Common Stock, and the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class A Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class A Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class A
Convertible Preferred Stock. A vacancy in an directorship elected by the holders
of the Class A Convertible Preferred Stock or Class B Convertible Preferred
Stock shall be filled only by vote or written consent of the holders of the
Class A Convertible Preferred Stock or Class B Convertible Preferred Stock,
respectively; a vacancy in any directorship elected by the holders of the Common
Stock shall be filled only by vote or written consent of the holders of the
Common Stock; and a vacancy in the directorship elected jointly by the holders
of the Class B Convertible Preferred Stock and the Common Stock shall be filled
only by vote or written consent of the Class B Convertible Preferred Stock and
the Common Stock as provided above.
3. Dividends. The holders of the Class A Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor, (i) when
and if declared by at least four members of the Board of Directors, or (ii) upon
any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0224 per share (the "Class A Accruing
Dividends"). The holders of the Class B Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The Class A Accruing Dividends and the Class B Accruing Dividends are sometimes
referred to herein collectively as the "Accruing Dividends." Accruing Dividends
shall accrue from day to day, whether or not earned or declared, and shall be
cumulative. No dividend shall be paid on the Preferred Stock, other than
Accruing Dividends, or on the Common Stock.
4. Liquidation.
4A. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Class B Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class B Convertible Preferred Stock, to be paid an amount equal to $0.76 per
share plus, in the case of each share, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other dividends
declared but unpaid thereon, computed to the date payment thereof is made
available, such amount payable with respect to one share of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payment" and with respect to all shares of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock shall be insufficient
to permit payment in full to the holders of Class B Convertible Preferred Stock
of the Class B Liquidation Preference Payments, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class B Convertible Preferred Stock.
123
4B. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the holders of Class B
Convertible Preferred Stock shall have been paid in full the amounts to which
they shall be entitled pursuant to paragraph 4A, the holders of the shares of
Class A Convertible Preferred Stock shall then be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class A Convertible Preferred Stock, to b paid an amount equal to $.32 per
share plus, in the case of each share, an amount equal to all Class A Accruing
Dividends unpaid thereon (whether or not declared) computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class A Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Class B Liquidation Preference Payments are sometimes referred to herein
collectively as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Class A Convertible Preferred
Stock shall be insufficient to permit payment in full to the holders of Class A
Convertible Preferred Stock of the Class A Liquidation Preference Payments, then
the entire remaining assets of the Corporation to be so distributed shall be
distributed ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding up of
the Corporation, immediately after the holders of Class B Convertible Preferred
Stock and Class A Convertible Preferred Stock shall have been paid in full their
respective Liquidation Preference Payments, the remaining net assets of the
Corporation available for distribution shall be distributed ratably among the
holders of Preferred Stock and Common Stock (with each share of Preferred Stock
being deemed, for such purpose, to b equal to the number of shares of Common
Stock (including fractions of a share) into which such share of Preferred Stock
is convertible immediately prior to the close of business on the business day
fixed for such distribution). The consolidation or merger of the Corporation
into or with any other entity or entities which results in the exchange of
outstanding shares of the Corporation for securities or other consideration
issued or paid or caused to be issued or paid by any such entity or affiliate
thereof (other than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or other disposition
by the Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of the provisions of this paragraph 4.
4D. Written notice of such liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Preference Payments
and the place where said Liquidation Preference Payments shall be payable, shall
be delivered in person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, not less than 20 days prior to the
payment date stated therein, to the holders of record of Preferred Stock, such
notice to be addressed to each such holder at its address as shown by the
records of the Corporation. For purposes hereof, the Common Stock shall rank on
liquidation junior to the Class B Convertible Preferred Stock and Class A
Convertible Preferred Stock.
124
5. Restrictions. At any time when shares of Class B Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the Certificate of Incorporation, and in addition to any other vote required
by law or the Certificate of Incorporation, without the approval of the holders
of at least two-thirds of the then outstanding shares of Class B Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class, the Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock unless the same ranks junior to the Class B
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends, or increase the authorized amount of the Class B Convertible
Preferred Stock or increase the authorized amount of any additional class or
series of shares of stock unless the same ranks junior to the Class B
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends, or create or authorize any obligation or security convertible into
shares of Class B Convertible Preferred Stock or into shares of any other class
or series of stock unless the same ranks junior to the Class B Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends,
whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise; provided, that such consent shall not be unreasonably withheld for
the creation or issuance of an additional class or series of shares ranking
senior to the Class B Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation
redemption and the payment of dividends (a "Senior Security"), but provided
further, that if, within a reasonable time of the submission of a proposal for
the issuance of a Senior Security, information comes to light indicating that
such consent was withheld solely or primarily for the purpose of negotiating the
price of an additional investment by the holders of the Class B Convertible
Preferred Stock, then such consent shall be deemed to have been unreasonably
withheld for purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merge into or with any other entity or
entities or sell, lease, abandon, transfer or otherwise dispose of all or
substantially all its assets, unless such action would result in an annualized
return to the holders of the Class B Convertible Preferred Stock of at least
30%;
5C. Amend, alter or repeal its Certificate of Incorporation or
By-Laws if the effect would be materially detrimental or adverse in any manner
with respect to the rights of the holders of the Class B Convertible Preferred
Stock;
5D. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Class B Convertible Preferred Stock, except for (i) Class A Accruing Dividends,
(ii) dividends or other distributions payable on the Common Stock solely in the
form of additional shares of Common Stock, and (iii) the purchase
125
of shares of Common Stock from former employees of the Corporation who acquired
such shares directly from the Corporation if each such purchase is made pursuant
to contractual rights held by the Corporation relating to the termination of
employment of such former employee and the purchase price (except in the case of
agreements executed prior to July 12, 1996) does not exceed the original issue
price paid by such former employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock except as expressly authorized in paragraph 7 hereof
or pursuant to a purchase offer made pro rata to all holders of the shares of
Class B Convertible Preferred Stock on the basis of the aggregate number of
outstanding shares of Class B Convertible Preferred Stock then held by each such
holder.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of
this paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (i) multiplying the number of shares of Preferred
Stock so to be converted by the Original Purchase Price of such share (which
shall be $0.32 in the case of the Class A Convertible Preferred Stock and $.76
in the case of Class B Convertible Preferred Stock) and (ii) dividing the result
by the conversion price of the Original Purchase Price of such share or, in case
an adjustment of such price has taken place pursuant to the further provisions
of this paragraph 6, then by the conversion price as last adjusted and in effect
at the date any share or shares of Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred to as the
"Conversion Price" and, with respect to the Class B Convertible Preferred Stock,
the "Class B Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be 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 holders
of the 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.
6B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in subparagraph 6A
and surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation and the certificate or certificates for such
share or shares shall have been surrendered as aforesaid, and at such time the
rights of the holder of such
126
share or shares of 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.
6C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Preferred Stock into Common
Stock and no payment or adjustment shall be made upon any conversion on account
of any cash dividends on the Common Stock issued upon such conversion. At the
time of each conversion, the Corporation shall pay in cash an amount equal to
all dividends, excluding Accruing Dividends, accrued and unpaid on the shares of
Preferred Stock surrendered fo conversion to the date upon which such conversion
is deemed to take place as provided in subparagraph 6B. In case the number of
shares of Preferred Stock represented by the certificate or certificates
surrendered pursuant to subparagraph 6A exceeds the number of shares converted,
the Corporation shall, upon such conversion, execute and deliver to the holder,
at the expense of the Corporation, a new certificate or certificates for the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Class B Conversion Price in effect immediately prior to the time
of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price shall be reduced t the price determined by dividing (i) an
amount equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price and (b) the consideration, if any, received by the Corporation
upon such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or
127
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus,
in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the
Class B Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Class B Conversion
Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of
the issue or sale of such Convertible Securities and thereafter shall
be deemed to be outstanding, provided that (a) except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b if any
such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which
adjustments of the Class B Conversion Price have been or are to be made
pursuant to other provisions of this subparagraph 6D, no further
adjustment of the Class B Conversion Price shall be made by reason of
such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion
128
or exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Class B Conversion Price in effect at the time of such
event shall forthwith be readjusted to the Class B Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold, but only if
as a result of such adjustment the Class B Conversion Price then in
effect hereunder is thereby reduced; and on the termination of any such
Option or any such right to convert or exchange such Convertible
Securities, the Class B Conversion Price then in effect hereunder shall
forthwith be increased to the Class B Conversion Price which would have
been in effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities, then any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued o sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of th Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the
129
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Class B Conversion Price in the case of the issuance from
and after the date of filing of these terms of the Preferred Stock of up to an
aggregate of 925,000 shares (appropriately adjusted to reflect the occurrence of
any event described in subparagraphs 6E or 6F) (the "Reserved Shares") of Common
Stock to directors, officers, employees or consultants of the Corporation in
connection with their service as directors of the Corporation, their employment
by the Corporation or their retention as consultants by the Corporation
(provided that the number of Reserved Shares may be increased (a) prior to July
12, 1997, with the approval of a majority of the Board of Directors including
the Class B Director and (b) after July 12, 1997, with the approval of either
(i) a majority of the Board of Directors including the Class B Director or (ii)
all directors other than the Class B Director), plus such number of shares of
Common Stock which are repurchased by the Corporation from such persons after
such date pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices paid by
such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon hav the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with
130
respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detai the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into another entity or entities, or a sale,
lease, abandonment, transfer or other disposition of all or substantially all
its assets; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
131
6J. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6M. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Common Stock receivable upon conversion of shares of
Preferred Stock shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
132
6O. Mandatory Conversion. If at any time (i) the Corporation
shall effect a firm commitment underwritten public offering of shares of Common
Stock in which (A) the aggregate price paid for such shares by the public shall
be at least $15,000,000 and (B) the price paid by the public for such shares
shall be at least $3.80 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F), or (ii) a Liquidity Event
shall occur in which (a) the holders o shares of any class of Preferred Stock
would receive consideration for all of such shares (as if converted to Common
Stock) of at least four (4) times the original purchase price of such shares
(for example, at least $3.04 for (i) each share of Class B Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class B
Convertible Preferred Stock is convertible), then effective upon the closing of
the sale of such shares by the Corporation pursuant to such public offering or
immediately prior to the occurrence of such Liquidity Event, as the case may be,
all outstanding shares of Preferred Stock (in the case of a public offering) or
such class of Preferred Stock (in the case of a Liquidity Event) shall
automatically convert to shares of Common Stock on the basis set forth in this
paragraph 6. Holders of shares of Preferred Stock so converted may deliver 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 such
holders) during its usual business hours, the certificate or certificates for
the shares so converted. As promptly as practicable thereafter, the Corporation
shall issue and deliver to such holder a certificate or certificates for the
number of whole shares of Common Stock to which such holder is entitled,
together with any cash dividends and payment in lieu of fractional shares to
which such holder may be entitled pursuant to subparagraph 6C. Until such time
as a holder of shares of Preferred Stock shall surrender his or its certificates
therefor as provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the surrender
thereof.
7. Redemption. The shares of Class B Convertible Preferred Stock shall
be redeemed as follows:
7A. Mandatory Redemption. On June 30, 2001, and on each of the
next two anniversaries thereafter (the "Redemption Dates," and each a
"Redemption Date"), the Corporation shall redeem any outstanding shares of Class
B Convertible Preferred Stock according to the percentages listed below:
Percentage of Shares of
Class B Convertible
Preferred Stock then
Date of Redemption Outstanding to be Redeemed
June 30, 2001 33-1/3% of all the shares of
Class B Convertible Preferred
Stock Outstanding on June 30,
2001
June 30, 2002 50% of all the shares of Class
B Convertible Preferred Stock
outstanding on June 30, 2002
133
June 30, 2003 100% of all the shares of
Class B Convertible Preferred
Stock outstanding on June 30,
2003
7B. Redemption Price and Payment. The shares of Class B
Convertible Preferred Stock to be redeemed on any Redemption Date shall be
redeemed by paying for each share in cash an amount equal to $0.76 per share
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price". Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
7C. Redemption Mechanics. At least 20 but not more than
30 days prior to each Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, to each holder of record
(at the close of business on the business day next preceding the day on which
the Redemption Notice is given) of shares of Class B Convertible Preferred Stock
notifying such holder of the redemption and specifying the Redemption Price,
such Redemption Date, the number of shares of Class B Convertible Preferred
Stock to be redeemed from such holder (computed on a pro rata basis in
accordance with the number of such shares held by all holders thereof) and the
place where said Redemption Price shall be payable. The Redemption Notice shall
be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock (except the
right to receive the Redemption Price) shall cease with respect to the shares to
be redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock on a Redemption Date
are insufficient to redeem the total number of shares of Class B Convertible
Preferred Stock to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable to them if the
full number of shares to be redeemed on such Redemption Date were actually
redeemed. The shares of Class B Convertible Preferred Stock required t be
redeemed but not so redeemed shall remain outstanding and entitled to all rights
and preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of such shares of Class
B Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be Retired.
Any shares of Class B Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce accordingly the number of authorized shares of Class B
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock on any Redemption Date if the cost to the
Corporation of such redemption would be greater than one-half of the
Corporation's available average cash working capital balance for the quarter
immediately preceding such Redemption Date. If a redemption is delayed pursuant
to this Paragraph 7E, the Corporation shall redeem the shares to be so redeemed
within 120 days of such Redemption Date.
8. Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Preferred Stock.
134
CORRECTED CERTIFICATE OF INCORPORATION
OF
METSTART, INC.
METSTART, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST. That a Certificate of Incorporation of METSTART, INC., properly
executed, was filed with the Secretary of State of Delaware on November 6, 1995,
in good faith and with all belief that such incorporation was accurate and
correct.
SECOND. That the Certificate of Incorporation was filed with the
incorrect name and stock.
THIRD. That the Certificate of Incorporation should be corrected to
read in its entirety as follows as Exhibit A:
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by its sole incorporator this fourth day of December, A.D. 1995.
/s/ Jane S. Krayer
---------------------------------------
Jane S. Krayer
Incorporator
135
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
-------------------------------------------
FIRST. The name of this corporation shall be:
NETSTART, INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Ten Million Five Hundred (10,000,500) shares with a par value of One
Cent ($.01) per share, which shall be divided into Ten Million (10,000,000)
shares of common stock with a par value of One Cent ($.01), amounting to One
Hundred Thousand Dollars ($100,000) and Five Hundred (500) shares of Class B
Non-Voting Liquidating Preferred stock with a par value of One Cent ($.01),
amounting to Five Dollars ($5.00).
The corporation shall have the power, in addition to and not in
limitation of other powers, to adopt a plan or plans pursuant to section 1244 of
the Internal Revenue Code and issue stock pursuant thereto.
136
FIFTH. The names and address of the incorporator is as follows:
Jane S. Krayer
Corporation Service Company
1013 Centre road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by- laws.
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for 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) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this fourth day of December, A.D., 1995.
/s/ Jane S. Krayer
----------------------------------------
Jane S. Krayer
Incorporator
137
CERTIFICATE OF INCORPORATION
OF
METSTART, INC.
---------------------------------
FIRST. The name of this corporation shall be:
METSTART, INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Ten Million (10,000,000) shares of Common Stock with a par value of One
Cent $.01 per share, amounting to One Hundred Thousand Dollars ($100,000.00).
The Corporation shall have the power in addition to and not in
limitation of other powers, to adopt a plan or plans pursuant to section 1244 of
the Internal Revenue Code and issue stock pursuant thereto.
FIFTH. The name and address of the incorporator is as follows:
Jane Krayer
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
138
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this sixth day of November, A.D., 1995.
/s/ Jane Krayer
---------------------------------------
Jane Krayer
Incorporator