EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
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Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware
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The undersigned, IPG Photonics Corporation (the "Corporation"), a
corporation existing under the laws of the State of Delaware, hereby certifies
as follows:
1. The name of the Corporation is IPG PHOTONICS CORPORATION.
2. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on December 2, 1998 and a
Certificate of Amendment was filed on March 30, 2000.
3. The Amended and Restated Certificate of Incorporation as hereinafter set
forth has been duly adopted in accordance with the provisions of Sections 242
and 245 of the General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation is amended and restated in
full to read as follows:
FIRST: The name of the corporation (the "Corporation") is "IPG Photonics
Corporation."
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New
Castle, and the name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: Total number of shares of capital stock which the Corporation shall
have authority to issue is 55,000,000 shares of which 50,000,000 shares shall be
designated Common Stock, par value of $.0001 per share ("Common Stock"), and
5,000,000 shares shall be designated Preferred Stock, par value of $.0001 per
share ("Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed by
law and the terms of this Certificate, to provide for the issuance of shares of
Preferred Stock in one or more series, to establish the number of shares to be
included in each such series, and to fix the designations, powers, preferences,
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof.
A. Series A Preferred Stock.
Any capitalized terms not otherwise defined in this Section A are
defined in Section A.7.1 hereof.
Section 1. Designation and Amount
1.1 There shall be a series of the Preferred Stock which shall be
designated as the "Series A Preferred Stock," par value $.0001 per share, and
the number of shares constituting such series shall be Five Hundred Thousand
(500,000). Subject to Section A.5.3, such number of shares may be decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than that of
the shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation with respect to shares of Series A
Preferred Stock.
1.2 The Corporation shall not reissue any shares of the Series A
Preferred Stock and shall from time to time in accordance with applicable law
increase the authorized amount of its Common Stock in the event that the number
of authorized shares of Common Stock remaining available for issuance shall not
be sufficient to permit conversion of the Series A Preferred Stock.
Section 2. Dividends and Distributions. If any cash dividends or non-cash
dividends or other distributions (other than distributions of Common Stock) are
declared by the Board of Directors to be paid on any shares of Common Stock,
then a dividend shall be paid at the same time to the holders of the outstanding
shares of the Series A Preferred Stock at a rate per share equal to the product
of (i) such per share dividend or other distribution declared by the Board of
Directors on the Common Stock multiplied by (ii) the Conversion Ratio (as
defined in Section A.5.3 below) then in effect.
Section 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, or upon any Liquidating Merger, each holder of shares of Series
A Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Common Stock, from the assets of the Corporation
available for distribution to its Stockholders, whether from capital, surplus or
earnings, an amount in cash equal to the sum of the aggregate Liquidation Value
of all shares of Series A Preferred Stock held by such holder. Prior to the
liquidation, dissolution or winding up of the Corporation or to any Liquidating
Merger, the Corporation shall declare for payment all accrued and unpaid
dividends, if any, with respect to the Series A Preferred Stock as set forth in
Section A.2. If upon any such liquidation, dissolution or winding up of the
Corporation or any such Liquidating Merger, the Corporation's assets to be
distributed among the holders of the Series A Preferred Stock are insufficient
to permit payment to such holders of the aggregate amount that they are entitled
to be paid, then the entire assets to be distributed shall be distributed
ratably among such holders based upon the aggregate Liquidation Value of the
Series A Preferred Stock held by each such holder. The Corporation shall give
written notice of such liquidation, dissolution or winding up or of such
Liquidating Merger, not less than 30 days prior to the payment date stated
therein, to each record holder of shares of Series A Preferred Stock. Neither
the consolidation or merger of the Corporation into or with any other entity or
entities that is a wholly-owned subsidiary of the Corporation, nor the sale or
transfer by the Corporation of all or any part of its assets to any such
wholly-owned subsidiary, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution winding up or
Liquidating Merger of the Corporation within the meaning of
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this Section 3. After distribution of the holders of Series A Preferred Stock of
the full preferential amount set forth above, the remaining assets of the
Corporation available for distribution, if any, to the stockholders of the
Corporation shall be distributed to the holders of shares of Common Stock pro
rata based on their respective shareholdings on a fully diluted basis.
Section 4. Voting Rights. The holders of the Series A Preferred Stock,
voting as a class, shall be entitled to vote as provided by applicable law and
as herein provided.
4.1 Protective Voting Provisions. So long as shares of the Series A
Preferred Stock shall be outstanding, without first obtaining the approval (by
vote or written consent, as provided by law or by the Certificate of
Incorporation or the bylaws of the Corporation, each as amended from time to
time) of the holders of more than fifty percent of the outstanding shares of
Series A Preferred Stock, voting separately as a class, the Corporation shall
not:
(i) increase the authorized number of shares of Series A
Preferred Stock; or
(ii) affect, alter, amend, repeal or waive the rights,
preferences or privileges of the holders of the Series A Preferred Stock as set
forth herein.
4.2 Other Voting Provisions. The holders of the Series A Preferred
Stock shall not be entitled to vote on any matter on which the holders of Common
Stock shall be entitled to vote (including the election of directors), except as
otherwise required by law.
Section 5 Conversion.
5.1 Elective Conversion. At any time after March 30, 2002, at his, her
or its absolute and sole discretion, any holder of shares of Series A Preferred
Stock may convert all or any portion of the Series A Preferred Stock (including
any fraction of a share) held by such holder, into a number of fully paid and
nonassessable shares of Conversion Stock equal to the Conversion Ratio then in
effect by delivery to the Corporation of a number of shares of Series A
Preferred Stock having a value equal to the Conversion Price to be converted,
and by surrendering such holder's certificate(s) in accordance with Section
A.5.6 hereof, and subject to Section A.5.7 hereof.
5.2 Automatic Conversion. Immediately following the closing of (i) a
Qualified IPO or (ii) the consummation of any merger or sale of a majority of
the Common Stock of the Corporation or of all or substantially all of its assets
(other than a merger with or sale to an Affiliate of the Corporation) in which
the holders of the Common Stock (assuming conversion of all convertible
securities of the Corporation) would be entitled to receive in a liquidation
consideration worth at least $500,000,000, then any and all outstanding shares
of Series A Preferred Stock shall automatically convert to Conversion Stock at
the then effective Conversion Ratio without any further action on the part of
any holder of the Series A Preferred Stock, subject to Sections A.5.8 and
Section A.5.9 hereof. Upon such automatic conversion, each share of Series A
Preferred Stock shall be canceled and not subject to reissuance as Series A
Preferred Stock, but shall rather be undesignated and unreserved Preferred Stock
of the Corporation.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by
dividing the Original Liquidation Price by the Conversion Price (as defined in
Section A.5.4 hereof).
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5.4 Conversion Price. The initial Conversion Price shall equal $10.00
per share. The Conversion Price shall be subject to adjustment from time to time
as follows:
5.4.1 Definitions. For purposes of this Section A.5.4, the
following definitions shall apply:
(i) "Additional Shares" shall mean all shares of Common
Stock issued (or, with respect to options, rights or warrants, deemed to be
issued in accordance with Section A.5.4.2) by the Corporation after the date
that the original of the Series A Preferred Stock Certificate of Designation is
filed with the Secretary of State of the State of Delaware, other than in any of
the following transactions:
(a) in connection with the issuance to directors,
officers, employees, or consultants of the Corporation or its Affiliates, in
connection with their service to the Corporation, of options, rights, or
warrants to subscribe for, purchase or otherwise acquire shares of Common Stock
pursuant to stock purchase or stock options plans or agreements on terms from
time to time approved by the Board of Directors;
(b) upon the issuance of securities in an underwritten
offering of the Corporation's equity securities to the public pursuant to an
effective registration statement under the Securities Act;
(c) upon conversion of Series A Preferred Stock;
(d) upon the issuance of a stock dividend declared by
the Board of Directors to be paid on the Common Stock as a class, or upon any
stock split or other subdivision or combination of Common Stock;
(e) upon the exercise of options, rights, or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Series A
Preferred Stock outstanding or committed to be issued the date that the original
of the Series A Preferred Stock Certificate of Designation is filed with the
Secretary of State of the State of Delaware or described in (a) above;
(f) upon the exercise of warrants delivered in
connection with borrowings, lines of credit or other credit facilities extended
to the Corporation;
(g) in connection with a strategic alliance or
partnership, or joint venture or development arrangement with any non-Affiliated
Person;
(h) upon the issuance of shares issued in respect of
the antidilution provisions of this Certificate of Incorporation or other
antidilution provisions governing the Corporation's securities; or
(i) in connection with the issuance to an
Affiliate of the Corporation of securities of the Corporation, provided that
such issuance does not cause the Corporation's issued Common Stock to exceed
50,000,000 shares, taking into consideration reserves for stock options,
warrants, Conversion Shares and other series of convertible preferred shares
issued after the date that the original of the Series A Preferred Stock
Certificate of Designation is filed with the Secretary of State of Delaware.
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(ii) "Consideration" shall mean the following:
(a) In the case of the issuance of Common
Stock for cash, the Consideration shall be deemed to be the aggregate amount of
cash paid therefor before deducting any discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof and excluding amounts paid or
payable for accrued interest or accrued dividends thereon.
(b) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the Consideration
other than cash, including securities acquired in exchange therefor (other than
securities by their terms so exchangeable), shall be deemed to be the fair value
thereof as determined in good faith by the Board of Directors, irrespective of
any accounting treatment; provided, however, that if, at the time of such
determination, the Common Stock is traded in the over-the-counter market, the
Nasdaq Stock Market, or on a national or regional securities exchange (or if
other securities constituting such Consideration are traded in the
over-the-counter market, the Nasdaq Stock Market or on a national or regional
securities exchange), such fair value as determined by the Board of Directors
shall not exceed the Current Market Value (as defined in Section A.5.4.1(iii))
of the Common Stock or of such other securities.
(c) In the case of the granting or issuance
of options to purchase or rights to subscribe for Common Stock that are deemed
to be Additional Shares under Section A.5.4.1(i) hereof, such Additional Shares
shall be deemed to be issued at the time such options or rights were granted or
issued and for a consideration equal to the Consideration (determined in the
manner provided in Section A.5.4.1(ii)(a) and Section A.5.4.1(ii)(b) hereof), if
any, received by the Corporation upon the issuance of such options or rights,
plus the additional minimum aggregate amount (as set forth in the instruments
relating thereto, without regard to any provision contained therein designed to
protect against dilution), if any, to be received by the Corporation upon the
exercise of such options or rights.
(d) In the case of the granting or issuance
of securities by their terms convertible into or exchangeable for Common Stock
that are deemed to be Additional Shares under Section A.5.4.1(i) hereof, such
Additional Shares shall be deemed to be issued at the time such securities were
granted or issued and for a consideration equal to the Consideration (determined
in the manner provided in Sections Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, received by the Corporation for such securities
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional minimum aggregate amount (as set forth in the
instruments relating thereto, without regard to any provision contained therein
designed to protect against dilution) of consideration (determined in the manner
provided in Sections Section A.5.4.1(ii)(a) and Section A.5.4.1(ii)(b) hereof),
if any, to be received by the Corporation upon the conversion or exchange of
such securities.
(e) In the case of the granting or issuance
of options to purchase or rights to subscribe for securities by their terms
convertible into or exchangeable for Common Stock that are deemed to be
Additional Shares under Section A.5.4.1(i) hereof, such Additional Shares shall
be deemed to be issued at the time such securities were issued or the options or
rights were granted or issued or for a consideration equal to the Consideration
(determined in the manner provided in Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, received by the Corporation for such options or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the additional Consideration (determined
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in the manner provided in Sections Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, to be received by the Corporation upon the
exercise of such options or rights.
(f) In the case of the issuance of Common
Stock without consideration, the Consideration shall be deemed to be $0.0001 per
share, or such lesser amount as shall be the then par value of the Common Stock.
(iii) "Current Market Value" of a given security
on any given date shall be deemed to be the average of the daily closing prices
per share of the security for 20 consecutive business days selected by the
Corporation before such date. The closing price for each day shall be the last
sale price regular way or, in case no sale takes place on such day, the average
of the closing bid and asked prices regular way, in either case on the principal
national or regional securities exchange on which the security is listed or
admitted to trading or on the Nasdaq Stock Market or, if it is not listed or
admitted to trading on any national or regional securities exchange or on the
Nasdaq Stock Market, the average of the closing and asked prices as furnished by
any member of the National Association of Securities Dealers, Inc., selected
from time to time by the Corporation for that purpose, or if it is not a
publicly traded company, as determined by the Board of Directors of the
Corporation in a good faith resolution, based upon the best information
available to it.
5.4.2 The maximum number of shares of Common Stock deliverable
upon the exercise, conversion or exchange of options, rights or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Series A Preferred
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) shall be
deemed to be exercised, converted or exchanged immediately upon any such grant
or issuance. In the case that options or rights granted or issued as set forth
in Section A.5.4.1 (i) (c) or Section A.5.4.1(i)(e) expire, or in the case that
all of the rights to exchange or convert securities issued as set forth in
Section A.5.4.1(i)(d) terminate, in each case having been issued by the
Corporation for Consideration (as determined pursuant to Section A.5.4.1(i)(c),
Section A.5.4.1(i)(d) and Section A.5.4.1(i)(e) above), the Conversion Price
shall forthwith be appropriately readjusted to such Conversion Price as would
have been in effect at the time of such expiration or termination had such
options or rights or securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted or issued, and the Common
Stock issuable thereunder shall no longer be deemed to be outstanding.
5.4.3 If the Corporation shall issue any Additional Shares
without Consideration or for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares, the
Conversion Price shall be adjusted according to the following formula:
CP = ((OS x OCP) + C) / (OS + NS)
where
CP = Adjusted Conversion Price;
OS = Shares of Common Stock or Common Stock Equivalents
outstanding or deemed outstanding (including those
shares deemed to be issued as a result of previous
adjustments of the Conversion Price pursuant to
Section A.5 hereof), on a fully diluted, as-converted
basis immediately prior to such issuance of Additional
Shares;
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OCP = Conversion Price in effect immediately prior to such
issuance of Additional Shares;
C = Consideration (as calculated in accordance with
Section A.5.4.1(ii) hereof), if any, received by the
Corporation in such issuance of Additional Shares; and
NS = Number of Additional Shares (but excluding the
additional shares of Common Stock deemed issued only
as a result of such adjustment of the Conversion
Price).
5.4.4 No adjustment of the Conversion Price shall be made if such
adjustment would result in a change in a Conversion Price in an amount less than
0.01 per share. Any Additional Shares issued or deemed issued (and any
Consideration received or deemed received) shall be included in subsequent
future adjustments, but only until such change in the Conversion Price as a
result of such cumulative adjustments is equal to at least $0.01 per share.
5.4.5 No adjustment of the Conversion Price shall be made in
respect of non-stock dividends on the Common Stock or the Series A Preferred
Stock.
5.4.6 On any change in the number of shares of Common Stock
deliverable upon (i) the exercise of any options or rights deemed to be
Additional Shares under Section A.5.4.1(i) hereof, or (ii) the conversion of or
exchange for convertible or exchangeable securities deemed to be Additional
Shares under Section A.5.4.1(i) hereof, or (iii) the conversion of or exchange
for convertible or exchangeable securities issuable upon the exercise of any
options or rights deemed to be Additional Shares under Section A.5.4.1(i)
hereof, or on any change in the minimum purchase price of such options, rights
or securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, then the Conversion Price for the Series A
Preferred Stock shall forthwith be readjusted to reflect such change with
respect to (x) such options or rights not exercised prior to such change, or
(y)such securities not converted or exchanged prior to such change, or (z) the
options or rights related to such securities not converted or exchanged prior to
such change, as the case may be.
5.4.7 If the number of shares of Common Stock outstanding at any
time after the effective date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, or the effective date of
such subdivision or split-up, the Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each such share of Series A Preferred Stock shall be increased in proportion to
such increase of outstanding shares of Common Stock.
5.4.8 If the number of shares of Common Stock outstanding at any
time after the effective date hereof is decreased by a combination of the
outstanding shares of Common Stock, then, following the effective date of such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each such share of
Series A Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
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5.4.9 Notwithstanding anything seemingly to the contrary herein,
in no event whatsoever shall the Conversion Price be adjusted to a number less
than the par value of the Conversion Stock; such an adjustment shall be deemed
not to be "appropriate" within the meaning of this Section A.5.
5.5 Reorganization or Reclassification. In the event of any capital
reorganization, or any reclassification of the capital stock of the Corporation
(other than a change in par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or any related series of such
transactions, the shares of Series A Preferred Stock shall, after such
reorganization or reclassification, be convertible into the kind and number of
shares of stock or other securities or property or cash of the Corporation or
entity resulting from such reorganization or reclassification to which such
holder would have been entitled, if immediately prior to such reorganization or
reclassification, such holder had converted the shares of Series A Preferred
Stock held by such holder to Common Stock immediately prior to such
reorganization or reclassification.
5.6. Mechanics of Elective Conversion. Before any holder of shares of
Series A Preferred Stock shall be entitled to convert the same into shares of
Conversion Stock pursuant to Section A.5.1 hereof, such holder shall surrender
the certificate or certificates therefor, duly endorsed or in blank, at the
office of the Corporation or of any transfer agent for the Series A Preferred
Stock (or, in addition to the aforementioned places, at such other place as the
Board of Directors may reasonably designate), and shall give written notice to
the Corporation (in the manner described in Section A.7.3 hereof) at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Conversion Stock are to be issued. The Corporation shall use its commercially
reasonable efforts promptly to (subject to Section A.5.9), issue and deliver at
such office to such holder of shares of Series A Preferred Stock, or to the
nominee or nominees of such holder, (x) a certificate or certificates for the
number of shares of Conversion Stock to which such holder shall be entitled as
herein provided, (y) a certificate representing any shares of Series A Preferred
Stock not so converted and (z) an amount of cash equal to accrued but unpaid
dividends on the shares converted, calculated through the date of such
conversion and, if applicable, the payment required by Section A.5.7 and Section
A.5.8. Any conversion shall be deemed to have been made immediately prior to the
close of business on (i) the date such written notice is given (provided that
such holder's certificate or certificates are delivered to the Corporation
within two business days after such notice is given) or (ii) in any other case,
on the date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Conversion Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Conversion Stock on such date.
Notwithstanding the foregoing, no written notice of election to convert or
surrender of certificates shall be required in the event of an automatic
conversion pursuant to Section A.5.2.
5.7 Fractional Shares. No fractional shares shall be issued upon
conversion of the Series A Preferred Stock into Conversion Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, in its
reasonable discretion, the Board of Directors may cause the Corporation to pay
cash to such holder equal to such fraction (calculated as to each conversion to
the nearest 1/100th of a share) multiplied by the applicable Conversion Price or
may round the number of shares of Conversion Stock to be issued to the nearest
whole share as follows: (i) any fractional shares equal to at least one-half
shall be rounded upward; and (ii) any fractional shares equal to less than
one-half shall be rounded downward.
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5.8 Declared, but Unpaid Dividends. Promptly upon conversion, the
Corporation shall also pay to the former holders of shares of the Series A
Preferred Stock so converted an amount in cash equal to any and all accrued but
unpaid dividends on the shares of Series A Preferred Stock surrendered for
conversion through the date of such conversion (whether or not declared) out of
funds legally available for such payment; provided, however, that if the funds
of the Corporation legally available for payment of such dividends are
insufficient to pay all such dividends required to be paid on such date, those
funds which are legally available and not subject to such restrictions shall be
used to pay the maximum possible amount of such dividends and the remaining
dividends shall be paid as soon as practicable when additional funds of the
Corporation not subject to such restrictions become legally available therefor.
5.9 Transfer Taxes. The Corporation will pay any and all taxes that
may be payable in respect of the issue or delivery of shares of Conversion Stock
on conversion of shares of the Series A Preferred Stock pursuant to this Section
A.5. The Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue or transfer and
delivery of shares of Conversion Stock in a name other than that in which the
shares of the Series A Preferred Stock so converted were registered, and no
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
5.10 No Impairment; Cooperation. The Corporation will not, through any
reorganization, transfer of assets, consolidation, merger, Liquidating Merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section A.5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Series A Preferred Stock against
impairment. Subject to Section A.4.1, this provision shall not restrict the
Corporation from effecting an amendment to its Certificate of Incorporation in
accordance with the General Company Law of the State of Delaware. The
Corporation shall assist and cooperate with any holder of shares of Series A
Preferred Stock required to make any filings or obtain any approvals,
governmental or otherwise, prior to or in connection with any conversion of such
shares hereunder (including, without limitation, making any filings required to
be made by the Corporation).
5.11 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section A.5, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and shall prepare
and cause to be furnished to holders of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in reasonable detail
the facts upon which such adjustment or readjustment is based. The Corporation
also shall, upon written request of any holder of record of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (a) such adjustments and readjustments and (b) the Conversion
Price at the time in effect.
5.12 Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution or to vote on any
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matter upon which such stockholders may be entitled to vote, the Corporation
shall give notice to each holder of shares of Series A Preferred Stock and to
each holder of outstanding warrants, options or other rights to acquire Series A
Preferred Stock at least 10 days prior to the date specified therein, specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or vote.
5.13 Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Conversion Stock solely for the purpose of effecting the conversion of
the outstanding shares of Series A Preferred Stock and all shares of Series A
Preferred Stock issuable upon exercise of outstanding warrants and options, such
number of shares of Conversion Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred Stock and
all shares of Series A Preferred Stock issuable upon exercise of outstanding
warrants and options. All shares of Conversion Stock that shall be so issued
shall be duly and validly issued, fully paid, nonassessable and free from all
taxes, liens and charges arising out of or by reason of the issue thereof.
Section 6. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series A Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series A Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 7. Miscellaneous.
7.1 Definitions. For the purposes of Section A.1 through Section A.7
of this Article Fourth:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the
Corporation. For purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock preferred stock
or any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
10
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Corporation's common stock,
par value $.0001 per share, and any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value with respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.
"Conversion Stock" means shares of the Common Stock issuable upon
conversion of the Series A Preferred Stock, provided that if there is a change
such that the securities issuable upon conversion of the Series A Preferred
Stock are issued by a Person other than the Corporation or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
the aggregate number of shares of the securities issuable upon conversion of the
Series A Preferred Stock if such securities are issuable in shares, or the
aggregate of the smallest units in which such securities are issuable if such
securities are not issuable in shares.
"Liquidation Value" of any share of Series A Preferred Stock as of any
particular date shall be equal to the Original Liquidation Price per share of
Series A Preferred Stock, plus any and all accrued and unpaid dividends,
including those dividends required to be paid thereon under Section A.2 hereof.
"Liquidating Merger" shall mean any merger, consolidation or sale or
exchange of all or substantially all of the property and assets of the
Corporation or any subsidiary thereof (other than with or to any Affiliate of
the Corporation), otherwise than in the usual and regular course of its
business, which will result in the stockholders of the Corporation immediately
prior to such transaction not holding (by virtue of such shares or securities
issued solely with respect thereto) at least 50% of the combined voting power of
the surviving, continuing or purchasing entity.
"Original Liquidation Price" of any share of Series A Preferred Stock
shall be equal to $10.00 per share.
"Person" means any individual, sole proprietorship, Company,
partnership, unincorporated organization, association, limited liability
Company, trust, joint venture or other business or not for profit entity or
government.
"Qualified IPO" means the sale of the Common Stock to the public in a
firm commitment public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended (together with any successor
thereto, the "Securities Act") that generates gross proceeds to the Corporation
(before deducting underwriting discounts and other customary offering expenses)
in an aggregate amount equal to at least $35,000,000 at a pre-money valuation of
at least $500,000,000.
7.2 Notices. Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be deemed given upon
the earlier of delivery thereof if by hand, or upon receipt if sent by mail
(registered or certified mail, return receipt requested and postage prepaid), or
on the next business day after deposit if sent by reputable overnight courier
service, charged prepaid, or upon transmission if sent by telecopy or facsimile
transmission (with request of assurance of receipt in a manner customary for
communication of such type), and shall be deemed to have been given when so
11
mailed or sent (i) to the Corporation, at its principal executive offices, and
(ii) to any holder of shares of Series A Preferred Stock or of Conversion Stock,
at such holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).
7.3 Severability. If any right, preference or limitation of the Series
A Preferred Stock set forth in this Certificate of Incorporation is finally
adjudicated by a court of competent jurisdiction to be invalid, unlawful or
incapable of being enforced by any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation, shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be dependent upon any other such right, preference or limitation unless so
expressed herein.
B. Series B Preferred Stock.
Designation and Amount. A total of 3,800,000 shares of the
Corporation's Preferred Stock shall be designated as a series known as Series B
Convertible Participating Preferred Stock, par value $0.0001 per share (the
"Series B Preferred Stock").
Section 2. Dividends and Distributions. The holders of Series B Preferred
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as the Board of Directors may
determine in its sole discretion; provided, however, that no such dividend may
be declared or paid on any shares of Common Stock or Series A Preferred Stock
unless at the same time a dividend is declared or paid on all outstanding shares
of Series B Preferred Stock, with holders of Series A Preferred Stock, Series B
Preferred Stock and Common Stock sharing in any such dividends as if they
constituted a single class of stock and with each holder of shares of Series B
Preferred Stock entitled to receive such dividends based on the number of shares
of Common Stock into which such shares of Series B Preferred Stock are then
convertible in accordance with Section B.6 hereof.
Section 3. Liquidation; Merger, etc.
3.1 Series B Liquidation Preference. Upon any liquidation, dissolution
or winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary (a "Liquidation Event"), each holder of outstanding shares of Series
B Preferred Stock shall be entitled to be paid, on a pari passu basis to the
Series A Preferred, before any amount shall be paid or distributed to the
holders of the Common Stock and any other capital stock ranking on liquidation
junior to the Series B Preferred Stock (the Common Stock and such other capital
stock being referred to collectively as, "Junior Stock"), an amount per share of
Series B Preferred Stock, payable in cash, equal to the sum of (i) $25.00 plus
any declared but unpaid dividends on such shares of Series B Preferred Stock
(such amount to be adjusted appropriately for stock splits, stock dividends,
recaptalizations and the like) (the "Series B Participation Amount") and (ii)
such amount of the remaining assets of the Corporation as would have been
payable per share of Series B Preferred Stock had each such share been converted
to Common Stock immediately prior to such Liquidation Event pursuant to the
provisions of Section B.6 hereof (the sum of (i) and (ii), the "Series B
Preference Amount"); provided, however, that in the event that the Series B
Preference Amount determined pursuant to the foregoing formula would result in
amount equal to or greater than $100.00 per share (such amount to be adjusted
appropriately for stock splits, stock dividends, recapitalizations and the
like), the Series B
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Participation Amount shall be adjusted in a linear fashion such that the
adjusted Series B Participation Amount equals the product of (x) the Series B
Participation Amount prior to the adjustment and (y) the Adjustment Factor (as
defined below). The "Adjustment Factor" shall be a number not less than zero and
not greater than one determined by the following formula:
Adjustment Factor = 1 - ( x - y )
---------
z
where:
x = the Series B Preference Amount prior to any adjustment to the
Series B Participation Amount (but adjusted appropriately for
stock splits, stock dividends, recapitalizations and the like);
y = $100.00 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like);
z = $25.00 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like).
If the amounts available for distribution to holders of Series A Preferred
Stock and Series B Preferred Stock upon a Liquidation Event are not sufficient
to pay all amounts due, such holders shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled.
3.2 Remaining Assets. After the payment of all preferential amounts
required to be paid to the holders of the Series B Preferred Stock and any other
class or series of stock of the Corporation ranking on liquidation on a parity
with the Series B Preferred Stock, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
3.3 Amount Payable in Mergers, etc. The holders of not less than a
Majority Interest may elect to have treated as a Liquidation Event (i) any
merger or consolidation of the Corporation into or with another corporation
(except one in which the holders of capital stock of the Corporation immediately
prior to such merger or consolidation continue to hold at least a majority of
the voting power of the capital stock of the surviving corporation), (ii) any
sale of all or substantially all of the assets of the Corporation, or (iii) any
other transaction by or as a result of which a single person (or group of
affiliated persons) newly acquires or holds stock representing a majority of the
Corporation's outstanding voting power (a "Change of Control Transaction"). In
such event, all consideration payable to the stockholders of the Corporation by
the relevant purchaser or the Corporation in connection with a merger,
consolidation or Change of Control Transaction, or all consideration payable to
the Corporation and distributable to its stockholders, together with all other
available assets of the Corporation (net of obligations owed by the
Corporation), in the case of an asset sale, shall be paid by the purchaser or
distributed by the Corporation in redemption of the Series B Preferred Stock, as
applicable, to the holders of capital stock of the Corporation in accordance
with the preferences and priorities set forth in Sections B.3.1 and B.3.2 above,
with such preferences and priorities specifically intended to be applicable in
any such merger, consolidation, asset sale or Change of Control Transaction as
if the same were a Liquidation Event. The Corporation shall promptly provide to
the holders of shares of Series B Preferred Stock such information concerning
the
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terms of such merger, consolidation, asset sale or Change of Control Transaction
and the value of the assets of the Corporation as may reasonably be requested by
the holders of Series B Preferred Stock. If applicable, the Corporation shall
cause the agreement or plan of merger, consolidation or Change of Control
Transaction agreement to provide for a rate at which the shares of capital stock
of the Corporation are converted into or exchanged for cash, new securities or
other property, or redeemed, on a basis which gives effect to the provisions of
this Section B.3. The amount deemed distributed to the holders of Series B
Preferred Stock upon any such transaction shall be the cash or the value of the
property, rights or securities distributed to such holders by the Corporation or
the acquiring person, firm or other entity, as applicable; provided, however,
that in the event the amount per share to be paid in any such transaction is
$25.00 or less (such amount to be adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like), such amount shall be paid in cash.
The value of such property, rights or other securities shall be determined as
provided below in good faith by agreement of the Board of Directors of the
Corporation and a Majority Interest. Notwithstanding anything to the contrary
contained herein, the holders of shares of Series B Preferred Stock shall have
the right to elect by vote of a Majority Interest to give effect to the
conversion rights contained in Section B.6 (or by vote of a Majority Interest to
give effect to the rights contained in Section B.7.5, if applicable) instead of
giving effect to the provisions contained in this Section B.3.3 with respect to
the shares of Series B Preferred Stock owned by them. Any election pursuant to
this Section B.3.3 shall be made by written notice to the Corporation at least 5
days prior to the closing of the relevant transaction, and any such election
shall bind all holders of this Series B Preferred Stock.
For purposes of valuing any securities or other noncash or consideration to
be delivered to the holders of the Series B Preferred Stock any transaction to
which this Section B.3 is applicable, the following shall apply:
(i) If traded on a nationally recognized securities exchange or
inter-dealer quotation system, the value shall be deemed to be the
average of the closing prices of the securities on such exchange or
system over the 30-day period ending three (3) business days prior to
the closing;
(ii) If traded over-the-counter, the value shall be deemed to be
the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the Corporation
and the holders of not less than a Majority Interest, provided that if
the Corporation and the holders of a Majority Interest are unable to
reach agreement, then by independent appraisal by a mutually agreed to
investment banker, the fees of which shall be paid by the Corporation.
Section 4. Election of Directors; Voting.
4.1 Election of Directors. The holders of outstanding shares of Series
B Preferred Stock shall, voting together as a separate class, be entitled to
elect one (1) Director of the Corporation. Such Director shall be the candidate
receiving the greatest number of affirmative votes (with each holder of Series B
Preferred Stock entitled to cast one vote for or against each candidate with
respect to each share of Series B Preferred Stock held by such holder) of the
outstanding shares of Series B Preferred Stock (the "Series B Preferred Stock
14
Director Designee"), with votes cast against such candidate and votes withheld
having no legal effect. The election of the Series B Preferred Stock Director
Designee shall occur (i) at the annual meeting of holders of capital stock, (ii)
at any special meeting of holders of capital stock, (iii) at any special meeting
of holders of Series B Preferred Stock called by holders of not less than a
majority interest of the outstanding shares of the Series B Preferred Stock (a
"Majority Interest") or (iv) by the written consent of the holder or holders of
not less than a Majority Interest. If at any time when any share of Series B
Preferred Stock is outstanding any Series B Preferred Stock Director Designee
should cease to be a Director for any reason, the vacancy shall only be filled
by the vote or written consent of the holders of the outstanding shares of
Series B Preferred Stock, voting together as a separate class, in the manner and
on the basis specified above or as otherwise provided by law. The holders of
outstanding shares of Series B Preferred Stock shall also be entitled to vote
for all other Directors of the Corporation together with holders of all other
shares of the Corporation's outstanding capital stock entitled to vote thereon,
voting as a single class, with each outstanding share entitled to the same
number of votes specified in Section B.4.2. Notwithstanding the foregoing, the
holders of outstanding shares of Series B Preferred Stock, may, in their sole
discretion, determine to elect no Series B Preferred Stock Director Designee
from time to time, and during any such period the Board of Directors nonetheless
shall be deemed duly constituted.
4.2 Voting Generally. Each outstanding share of Series B Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such share of Series B Preferred Stock is then
convertible pursuant to Section B.6 hereof as of the record date for the vote or
written consent of stockholders, if applicable. Each holder of shares of Series
B Preferred Stock shall be entitled to notice of any stockholder's meeting in
accordance with the by-laws of the Corporation and shall vote with holders of
the Common Stock, voting together as single class, upon all matters submitted to
a vote of stockholders, excluding those matters required to be submitted to a
class or series vote pursuant to the terms hereof (including, without
limitation, Section B.8) or by law.
Section 5. Redemption.
5.1 Redemption.
5.1.1 At any time on or after August 25, 2006, upon the election
of the holder or holders of not less a Majority Interest, the Corporation shall
redeem, out of funds legally available therefor, up to thirty-three and
one-third percent ("33 1/3%") of the originally issued and outstanding shares of
Series B Convertible Preferred Stock held by each holder of Series B Convertible
Preferred Stock at such time;
5.1.2 At any time on or after August 25, 2007, upon the election
of the holder or holders of not less than a Majority Interest, the Corporation
shall redeem, out of funds legally available therefor, up to that percentage of
outstanding shares of Series B Convertible Preferred Stock that would, when
combined with any prior redemptions pursuant to Section B.5.1.1 above, result in
the redemption by the Corporation of up to sixty-six and two-thirds percent
("66 2/3%") of the originally issued and outstanding shares of Series B
Convertible Preferred Stock held by each holder of Series B Convertible
Preferred Stock at such time; and
5.1.3 At any time on or after August 25, 2008, upon the election
of the holder or holders of not less than a Majority Interest, the Corporation
15
shall redeem, out of funds legally available therefor, up to that percentage of
outstanding shares of Series B Convertible Preferred Stock that would, when
combined with any prior redemptions pursuant to Section B.5.1.1 and Section
B.5.1.2 above, result in the redemption by the Corporation of up to one hundred
percent (100%) of the outstanding shares of Series B Convertible Preferred Stock
held by each holder of Series B Convertible Preferred Stock at such time.
The foregoing elections shall be made by such holders giving the Corporation and
each of the other holders of Series B Preferred Stock not less than sixty (60)
business days prior written notice, which notice shall set forth the date for
such redemption and the percentage of such shares of Series B Preferred Stock to
be redeemed from each holder (which percentage so elected on each redemption
date shall be the same for each holder). The price per share for Series B
Preferred Stock in connection with any redemption made pursuant to Section B.5.1
shall equal the Series B Participation Amount (the "Series B Redemption Price").
5.2 Redemption Date and Price Determination. Upon the election of the
holders of not less than a Majority Interest to cause the Corporation to redeem
Series B Preferred Stock pursuant to Section B.5.1, each holder of Series B
Preferred Stock shall be deemed to have elected to cause the applicable
percentage of such shares held by such holder to be so redeemed or to so
participate. The date upon which a redemption is to occur in accordance with
Section B.5.1 shall be specified in the notice of redemption pursuant to Section
B.5.1 and shall be referred to as a "Redemption Date." Subject to Section B.5.3,
the aggregate Series B Redemption Price shall be payable in cash in immediately
available funds to the respective holders on the Redemption Date in the amount
specified in Section B.5.1.
5.3 Insufficient Funds. If the funds of the Corporation legally
available for the redemption of shares of Series B Preferred Stock on the
Redemption Date are insufficient to redeem the total number of such shares
required to be redeemed on such date, the Corporation shall (i) take such action
as shall be necessary or appropriate, to the extent reasonably within its
control, to remove promptly any impediments to its ability to redeem the total
number of shares of Series B Preferred Stock required to be so redeemed,
including, without limitation, (A) reducing the stated capital of the
Corporation or causing a revaluation of the assets of the Corporation under
Section 154 of the Delaware General Corporation Law, to the extent permissible
under applicable law, to create sufficient surplus to make such redemption and
(B) incurring any indebtedness necessary to make such redemption, and (ii) in
any event, use any funds that are legally available to redeem the maximum
possible number of such shares from the holders of such shares to be redeemed in
proportion to the respective number of such shares that otherwise would have
been redeemed if all such shares had been redeemed in full. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Series B Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that the Corporation
became obligated to redeem on the Redemption Date (but which it has not yet
redeemed) at the Series B Redemption Price.
In the event that the Corporation fails for any reason to redeem shares for
which redemption is required pursuant to this Section B.5, including without
limitation due to a prohibition of such redemption under the Delaware General
Corporation Law, then such shares shall continue to be outstanding and entitled
to all of the rights and preferences provided herein, and during the period from
the applicable Redemption Date through the date on which such shares are
redeemed, the applicable redemption price shall increase at the rate per annum
16
equal to 3% in excess of the rate established from time to time by Citibank,
N.A. as its prime rate (the "Prime Rate") provided, however, that in no event
shall such interest exceed the maximum permitted rate of interest under
applicable law (the "Maximum Permitted Rate"). In the event that fulfillment of
any provision hereof results in such rate of interest being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess; provided, however, that, to the extent
permitted by law, any subsequent increase in the Maximum Permitted Rate shall be
retroactively effective to the applicable Redemption Date.
5.4 Surrender of Certificates. Each holder of shares of Series B
Preferred Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), or, in the event the certificate or certificates are lost,
stolen or missing, shall deliver an affidavit or agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith (an "Affidavit of Loss"), at the principal executive office
of the Corporation or such other place as the Corporation may from time to time
designate by notice to the holders of Series B Preferred Stock, and each
surrendered certificate shall be canceled and retired and the Corporation shall
thereafter make payment of the applicable Series B Redemption Price by certified
check or wire transfer; provided, however, that if the Corporation has
insufficient funds legally available to redeem all shares of Series B Preferred
Stock required to be redeemed, each such holder shall, in addition to receiving
the payment of the portion of the applicable Series B Redemption Price that the
Corporation is not prohibited from paying by certified check or wire transfer,
receive a new stock certificate for those shares of Series B Preferred Stock not
so redeemed.
Section 6. Conversion. The holders of Series B Preferred Stock shall have
the following conversion rights:
6.1 Right to Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth (5th) day prior to a
Redemption Date, if any, at the office of the Corporation or any transfer agent
for such series, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $25.00 by the Conversion Price at the
time in effect for such series (the "Conversion Rate"). In addition, the holders
of shares of Series B Preferred Stock shall be entitled at any time, upon the
written election of the holder or holders of not less than a Majority Interest,
without the payment of any additional consideration, to cause all (but not less
than all) of the outstanding shares of Series B Preferred Stock to be converted
into Common Stock on the basis that each outstanding share of Series B Preferred
Stock shall be converted into the number of fully paid and nonassessable shares
of Common Stock which results from dividing $25.00 by the Conversion Price in
effect at the time of such conversion, and upon the election to so convert in
the manner and on the basis specified in this sentence, all holders of the
Series B Preferred Stock shall be deemed to have elected to voluntarily convert
all outstanding shares of Series B Preferred Stock pursuant to this Section
B.6.1. The initial "Conversion Price" per share for shares of Series B Preferred
Stock shall be $25.00, subject to adjustment as set forth in Section B.7.
6.2 Automatic Conversion. Each share of Series B Preferred Stock shall
automatically be converted, without the payment of any additional consideration,
into fully paid and nonassessable shares of Common Stock at the Conversion Rate
17
as of, and in all cases subject to, the closing of the Corporation's first
underwritten offering to the public pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act");
covering the offer and sale of shares of the Corporation's common stock (i) in
which proceeds received by the Corporation (after deduction of underwriter
discounts and commissions) equal or exceed $100,000,000, (ii) with respect to
which such Common Stock is listed for trading on either the New York Stock
Exchange or the NASDAQ National Market,(iii) at an initial public offering price
per share of Common Stock, after underwriter discounts and commissions, of not
less than (A) $40.00 per share, in the case of an offering which closes on or
prior to December 31, 2000, (B) $43.75 per share, in the case of an offering
which closes from January 1, 2001 to March 31, 2001, (C) $50.00 per share in the
case of an offering which closes from April 1, 2001 to December 31, 2001, (D)
$56.25 per share, in the case of an offering which closes from January 1, 2002
to August 31, 2002 or (E) $62.50 per share in the case of an offering which
closes after August 31, 2002 (in each case appropriately adjusted for any stock
split, stock dividend, combination, recapitalization and the like) (a "QPO" or a
"Qualified Public Offering"). If the Corporation's first underwritten offering
of Common Stock would not otherwise be a QPO, then the Conversion Price shall be
adjusted downward such that the adjusted Conversion Price is equal to the
initial public offering price per share in such public offering divided by
either 1.60, 1.75, 2.00, 2.25 or 2.50, as applicable (for each of the respective
offerings described in (A) - (E) in the immediately preceding sentence);
provided that in no event shall the Conversion Price be reduced by operation of
this paragraph to an amount which is less than $10.00 and upon such adjustment
such offering shall be deemed to be a QPO. If a closing of a QPO occurs, all
outstanding shares of Series B Preferred Stock shall be deemed to have been
converted into shares of Common Stock immediately prior to such closing.
6.3 Procedure for Conversion.
6.3.1 Voluntary Conversions. Upon election to convert pursuant to
Section B.6.1, the relevant holder of Series B Preferred Stock shall surrender
the certificate or certificates representing the Series B Preferred Stock being
converted to the Corporation, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto) or
shall deliver an affidavit of loss to the Corporation, at its principal
executive office or such other place as the Corporation may from time to time
designate by notice to the holders of the Series B Preferred Stock. Upon
surrender of such certificate(s) or delivery of an affidavit of loss, the
Corporation shall issue and send by hand delivery, by courier or by first class
mail (postage prepaid) to the holder thereof or to such holder's designee, at
the address designated by such holder, certificates for the number of shares of
Common Stock to which such holder shall be entitled upon conversion. The
issuance of certificates for Common Stock upon conversion of Series B Preferred
Stock shall be deemed effective as of the date of surrender of such Series B
Preferred Stock certificates or delivery of such affidavit of loss and will be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection with
such conversion and the related issuance of such stock.
6.3.2 Automatic Conversion. As of the closing of a QPO (the
"Automatic Conversion Date"), all outstanding shares of Series B Preferred Stock
shall be converted into shares of Common Stock without any further action by the
holders of such shares and whether or not the certificates representing such
shares of Series B Preferred Stock are surrendered to the Corporation or its
transfer agent. On the Automatic Conversion Date, all rights with respect to the
Series B Preferred Stock so converted shall terminate, except any of the rights
of the holders thereof
18
upon surrender of their certificate or certificates therefor or delivery of an
affidavit of loss thereof to receive certificates for the number of shares of
Common Stock into which such Series B Preferred Stock has been converted. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his, her or its attorney duly authorized in writing. Upon surrender of such
certificates or affidavit of loss, the Corporation shall issue and deliver to
such holder, promptly (and in any event in such time as is sufficient to enable
such holder to participate in such QPO) at such office and in its name as shown
on such surrendered certificate or certificates, a certificate or certificates
for the number of shares of Common Stock into which the shares of the Series B
Preferred Stock surrendered are convertible on the Automatic Conversion Date.
6.4 Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series B Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the then outstanding shares of Series B Preferred
Stock, the Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, and to reserve such shares for
issuance upon such conversion.
6.5 No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of shares of Series B Preferred Stock in any manner
that would interfere with the timely conversion of any shares of Series B
Preferred Stock.
Section 7. Adjustments.
7.1 Adjustments to the Conversion Price. Except as provided in Section
B.7.2 and except in the case of an event described in Section B.7.3, if and
whenever after the date on which the Amended and Restated Certificate of
Incorporation becomes effective (the "Closing Date") the Corporation shall issue
or sell, or is, in accordance with this Section B.7.1, deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Conversion Price in effect immediately prior to the time of such issuance or
sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion
Price shall be reduced as follows:
(X) if such Dilutive Issuance occurs at any time on or prior to
August 25, 2001 (except in connection with issuances of shares of
Common Stock to strategic investors in a strategic alliance or other
corporate partnering transaction approved by the Board of Directors of
the Corporation, (a "Strategic Investment") which shall be subject to
clause (Y) below), the Conversion Price shall be reduced to the price
so as to be equal to the lowest consideration per share (determined as
provided in Section B.7.1.1, Section B.7.1.2 or Section B.7.1.5, as
applicable) received for each additional share upon such dilutive
issuance.
(Y) if such Dilutive Issuance occurs in connection with a
Strategic Investment or at any time after August 25, 2001, the
Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied
19
by the then existing Conversion Price and (2) the consideration, if
any, received by the Corporation upon such issue or sale (determined
as set forth below) by (ii) the total number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of
shares of Common Stock so issued or sold.
For purposes of this Section B.7.1, the following shall also be
applicable:
7.1.1 Issuance of Rights or Options. If the Corporation shall, at
any time after the Closing Date, 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"), in each
case for consideration per share determined, as provided in this paragraph and
in Section B.7.1.5 less than the Conversion Price, whether or not such Options
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, 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 exercise
of such Options, shall be deemed to have been issued as of the date of granting
of such Options (and thereafter shall be deemed to be outstanding), at a price
per share equal to the amount determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock deemed to have been so
issued. Except as otherwise provided in Section B.7.1.3, no adjustment of the
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.
7.1.2 Issuance of Convertible Securities. If the Corporation
shall, at any time after the Closing Date, in any manner issue or sell any
Convertible Securities for consideration per share (determined as provided in
this paragraph and in Section B.7.1.5 less than the Conversion Price, whether or
not the rights to exchange or convert any such Convertible Securities are
immediately exercisable, 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, as of the date of the issue or sale of such
Convertible Securities (and thereafter shall be deemed to be outstanding), at a
price per share equal to the amount determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock
deemed to have been so issued; provided, that (1) except as otherwise provided
in Section B.7.1.3, no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (2) if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any such Convertible
Securities, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
20
7.1.3 Change in Option Price or Conversion Rate. If there shall
occur a change in (A) the maximum number of shares of Common Stock issuable in
connection with any Option referred to in Section B.7.1 or any Convertible
Securities referred to in Section B.7.1 or 2, (B) the purchase price provided
for in any Option referred to in Section B.7.1, (C) the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section B.7.1 or 2 or (D) the rate at
which Convertible Securities referred to in Section B.7.1 or (2) are convertible
into or exchangeable for Common Stock (in each case, other than in connection
with an event described in Section B.7.2, then the Conversion Price in effect at
the time of such event shall be readjusted to the Conversion Price that would
have been in effect at such time had such Options or Convertible Securities that
are still outstanding provided for such changed maximum number of shares,
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 Conversion Price then in effect is thereby reduced; and on the
termination or repricing of any such Option or any such right to convert or
exchange such Convertible Securities, the Conversion Price then in effect
hereunder shall be increased to the Conversion Price that would have been in
effect at the time of such termination or repricing had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
termination (i.e., to the extent that fewer than the number of shares of Common
Stock deemed to have been issued in connection with such Option or Convertible
Securities were actually issued), never been issued or issued at such higher
price, as the case may be.
7.1.4 Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities or other
property of the Corporation other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of the Series B Preferred
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities or other property
of the Corporation that they would have received had the Series B Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series B
Preferred Stock; and provided further, however, that no such adjustment shall be
made if the holders of Series B Preferred simultaneously receive a dividend or
other distribution of such securities or other property in an amount equal to
the amount of such securities as they would have received if all outstanding
share of Series B Preferred Stock had been converted into Common Stock on the
date of such event.
7.1.5 Consideration for Stock. In case any shares of Common Stock
shall be issued or sold, or deemed issued or sold, for cash, the consideration
received therefor shall be deemed to be the amount received or to be received by
the Corporation therefor (determined with respect to deemed issuances and sales
in connection with Options and Convertible Securities in accordance with clause
(A) of Section B.7.1.1 or 2, as appropriate. In case any shares of Common Stock
shall be issued or sold, or deemed 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 received
or to be received by the Corporation (determined with respect to deemed
21
issuances and sales in connection with Options and Convertible Securities in
accordance with clause (A) of Section B.7.1.1 or 2 as appropriate) as determined
in good faith by the Board of Directors of the Corporation. 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 and a Majority Interest.
7.1.6 Record Date. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (B) 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.
7.1.7 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; provided, that the disposition of any such
shares shall be considered an issue or sale of Common Stock for the purpose of
this Section B.7.
7.2 Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Closing Date of (i) shares of Common Stock upon conversion of shares of
Series A Preferred Stock and Series B Preferred Stock or upon exercise of
warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares
issued in exchange for the stock or assets of another company in connection with
the acquisition of or merger into such company; provided, that such actions
shall have been approved by a majority of the members of the Board of Directors,
which shall include the Series B Preferred Stock Director Designee, or (iii) up
to an aggregate of 7,500,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) 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 or to the National Advisory
Board, in each case authorized by the Board of Directors and issued pursuant to
the Corporation's 2000 Incentive Compensation Plan or any other equity incentive
plan approved by a Majority Interest ("Excluded Shares"), plus such number of
Excluded Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with this Amended and Restated Certificate of
Incorporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section B.7.3 paid by such persons to the Corporation therefor.
7.3 Subdivision or Combination of Common Stock. In case the
Corporation shall at any time after the Closing Date subdivide its outstanding
shares of Common Stock into a greater number of shares (by any stock split,
stock dividend or otherwise), 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
22
shall be proportionately increased. In the case of any such subdivision, no
further adjustment shall be made pursuant to Section B.7.1.4 by reason thereof.
7.4 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 Series B
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 Series B Preferred Stock, as the case may be, 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.
7.5 Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series B Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series B Preferred Stock would
have been entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in Section B.7 set forth with
respect to the rights and interests thereafter of the holders of the Series B
Preferred Stock, to the end that the provisions set forth in Section B.7
(including provisions with respect to changes in and other adjustments of the
Series B Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Series B Preferred Stock.
Notwithstanding anything to the contrary contained herein, each holder of shares
of Series B Preferred Stock shall have the right to elect to give effect to the
conversion rights contained in Section B.6 (or the rights contained in Section
B.3.3, if applicable) instead of giving effect to the provisions contained in
this Section B.7.3 with respect to the shares of Series B Preferred Stock owned
by such holder.
Section 8. Covenants. The Corporation shall not, without first having
provided written notice of such proposed action to each holder of outstanding
shares of Series B Preferred Stock and having obtained the affirmative vote or
written consent of the holders of a Majority Interest:
8.1 declare or pay any dividends or make any distributions of cash,
property or securities of the Corporation in respect of its capital stock (other
than (i) with respect to the Series A Preferred Stock or (ii) dividends that are
paid pro rata to the holders of the Series B Preferred Stock), or apply any of
its assets to the redemption, retirement, purchase or other acquisition of its
capital stock or stock appreciation, phantom stock or similar rights, directly
23
or indirectly, through subsidiaries or otherwise, except for (i) the redemption
of Series B Preferred Stock pursuant to and as provided in this Amended and
Restated Certificate of Incorporation, (ii) the repurchase of Excluded Shares
pursuant to rights held contractual by the Corporation and at repurchase prices
not exceeding the respective original purchase price (appropriately adjusted to
reflect the occurrence of any event described in Section B.7.3, or (iii)
dividends or distributions payable solely in shares of Common Stock;
8.2 authorize or issue, or obligate itself to issue, any convertible
debt or other debt with any equity participation or any other equity security
ranking senior to the Series B Preferred Stock as to liquidation, sale or merger
preferences, conversion, redemption or dividend rights or with any special
voting rights;
8.3 amend, alter or repeal any provision of, or add any provision to,
Section B of this Amended and Restated Certificate of Incorporation or otherwise
alter or change the rights, preferences, privileges or powers of, or
restrictions provided for the benefit or, the Series B Preferred Stock;
8.4 otherwise adopt any amendment to this Amended and Restated
Certificate of Incorporation or the Company's By-laws that adversely affects the
powers, preferences or material rights of the Series B Preferred Stock;
8.5 increase the number of authorized shares of Series B Preferred
Stock or reclassify any capital stock;
8.6 change the nature of the business now conducted by the Company;
8.7 effect a recapitalization or reorganization in a form which
results in the termination of the Corporation's status as a Corporation under
the Internal Revenue Code of 1986, as amended (including without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes);
8.8 enter into any agreement to do any of the foregoing that is not
expressly made conditional on obtaining the affirmative vote or written consent
of a Majority Interest.
Further, the Corporation shall not, by amendment of this Amended and
Restated Certificate of Incorporation or through any Liquidation Event or other
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, agreement or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation and shall at all times in good faith
assist in the carrying out of all the provisions of this Article IV and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Series B Preferred Stock against impairment.
Any successor to the Corporation shall agree in writing, as a condition to such
succession, to carry out and observe the obligations of the Corporation
hereunder with respect to the Series B Preferred Stock.
Section 9. Notice; Adjustments.
9.1 Liquidation Events, Extraordinary Transactions, Etc. In the event
(i) the Corporation establishes a record date to determine the holders of any
24
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or any other public offering becomes reasonably likely to
occur, the Corporation shall mail or cause to be mailed by first class mail
(postage prepaid) to each holder of Series B Preferred Stock at least thirty
(30) days prior to such record date specified therein or the expected effective
date of any such transaction, whichever is earlier, a notice specifying (A) the
date of such record date for the purpose of such dividend or distribution or
meeting or consent and a description of such dividend or distribution or the
action to be taken at such meeting or by such consent, (B) the date on which any
such Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or other public offering is expected to become effective, and
(C) the date on which the books of the Corporation shall close or a record shall
be taken with respect to any such event. Such notice shall be accompanied by a
certificate prepared by the chief financial officer of the Corporation
describing in detail (1) the facts of such transaction, (2) the amount(s) per
share of Series B Preferred Stock each holder of Series B Preferred Stock would
receive pursuant to the applicable provisions of this Amended and Restated
Certificate of Incorporation, and (3) the facts upon which such amounts were
determined.
9.2 Adjustments; Calculations. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to Section B.7, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series B Preferred Stock a certificate setting forth in detail (i) such
adjustment or readjustment, (ii) the Conversion Price before and after such
adjustment or readjustment, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Series B Preferred Stock. All such
calculations shall be made to the nearest cent or to the nearest one hundredth
(1/100) of a share as the case may be.
9.3 Waiver of Notice. The holder or holders of a Majority Interest
may, at any time upon written notice to the Corporation, waive any notice or
certificate delivery provisions specified herein for the benefit of such
holders, and any such waiver shall be binding upon all holders of such
securities.
Section 10. No Reissuance of Series B Preferred Stock. No share or shares
of Series B Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
Section 11. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Series B Preferred Stock shall be
deemed contract rights enforceable by them, including, without limitation, one
or more actions for specific performance.
C. Ranking.
(a) Liquidation. The Series A Preferred Stock and the Series B
Preferred Stock shall rank on a parity with each other as to
liquidation rights. Except as otherwise stated in this Amended
and Restated Certificate of Incorporation, the Preferred Stock
shall be senior to all other classes of the Corporation's capital
stock as to liquidation rights.
25
(b) Dividends. No dividend shall be declared, paid or set apart
on any Common Stock (other than a dividend payable in stock
ranking junior to the Series A Preferred Stock or Series B
Preferred Stock as to dividends and liquidation rights) at a time
at which any dividend on any Series A Preferred Stock or Series B
Preferred Stock then outstanding shall be past due unless all
past due dividends on the Series A Preferred Stock and Series B
Preferred Stock shall be paid or properly made available not
later than the time such dividend shall be paid on such junior
stock. The Series A Preferred Stock and the Series B Preferred
Stock shall rank pari passu as to the declaration and payment of
dividends.
In the case of dividends or other distributions payable in stock
of the Corporation other than Series A Preferred Stock or Series
B Preferred Stock, including distributions pursuant to stock
splits or divisions of stock of the Corporation other than Series
A Preferred Stock or Series B Preferred Stock, which occur after
the initial issuance of shares of Series B Preferred Stock by the
Corporation, only shares of Common Stock shall be distributed
with respect to Common Stock, only shares of Series A Preferred
Stock shall be distributed with respect to Series A Preferred
Stock and only shares of Series B Preferred Stock shall be
distributed with respect to Series B Preferred Stock.
D. Common Stock.
(a) Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of
Directors, out of the assets of the Corporation which are by law
available therefor, dividends payable either in cash, in
property, or in shares of Common Stock.
(b) Voting Rights. At every annual or special meeting of
stockholders of the Corporation, every holder of Common Stock
shall be entitled to one vote, in person or by proxy, for each
share Common Stock outstanding in his name on the books of the
Corporation.
(c) Liquidation. In the event of any liquidation, after payment
or provision for payment of the debts and other liabilities of
the Corporation and of the preferential amounts, if any, to which
the holders of Preferred Stock shall be entitled, the holders of
all outstanding shares of Common Stock shall be entitled to share
ratably in the remaining net assets of the Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any, contained
in the by-laws of the Corporation, such by-laws may be adopted,
amended or repealed by the board of directors of the Corporation.
(b) Elections of directors need not be by written ballot unless,
and only to the extent, otherwise provided in the by-laws of the
Corporation.
26
(c) Subject to any applicable requirements of law, the books of
the Corporation may be kept outside the State of Delaware at such
location or locations as may be designated by the board of
directors of the Corporation or in the by-laws of the
Corporation.
(d) Except as provided to the contrary in the provisions
establishing a class of stock, the number of authorized shares of
such class may be increased or decreased (but not below the
number of shares thereof then outstanding)by the affirmative vote
of the holders of a majority of stock of the Corporation entitled
to vote, voting as a single class.
SIXTH: The Corporation shall indemnify each person who at any time is, or
shall have been, a director or officer of the Corporation and was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director of
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred in connection with any such action, suit or proceeding, to the maximum
extent permitted by the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. The foregoing right of indemnification
shall in no way be exclusive of any other rights of indemnification to which any
such director or officer may be entitled, under any by-law, agreement, vote of
directors or stockholders or otherwise. No amendment to or repeal of the
provisions of this Article SIXTH shall deprive a director or officer of the
benefit hereof with respect to any act or failure to act occurring prior to such
amendment or repeal.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them or between the Corporation
and its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, or of the stockholders or class
of stockholders of the Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, or on all
the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or to any of its stockholders for monetary damages arising out of
such director's breach of fiduciary duty as a director of the Corporation,
except to the extent that the elimination or limitation of such liability is not
permitted by
27
the General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended. No amendment to or repeal of the provisions of this
Article EIGHTH shall deprive any director of the Corporation of the benefit
hereof with respect to any act or failure to act of such director occurring
prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by the General
Corporation Law of the State of Delaware and this Certificate of Incorporation,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
[SIGNATURE PAGE FOLLOWS]
28
IN WITNESS WHEREOF, IPG Photonics Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by Valentin P. Gapontsev, its
President, this 25th day of August, 2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev
------------------------------------
Valentin P. Gapontsev,
Chairman of the Board
29
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation", a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted resolutions to amend the Certificate of Incorporation of
the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting Article FOURTH, B, Section 1 in its entirety and
substituting therefor the following new Article FOURTH, B, Section 1:
Designation and Amount. A total of 3,600,000 shares of the
Corporation's Preferred Stock shall be designated as a series known as
Series B Convertible Participating Preferred Stock, par value $0.000l
per share (the "Series B Preferred Stock").
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting Article FOURTH, B, Section 7.2 in its entirety and
substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted, Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance from
and after the Closing Date of (i) shares of Common Stock upon conversion
of shares of Series A Preferred Stock and Series B Preferred Stock or
upon exercise of warrants to purchase Common Stock outstanding as of
August 25, 2000, (ii) shares issued in exchange for the stock or assets
of another company in connection with the acquisition of or merger into
such company; provided, that such actions shall have been approved by a
majority of the members of the Board of Directors, which shall include
the Series B Preferred Stock Director Designee, or (iii) up to an
aggregate of 3,750,000 (subject to appropriate adjustment for any stock
split, stock dividend or similar event) 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 or to
the National Advisory Board, in each case authorized by the Board of
Directors and issued pursuant to the Corporation's 2000 Incentive
Compensation Plan or any other equity incentive plan approved by a
Majority Interest ("Excluded Shares"), plus such number of Excluded
Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with this Amended and Restated
Certificate of Incorporation, pursuant to
contractual rights held by the Corporation and at repurchase prices not
exceeding the respective original purchase prices (appropriately
adjusted to reflect the occurrence of any event described in Section
B.7.3 paid by such persons to the Corporation therefor.
SECOND: That as of the date hereof the Corporation has received approval of a
majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provision of Section 242 of the General Corporation Law of
the State of Delaware.
[Remainder of Page Intentionally Left Blank]
2
IN WITNESS WHEREOF, I have hereunto set my hand the 6th day of October,
2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board and
Chief Executive Officer
3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation") a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware. DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted resolutions to amend the Certificate of incorporation of
the Corporation as follows;
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting Article FOURTH, B, Section 1 in its entirety and
substituting thereby the following new Article FOURTH. B, Section 1:
Designation and Amount. A total of 3,800,000 shares of the
Corporation's Preferred Stock shall be designated as a series known as
Series B Convertible Participating Preferred Stock, par value $.0001 per
share (the "Series B Preferred Stock")
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting Article FOURTH, B, Section 7.2 in its entirety and
substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted, Anything herein to the
contrary notwithstanding, the Corporation shall not be requited to make
any adjustment of the Conversion Price in the case of the Issuance from
and after the Closing Date of (i) shares of Common Stock upon conversion
of shares of Series A Preferred Stock and Series B Preferred Stock or
upon exercise of warrants to purchase Common Stock outstanding as of
August 25, 2000, (ii) shares issued in exchange for the stock or assets
of another company in connection with the acquisition of or merger into
such company; provided, that such actions shall have been approved by a
majority of the members of the Board of Directors, which shall include
the Series B Preferred Stock Director Designee, or (iii) up to an
aggregate of 7,500,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) 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 or to the National Advisory Board, in each ease authorized
by the Board of Directors and issued pursuant to the Corporation's 2000
Incentive Compensation Plan or any other equity Incentive plan approved
by a Majority Interest ("Excluded Shares"), plus such number of Excluded
Shares that are
repurchased by the Corporation from such persons after such Closing Date
in accordance with this Amended and Restated Certificate of
Incorporation, pursuant to contractual rights held by the Corporation
and at repurchase prices not exceeding the respective original purchase
prices (appropriately adjusted to reflect the occurrence of any event
described in Section B.7.3 paid by such persons to the Corporation
therefor.
SECOND: That as of the date hereof the Corporation has received approval of a
majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provision of Section 242 of the General Corporation Law of
the State of Delaware.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, I have hereunto set my hand the 4th day of December,
2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board
and Chief Executive Officer
3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted resolutions to amend the Certificate of Incorporation of
the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation he
amended by deleting the first paragraph of Article FOURTH in its
entirety and substituting therefor the following new paragraph:
FOURTH: Total number of shares of capital stock which the Corporation
shall have authority to issue is 67,000,000 shares of which 60,000,000
shares shall be designated Common Stock par value of $.0001 per share
("Common Stock"), and 7,000,000 shares shall be designated Preferred
Stock, par value of $.0001 per share ("Preferred Stock").
SECOND: That as of the date hereof the Corporation has received approval of a
majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provision of Section 242 of the General Corporation Law of
the State of Delaware
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, I have hereunto set my hand the 11th day of April, 2001
IPG PHOTONICS CORPORATION
By: /S/ Valentin P. Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board and
Chief Executive Officer
2
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
IPG PHOTONICS CORPORATION
(Pursuant to Section 151(g) of The General
Corporation Law of the State of Delaware)
IPG PHOTONICS CORPORATION, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Company"), hereby
certifies, in accordance with Section 151(g) thereof, that the Company, by
unanimous written consent dated as of March 30, 2001 in lieu of a meeting,
pursuant to the authority expressly vested in the Company's board of directors
(the "Board of Directors") by the Certificate of Incorporation of the Company
(the "Certificate of Incorporation"), adopted the following resolutions creating
a series of Two Million (2,000,000) shares of the Company's preferred stock, par
value $.0001 per share (the "Preferred Stock"), designated as Series C Preferred
Stock:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors by the Certificate of Incorporation, the Board of Directors
hereby creates a series of the Preferred Stock, par value $.0001 per share, of
the Company (the "Series C Preferred Stock") and hereby states that the powers,
designations and number of shares thereof, and the relative, participating,
optional and other rights of the shares of such Series C Preferred Stock and the
qualifications, limitations or restrictions thereof, are as follows (capitalized
terms not immediately defined or referenced shall have the meanings provided for
such terms in Section 10.1 of this Certificate of Designation or in the
Certificate of Incorporation):
Section 1. Designation and Amount.
1.1 There shall be a series of the Preferred Stock which shall be
designated as the "Series C Preferred Stock", par value $.0001 per share, and
the number of shares constituting such series shall be Two Million (2,000,000).
Subject to Section 5.3 of this Certificate of Designation, such number of shares
may be decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series C Preferred Stock to a
number less than that of the shares then outstanding plus the number of shares
issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Company with respect to
shares of Series C Preferred Stock. The issuance price of the Series C Preferred
Stock shall be $30.00 per share (the "Series C Issue Price").
1.2 The Company shall not reissue any shares of the Series C Preferred
Stock and shall from time to time in accordance with applicable law increase the
authorized amount of its Common Stock in the event that the number of authorized
shares of Common Stock remaining available for issuance shall not be sufficient
to permit conversion of the Series C Preferred Stock.
Section 2. Dividends and Distributions.
2.1 The holders of the Series C Preferred Stock shall be entitled to
receive, out of funds legally available therefor only on outstanding shares of
Series C Preferred Stock, when, as and if declared by the Board of Directors or
upon a Liquidation Event (as defined in Section 3.1), cash dividends at a rate
per annum of 6% of the Series C Issue Price per share (the "Series C
Dividends"). Series C Dividends shall cumulate from day to day, whether or not
declared by the Board of Directors. Notwithstanding the foregoing, no dividends
may be paid with respect to the Series C Preferred Stock unless, prior thereto,
an equivalent dividend is declared and paid on all outstanding shares of Series
A Preferred Stock and the Series B Preferred Stock, with each holder of shares
of Series A Preferred Stock or the Series B Preferred Stock entitled to receive
such dividends based on the number of shares of Common Stock into which such
shares of Series A Preferred Stock or Series B Preferred Stock are then
convertible in accordance with their terms. No cumulated dividends shall be paid
upon any conversion of the Series C Preferred Stock (except and only to the
extent declared before the date of conversion), notwithstanding anything herein
to the contrary.
2.2 If any cash dividends or non-cash dividends or other then convertible.
distributions (other than distributions of Common Stock) are declared by the
Board of Directors to be paid on any shares of Common Stock, then the cumulative
dividends set forth in Section 2.1 shall first be paid with respect to the
Series C Preferred Stock, but after dividends or distributions are made upon the
Series A Preferred Stock and the Series B Preferred Stock in accordance with
Section 2.1, and thereafter the dividend or other distribution declared with
respect to the Common Stock shall be paid at the same time to the holders of the
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Common Stock, as if they constituted a single class of
stock based upon the number of shares of Common Stock into which the holders of
the Preferred Stock are
Section 3. Liquidation.
3.1 Upon any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary (a "Liquidation Event"), each holder of shares of
Series C Preferred Stock shall be entitled to be paid, before any distribution
or payment is made upon any Common Stock, but after distributions or payments
are made upon the Series A Preferred Stock and the Series B Preferred Stock,
from the assets of the Company available for distribution to its stockholders,
whether from capital, surplus or earnings, an amount in cash equal to the sum of
the aggregate Liquidation Value of all shares of Series C Preferred Stock held
by such holder. In connection with the Liquidation Event, the Company shall
declare for payment on the payment date for the Liquidation Event all cumulative
and unpaid dividends, if any, with respect to the Series C Preferred Stock as
set forth in Section 2. If upon any such Liquidation Event, the Company's assets
to be distributed among the holders of the Series C Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount that they
are entitled to be paid, then the entire assets to be distributed shall be
distributed ratably among such holders based upon the aggregate Liquidation
Value of the Series C Preferred Stock held by each such holder. The Company
shall give written notice of such Liquidation Event, not less than 30 days prior
to the payment
2
date stated therein, to each record holder of shares of Series C Preferred
Stock. Prior to the last day of such 30-day period, each holder of the Series C
Preferred Stock may convert all but not less than all of the Series C Preferred
Stock (including any fraction of a share) held by such holder, into a number of
fully paid and nonassessable shares of Conversion Stock equal to, with respect
to each share of Series C Preferred Stock, the Conversion Ratio then in effect
subject to the proviso in Section 5.1 and by surrendering such holder's
certificate(s) in accordance with Section 5.9 hereof, and subject to Section
5.10 hereof. A merger, reorganization, consolidation or other similar
transaction of the Company (including a merger or consolidation of the Company
into or with any other entity or entities that is a wholly-owned subsidiary of
the Company), the sale or transfer by the Company of all or any part of its
assets (including to any wholly-owned subsidiary), and the reduction of the
capital stock of the Company, shall not be deemed to be a Liquidation Event.
Section 4. Voting Rights. Each outstanding share of Series C Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such share of Series C Preferred Stock is then
convertible as of the record date for the vote or written consent of
stockholders, if applicable. Each holder of shares of Series C Preferred Stock
shall be entitled to notice of any stockholder's meetings in accordance with the
by-laws of the Company and shall vote with holders of the Common Stock, voting
together as single class, upon all matters submitted to a vote of stockholders,
excluding those matters required to be submitted to a class or series vote
pursuant to the terms hereof or the Certificate of Incorporation or by law.
4.1 Protective Voting Provisions. So long as shares of the Series C
Preferred Stock shall be outstanding, without first obtaining the approval (by
vote or written consent, as provided by law or by the Certificate of
Incorporation or the bylaws of the Company, each as amended from time to time)
of the holders of more than fifty percent of the outstanding shares of Series C
Preferred Stock, voting separately as a class, the Company shall not:
(i) increase the authorized number of shares of Series C Preferred
Stock; or
(ii) affect, alter, amend, repeal or waive the rights, preferences or
privileges of the holders of the Series C Preferred Stock as set forth herein.
Otherwise and except as required by the General Corporation Law of the State of
Delaware, the holders of the Series C Preferred Stock shall not vote separately
as a class of stock.
Section 5. Conversion.
5.1 Elective Conversion. At any time after the 12-month anniversary of the
original issuance of the Series C Preferred Stock (the "Series C Issuance
Date"), at his, her or its absolute and sole discretion, any holder of shares of
Series C Preferred Stock may convert all or any portion of the Series C
Preferred Stock (including any fraction of a share) held by such holder, into a
number of fully paid and nonassessable shares of Conversion
3
Stock equal to, with respect to each share of Series C Preferred Stock, the
Conversion Ratio then in effect by delivery to the Company of the number of
shares of Series C Preferred Stock to be so converted, and by surrendering such
holder's certificate(s) in accordance with Section 5.9 hereof, and subject to
Section 5.10 hereof; provided, that, (i) if a conversion is effected after 18
months following the Series C Issuance Date but prior to the second anniversary
of the Series C Issuance Date, the Conversion Price (as defined in Section 5.4)
shall be adjusted, immediately prior to such conversion, to equal 120% of the
Conversion Price then in effect; and (ii) if a conversion is effected on or
after the second anniversary of the Series C Issuance Date, the Conversion Price
shall be adjusted, immediately prior to such conversion, to equal 140% of the
Conversion Price then in effect.
5.2 Mandatory Conversion. The Company may elect to convert all, but not
less than all, of the Series C Preferred Stock, (i) with such conversion to be
effective at any time after the second anniversary of the Series C Issuance
Date, by providing written notice to the holders of Series C Preferred Stock no
less than 30 days prior to the proposed date of conversion (which notice may be
delivered prior to such second-year anniversary) or (ii) in connection with any
merger or consolidation of the Company into or with another corporation (except
one in which the holders of capital stock of the Company immediately prior to
such merger or consolidation continue to hold at least a majority of the voting
power of the capital stock of the surviving corporation). The written notice
shall state the proposed date of conversion. The number of shares of Conversion
Stock deliverable upon conversion hereunder shall be determined as set forth in
Section 5.1 above. Upon such mandatory conversion, each share of Series C
Preferred Stock shall be canceled and not subject to reissuance as Series C
Preferred Stock, but shall rather be undesignated and unreserved Preferred Stock
of the Company.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by
dividing $30.00 by the Conversion Price (as defined in Section 5.4 hereof).
5.4 Conversion Price. The initial Conversion Price shall equal $30.00 per
share.
5.5 Subdivision or Combination of Common Stock. In case the Company shall
subdivide its outstanding shares of Common Stock into a greater number of shares
(by any stock split, stock dividend or otherwise), 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.
5.6 Adjustment for Mergers or Reorganizations. If at any time or from time
to time there shall be a capital reorganization of the Common Stock (other than
a subdivision or combination of shares provided for in Section 5.5) or a merger
or consolidation of the Company with or into another Person or the sale of all
or substantially all of the Company's properties and assets to any other Person,
then, as a part of and as a condition to the effectiveness of such
reorganization, merger, consolidation or sale (but subject to the rights set
forth in Section 5.2(ii) hereof), lawful and adequate provision shall be made so
that if the Company is not the surviving company the Series C Preferred Stock
shall be converted into preferred stock
4
of the surviving Person having equivalent preferences, rights and privileges,
except that in lieu of being able to convert into shares of Common Stock of the
Company or common stock of the surviving Person, the holders of the Series C
Preferred Stock (including any such preferred stock issued upon conversion of
the Series C Preferred Stock) shall thereafter be entitled to receive upon
conversion of the Series C Preferred Stock (including any such preferred stock
issued upon conversion of the Series C Preferred Stock) the number of shares of
stock or other securities or property of the surviving Person resulting from
such reorganization, merger or consolidation or sale to which a holder of the
number of shares of Common Stock deliverable upon conversion of the Series C
Preferred Stock immediately prior to the capital reorganization, merger,
consolidation or sale would have been entitled on such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate provisions shall
be made with respect to the rights of the holders of the Series C Preferred
Stock (including any such preferred stock issued upon conversion of the Series C
Preferred Stock) after the reorganization, merger, consolidation or sale to the
effect that the provisions of this Section 5 (including without limitation
provisions for adjustment of the Conversion Price and the number of shares
issuable upon conversion of the Series C Preferred Stock or such preferred
stock) shall thereafter be applicable, as nearly as may be, with respect to any
shares of stock, securities or assets to be deliverable thereafter upon the
conversion of the Series C Preferred Stock or such preferred stock.
5.7 No Adjustment for Small Changes. No adjustment of the Conversion Price
shall be made if such adjustment would result in a change in Conversion Price in
an amount less than $0.01 per share. Any adjustments not made as a result of the
preceding sentence shall be included in subsequent future adjustments, but only
until such change in the Conversion Price as a result of such cumulative
adjustments is equal to at least $0.01 per share.
5.8 No Adjustment for Non-Stock Dividends. No adjustment of the Conversion
Price shall be made in respect of non-stock dividends on the Common Stock or the
Series C Preferred Stock.
5.9 Mechanics of Elective Conversion. Before any holder of shares of Series
C Preferred Stock shall be entitled to convert the same into shares of
Conversion Stock pursuant to Section 5.1 hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed or in blank, at the office
of the Company or of any transfer agent for the Series C Preferred Stock (or, in
addition to the aforementioned places, at such other place as the Board of
Directors may reasonably designate), and shall give written notice to the
Company (in the manner described in Section 10.2 hereof) at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of
Conversion Stock are to be issued. The Company shall use its commercially
reasonable efforts promptly to (subject to Section 5.10), issue and deliver at
such office to such holder of shares of Series C Preferred Stock, or to the
nominee or nominees of such holder, (x) a certificate or certificates for the
number of shares of Conversion Stock to which such holder shall be entitled as
herein provided, (y) a certificate representing any shares of Series C Preferred
Stock not so converted and, if applicable, the payment required by Section 5.10.
Any conversion shall be deemed to have been made immediately prior to the close
of business on (i) the date such written notice is given (provided that such
holder's certificate or
5
certificates are delivered to the Company within two business days after such
notice is given) or (ii) in any other case, on the date of such surrender of the
shares of Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Conversion Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Conversion Stock on such date. Notwithstanding the foregoing, no surrender of
certificates shall be required in the event of a mandatory conversion pursuant
to Section 5.2 of this Certificate of Designation. Accrued dividends on the
Series C Preferred Stock shall not be paid in the event of a conversion.
5.10 Fractional Shares. No fractional shares shall be issued upon
conversion of the Series C Preferred Stock into Conversion Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, in its
reasonable discretion, the Board of Directors may cause the Company to pay cash
to such holder equal to such fraction (calculated as to each conversion to the
nearest 1/100th of a share) multiplied by the applicable Conversion Price or may
round the number of shares of Conversion Stock to be issued to the nearest whole
share as follows: (i) any fractional shares equal to at least one-half shall be
rounded upward; and (ii) any fractional shares equal to less than one-half shall
be rounded downward.
5.11 Transfer Taxes. The Company will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Conversion Stock on
conversion of shares of the Series C Preferred Stock pursuant to this Section 5.
The Company shall not, however, be required to pay any tax that may be payable
in respect of any transfer involved in the issue or transfer and delivery of
shares of Conversion Stock in a name other than that in which the shares of the
Series C Preferred Stock so converted were registered, and no issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax or has established to the satisfaction of the
Company that such tax has been paid.
5.12 No Impairment; Cooperation. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of Series C Preferred Stock against impairment.
Subject to Section 4.1 of this Certificate of Designation, this provision shall
not restrict the Company from effecting an amendment to its Certificate of
Incorporation in accordance with the General Corporation Law of the State of
Delaware. The Company shall assist and cooperate with any holder of shares of
Series C Preferred Stock required to make any filings or obtain any approvals,
governmental or otherwise, prior to or in connection with any conversion of such
shares hereunder (including, without limitation, making any filings required to
be made by the Company).
5.13 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section 5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and shall prepare and cause to
be furnished to holders of Series C Preferred Stock a certificate
6
setting forth such adjustment or readjustment and showing in reasonable detail
the facts upon which such adjustment or readjustment is based. The Company also
shall, upon written request of any holder of Series C Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (a)
such adjustments and readjustments and (b) the Conversion Price at the time in
effect.
5.14 Notices of Record Date. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution or to vote on any matter upon which such
stockholders may be entitled to vote, the Company shall give notice to each
holder of shares of Series C Preferred Stock at least 10 days prior to the date
specified therein, specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or vote.
5.15 Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Conversion Stock solely for the purpose of effecting the conversion of the
outstanding shares of Series C Preferred Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series C
Preferred Stock. All shares of Conversion Stock that shall be so issued shall be
duly and validly issued, fully paid, nonassessable and free from all taxes,
liens and charges arising out of or by reason of the issue thereof.
Section 6. Redemption.
6.1 The Company shall have the right to redeem all or any portion of the
shares of Series C Preferred Stock from a holder thereof for no additional
consideration in partial or complete satisfaction of any liquidated indemnity
claim of the Company against any such holder pursuant to Sections 8.2 and 8.3 of
the Agreement and Plan of Reorganization dated as of March 20, 2001 by and among
the Company, MetroWave Communications Inc., a Cayman Islands corporation d/b/a
OpticWave Communications ("MetroWave"), OpticWave Communications, Inc., a
Delaware corporation and the stockholders signatory thereto (the "Agreement"),
which claim has been finally determined pursuant to the arbitration process
provided under Section 8.6 of the Agreement or agreed to by the holder (a
"Claim"), and remains unpaid for more than 15 days after it becomes due and
owing. Each holder shall have the right to require the Company to redeem all or
any portion of the shares of Series C Preferred Stock of such holder thereof for
no additional consideration in partial or complete satisfaction of a Claim of
the Company against any such holder pursuant to Sections 8.2 or 8.3 of the
Agreement. For purposes of satisfying any Claims pursuant to the foregoing
redemption right, shares of Series C Preferred Stock shall be valued at the
Series C Issue Price (with respect to all shares of Series C Preferred Stock to
be redeemed, the "Redemption Price").
6.2 At least 5 days and not more than 15 days prior to the date fixed for
any redemption of the Series C Preferred Stock from a holder thereof, written
notice shall be given in accordance with Section 10.2; provided, that, no
failure to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Series C Preferred Stock to
be redeemed except as to the holder or holders to whom the
7
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. The redemption notice shall state: (i) the amount of
the Claim with respect to such holder; (ii) the total number of shares of Series
C Preferred Stock being redeemed; (iii) the number of shares of Series C
Preferred Stock held, as of the appropriate record date, by the holder that the
Company intends to redeem; (iv) the date fixed for redemption; and (v) that the
holder is to surrender to the Company, at the place or places where certificates
for shares of Series C Preferred Stock are to be surrendered for redemption, in
the manner and at the price designated, the certificate or certificates
representing the shares of Series C Preferred Stock to be redeemed.
6.3 Each holder shall surrender the certificate or certificates
representing such shares of Series C Preferred Stock to the Company, duly
endorsed, in the manner and at the place designated in the redemption notice,
and each surrendered certificate shall be canceled and retired. In the event
that a holder seeks to redeem shares of Series C Preferred Stock, the holder
shall surrender the certificate or certificates representing such shares of
Series C Preferred Stock to the Company at its principal place of business, duly
endorsed, together with a writing that describes the shares to be redeemed, and
each surrendered certificate shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
6.4 Notwithstanding the foregoing, the rights to redemption of this Section
6 are subject to the provisions of Section 5.11(c) of the Agreement and shall
not be exercised to the extent that such redemption would reduce the overall
number of Series C Preferred Stock received in connection with the Agreement to
a number of shares having a value as of the Closing Date (as defined in the
Agreement), of less than fifty percent (50%) of the value of all of the formerly
outstanding stock of MetroWave as of the same date.
Section 7. Replacement. Upon receipt of evidence reasonably satisfactory to
the Company (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series C Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series C Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 8. Covenants.
8.1 Corporate Existence. The Company shall do or cause to be done, at its
own cost and expense, all things necessary to preserve and keep in full force
and effect its corporate existence and the corporate existence of each of its
subsidiaries in accordance with the respective organizational documents of each
such subsidiary and the material rights (charter and
8
statutory) and franchises of the Company and each such subsidiary; provided,
however, that the Company shall not be required to preserve, with respect to
itself, any material right or franchise and, with respect to any of its
subsidiaries, any such existence, material right or franchise, if the Board of
Directors of the Company shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
the subsidiaries, taken as a whole.
8.2 Payment of Taxes and Other Claims. The Company shall pay or discharge
or cause to be paid or discharged, before the same shall become delinquent, (A)
all material taxes, assessments and governmental charges (including withholding
taxes and any penalties, interest and additions to taxes) levied or imposed upon
it or any of its subsidiaries or properties of it or any of its subsidiaries and
(B) all lawful claims for labor, materials and supplies that, if unpaid, might
by law become a lien upon the property of it or any of its subsidiaries;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted for which
adequate reserves, to the extent required under U.S. generally accepted
accounting principles, have been taken.
8.3 Maintenance of Properties and Insurance.
8.3.1 The Company shall, and shall cause each of its subsidiaries to,
maintain its material properties in good working order and condition (subject to
ordinary wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business; provided, however, that nothing in this Section 8.3.l shall
prevent the Company or any of its subsidiaries from discontinuing the operation
and maintenance of any of its properties, if such discontinuance is, in the good
faith judgment of the Board of Directors of the Company or the subsidiary, as
the case may be, desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the holders of Series C Preferred
Stock.
8.3.2 The Company shall provide or cause to be provided, for itself
and each of its subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Board of Directors of the Company, are adequate and appropriate for the conduct
of the business of the Company and such subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States of America or any
agency or instrumentality thereof, in such amounts, with such deductibles, and
by such methods as shall be customary, in the good faith judgment of the Board
of Directors of the Company, for companies similarly situated in the industry.
8.4 Compliance with Laws. The Company shall comply, and shall cause each of
its subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as are not in the
aggregate reasonably likely to have a
9
material adverse effect on the financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
Section 9. Event of Default. If, on any date, an Event of Default (as
defined below) shall have occurred and be continuing, whether or not by reason
of the absence of legally available funds therefor, then the holders of a
majority of the Series C Preferred Stock then outstanding shall be entitled to
appoint one observer to attend all meetings of the Company's Board of Directors.
"Event of Default" means any of the following: (i) a material breach of the
covenants set forth in Section 8 which, if such breach is one that can be
remedied, is not remedied within 90 days of written notice of such breach from
the holders of Series C Preferred Stock to the Company; (ii) the acceleration
prior to its scheduled maturity of any indebtedness of the Company in excess of
$10,000,000; or (iii) any voluntary or involuntary declaration of bankruptcy by
the Company.
Section 10. Miscellaneous.
10.1 Definitions. For the purposes of this Certificate of Designation:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the Company.
For purposes of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock, preferred
stock or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Company's common stock, par
value $.0001 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value with respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company.
"Conversion Stock" means shares of the Common Stock issuable upon
conversion of the Series C Preferred Stock, provided that if there is a change
such that the securities issuable upon conversion of the Series C Preferred
Stock are issued by a Person other than the Company or there is a change in the
class of securities so issuable, then the term "Conversion Stock" shall mean the
aggregate number of shares of the securities issuable upon conversion of the
Series C Preferred Stock if such securities are
10
issuable in shares, or the aggregate of the smallest units in which such
securities are issuable if such securities are not issuable in shares.
"Liquidation Value" of any share of Series C Preferred Stock as of any
particular date shall be equal to $30.00 per share of Series C Preferred Stock,
plus any and all cumulative and unpaid dividends, including those dividends
required to be paid thereon under Section 2 hereof.
"Person" means any individual, sole proprietorship, corporation,
partnership, unincorporated organization, association, limited liability
company, trust, joint venture or other business or not for profit entity or
government.
10.2 Notices. Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be deemed given upon the
earlier of delivery thereof if by hand, or upon receipt if sent by mail
(registered or certified mail, return receipt requested and postage prepaid), or
on the next business day after deposit if sent by reputable overnight courier
service, charges prepaid, or upon transmission if sent by telecopy or facsimile
transmission (with request of assurance of receipt in a manner customary for
communication of such type), and shall be deemed to have been given when so
mailed or sent (i) to the Company, at its principal executive offices, and (ii)
to any holder of shares of Series C Preferred Stock or of Conversion Stock, at
such holder's address as it appears in the stock records of the Company (unless
otherwise indicated by any such holder).
10.3 Severability. If any right, preference or limitation of the Series C
Preferred Stock set forth in this Certificate of Designation is finally
adjudicated by a court of competent jurisdiction to be invalid, unlawful or
incapable of being enforced by any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of Designation
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation, shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be dependent upon any other such right, preference or limitation unless so
expressed herein.
11
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its President and attested by its Secretary this 11th
day of April, 2001.
/s/ Valentin P. Gapontsev
----------------------------------------
Valentin P. Gapontsev
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Angelo P. Lopresti
- -------------------------------------
Angelo P. Lopresti
Secretary
12
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted resolutions to amend the Certificate of Incorporation of
the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting the first and second paragraphs of Article FOURTH in
their entirety and substituting therefor the following:
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 85,000,000 shares of which
70,000,000 shares shall be designated Common Stock, par value of $.0001
per share ("Common Stock"), and 15,000,000 shares shall be designated
Preferred Stock, par value of $.0001 per share ("Preferred Stock").
The Board of Directors is authorized, subject to the limitations
prescribed by law and the terms of this Certificate, to provide for the
issuance of shares of Preferred Stock in one or more series, to
establish the number of shares to be included in each such series, and
to fix the designations, powers, including without limitation voting
powers, preferences, and rights of the shares of each such series and
any qualifications, limitations or restrictions thereof.
SECOND: That as of the date hereof the Corporation has received approval of a
majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted by written consent of the
stockholders without a meeting in accordance with the applicable
provisions of Section 228 and Section 242 of the General Corporation Law
of the State of Delaware.
[The next page is the signature page]
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of August,
2003.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board and
Chief Executive Officer
2
CERTIFICATE OF DESIGNATION
OF
SERIES D PREFERRED STOCK
OF
IPG PHOTONICS CORPORATION
(Pursuant to Section 151(g) of The General
Corporation Law of the State of Delaware)
IPG PHOTONICS CORPORATION, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies, in accordance with Section 151(g) thereof, that the Corporation, at
meeting on July 24, 2003 pursuant to the authority expressly vested in the
Corporation's board of directors (the "Board of Directors") by the Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation"),
adopted the following resolutions creating a series of Five Million Four Hundred
Thousand (5,400,000) shares of the Corporation's preferred stock, par value
$.0001 per share (the "Preferred Stock"), designated as Series D Preferred
Stock:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors by the Certificate of Incorporation, the Board of Directors
hereby creates a series of the Preferred Stock, par value $.0001 per share, of
the Corporation (the "Series D Preferred Stock") and hereby states that the
powers, designations and number of shares thereof, and the relative,
participating, optional and other rights of the shares of such Series D
Preferred Stock and the qualifications, limitations or restrictions thereof, are
as follows (capitalized terms not immediately defined or referenced shall have
the meanings provided for such terms in Section 10.1 of this Certificate of
Designation or in the Certificate of Incorporation):
Section 1. Designation and Amount
1.1 There shall be a series of the Preferred Stock which shall be
designated as the "Series D Preferred Stock," par value $.0001 per share, and
the number of shares constituting such series shall be Five Million Four Hundred
Thousand (5,400,000). Subject to Section 4, such number of shares may be
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series D Preferred Stock to a number less
than that of the shares of Series D Preferred Stock then outstanding plus the
number of shares of Series D Preferred Stock issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation with respect to shares of Series D
Preferred Stock.
1.2 The Corporation shall not reissue any shares of the Series D Preferred
Stock and shall from time to time in accordance with applicable law increase the
authorized amount of its Common Stock in the event that the number of authorized
shares of Common Stock remaining available for issuance shall not be sufficient
to permit conversion of the Series D Preferred Stock.
Section 2. Dividends and Distributions. The holders of Series D Preferred
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as the Board of Directors may
determine in its sole discretion; provided, however, that no such dividend may
be declared or paid on any shares of Common Stock, Series A Preferred Stock or
Series B Preferred Stock or any one or more other series of preferred stock
subsequently designated as pari passu with the Series D Preferred Stock, unless
at the same time a dividend is declared or paid on all outstanding shares of
Series D Preferred Stock, with holders of Series A Preferred Stock, Series B
Preferred Stock, Series D Preferred Stock, any one or more other series of
preferred stock subsequently designated as pari passu with the Series D
Preferred Stock and Common Stock sharing in any such dividends as if they
constituted a single class of stock and with each holder of shares of Series D
Preferred Stock entitled to receive such dividends based on the number of shares
of Common Stock into which such shares of Series D Preferred Stock are then
convertible in accordance with Section 5 hereof.
Section 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, or upon any Liquidating Merger, each holder of shares of Series
D Preferred Stock shall be entitled to be paid, on a pari passu basis to the
Series A Preferred and the Series B Preferred Stock and or any one or more other
series of preferred stock subsequently designated as pari passu with the Series
D Preferred Stock (collectively including the Series D Preferred Stock, the
"Senior Stock"), before any distribution or payment is made upon any Common
Stock and any other capital stock ranking on liquidation junior to the Series D
Preferred Stock (the Common Stock and such other capital stock being referred to
collectively as, "Junior Stock"), from the assets of the Corporation available
for distribution to its Stockholders, whether from capital, surplus or earnings,
an amount in cash equal to the sum of the aggregate Liquidation Value of all
shares of Series D Preferred Stock held by such holder. Prior to the
liquidation, dissolution or winding up of the Corporation or to any Liquidating
Merger, the Corporation shall declare for payment all declared and unpaid
dividends, if any, with respect to the Series D Preferred Stock as set forth in
Section 2 hereof. If upon any such liquidation, dissolution or winding up of the
Corporation or any such Liquidating Merger, the Corporation's assets to be
distributed among the holders of the Senior Stock are insufficient to permit
payment to such holders of the aggregate amount that they are entitled to be
paid, then the entire assets to be distributed shall be distributed ratably
among such holders based upon their respective aggregate preferential amounts to
which they are entitled. The Corporation shall give written notice of such
liquidation, dissolution or winding up or of such Liquidating Merger, not less
than 30 days prior to the payment date stated therein, to each record holder of
shares of Series D Preferred Stock. Neither the consolidation or merger of the
Corporation into or with any other entity or entities that is a wholly-owned
subsidiary of the Corporation, nor the sale or transfer by the Corporation of
all or any part of its assets to any such wholly-owned subsidiary, nor the
reduction of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution winding up or Liquidating Merger of the Corporation
within the meaning of this Section 3. After distribution of the holders of
Series D Preferred Stock and any other class of securities ranking in
liquidation on parity with the Series D Preferred Stock of the full preferential
amount to which they are entitled, the Series D Preferred Stock shall be
cancelled and not entitled to any further rights under this
2
Certificate of Designation of Series D Preferred Stock, the remaining assets of
the Corporation available for distribution, if any, to the stockholders of the
Corporation shall be distributed to the holders of shares of Junior Stock pro
rata based and other shares of preferred stock having rights of participation
with the Common Stock.
In the event of a Liquidating Merger, the amount deemed distributed to the
holders of the Series D Preferred Stock upon any such transaction shall be the
cash or the value of the property, rights or securities distributed to such
holders by the Corporation or the acquiring person, firm or other entity, as
applicable; provided, however, that holders of the Series D Preferred Stock
shall have any and all rights to be paid in cash with respect to such
distribution to the extent that holders of Series A Preferred Stock, Series B
Preferred Stock or any other capital stock of the Corporation are paid in cash.
In the event the distribution is not in cash, the value of such property, rights
or other securities shall be determined consistently with the determination made
with respect to the distribution made to holders of Series A Preferred Stock,
Series B Preferred Stock and any other capital stock of the Corporation. The
Corporation shall promptly provide to the holders of shares of Series B
Preferred Stock such information concerning the terms of such merger,
consolidation, asset sale or change of control transaction and the value of the
assets of the Corporation as may reasonably be requested by the holders of
Series D Preferred Stock and may be produced by the Corporation without undue
burden or expense.
Section 4. Voting Rights. Each outstanding share of Series D Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such share of Series D Preferred Stock is then
convertible pursuant to Section 5 hereof as of the record date for the vote or
written consent of stockholders, if applicable. Each holder of shares of Series
D Preferred Stock shall be entitled to notice of any stockholder's meetings in
accordance with the by-laws of the Corporation and shall vote with holders of
the Common Stock, voting together as single class, upon all matters submitted to
a vote of stockholders including any merger, sale of assets, liquidation,
dissolution, recapitalization or other fundamental transaction involving the
Corporation or any of its subsidiaries, excluding those matters required to be
submitted to a class or series vote pursuant to the terms hereof or the
Certificate of Incorporation.
4.1 Protective Voting Provisions. So long as shares of the Series D
Preferred Stock shall be outstanding, without first obtaining the approval (by
vote or written consent, as provided by law or by the Certificate of
Incorporation or the bylaws of the Corporation, each as amended from time to
time) of a majority of the outstanding shares of Series D Preferred Stock,
voting separately as a class, the Corporation shall not:
(i) increase the authorized number of shares of Series D Preferred
Stock; or
(ii) amend, alter, or repeal the rights, powers or preferences of the
holders of the Series D Preferred Stock as set forth herein as to affect them
adversely.
3
Section 5 Conversion. Upon any conversion of any share of Series D
Preferred Stock, each such share of Series D Preferred Stock shall be canceled
and not subject to reissuance as Series D Preferred Stock, but shall rather be
undesignated and unreserved Preferred Stock of the Corporation.
5.1 Elective Conversion. At any time and from time to time, at his, her or
its absolute and sole discretion, any holder of shares of Series D Preferred
Stock may convert all or any portion of the Series D Preferred Stock (including
any fraction of a share) held by such holder, into a number of fully paid and
nonassessable shares of Conversion Stock equal to the product of the number of
shares of Series D Preferred Stock being converted multiplied by the Conversion
Ratio then in effect by delivery to the Corporation of a number of shares of
Series D Preferred Stock to be converted, and by surrendering such holder's
certificate(s) in accordance with Section 5.6 hereof, and subject to Section 5.7
hereof.
5.2 Automatic Conversion. Immediately prior the closing of (i) a Qualified
IPO, (ii) the consummation of any merger or sale of a majority of the Common
Stock of the Corporation or of all or substantially all of its assets (other
than a merger with or sale to an Affiliate of the Corporation) in which the
holders of the Series D Preferred Stock would be entitled to receive in a
transaction consideration worth at least $1.90 per share of Series D Preferred
Stock (as adjusted for stock dividends, splits, divisions or combinations and
the like) or such lesser amount as shall approved by the holders of the Series A
Preferred Stock and Series B Preferred Stock voting as a single class provided
that each share of Series A Preferred Stock, Series B Preferred Stock and Series
D Preferred Stock receives an equal amount to which they would be entitled to in
a liquidation of the Company, or (iii) the conversion of all outstanding shares
of Series A Preferred Stock and Series B Preferred Stock into Common Stock, then
any and all outstanding shares of Series D Preferred Stock shall automatically
convert to Conversion Stock at the then effective Conversion Ratio without any
further action on the part of any holder of the Series D Preferred Stock,
subject to Sections 5.8 and Section 5.9 hereof. Transactions subject to Section
5.2 shall not be deemed to be a Liquidating Merger.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by
dividing the Original Liquidation Price by the Conversion Price (as defined in
Section 5.4 hereof).
5.4 Conversion Price. The initial "Conversion Price" shall equal $1.90 per
share. The Conversion Price shall be subject to adjustment from time to time as
follows:
5.5 Adjustments to the Conversion Price. Except as provided in Section 5.6
and except in the case of an event described in Section 5.7, if and whenever
after the date on which the Certificate of Designation of the Series D Preferred
Stock becomes effective (the "Closing Date") the Corporation shall issue or
sell, or is, in accordance with this Section 5.5, deemed to have issued or sold,
any shares of Common Stock for a consideration per share less than the
Conversion Price in effect immediately prior to the time of such issuance or
sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale
4
multiplied by the then existing Conversion Price and (2) the consideration, if
any, received by the Corporation upon such issue or sale (determined as set
forth below) by (ii) the total number of shares of Common Stock outstanding
immediately prior to such issue or sale plus the number of shares of Common
Stock so issued or sold.
For purposes of this Section 5.5, the following shall also be applicable:
5.5.1 Issuance of Rights or Options. If the Corporation shall, at any
time after the Closing Date, 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"), in each
case for consideration per share (determined, as provided in this paragraph and
in Section 5.5.5 less than the Conversion Price, whether or not such Options or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, 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 exercise of such
Options, shall be deemed to have been issued as of the date of granting of such
Options (and thereafter shall be deemed to be outstanding), at a price per share
equal to the amount determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock deemed to have been so
issued. Except as otherwise provided in Section 5.5.3, no adjustment of the
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.
5.5.2 Issuance of Convertible Securities. If the Corporation shall, at
any time after the Closing Date, in any manner issue or sell any Convertible
Securities for consideration per share (determined as provided in this paragraph
and in Section B.5.5.5 less than the Conversion Price, whether or not the rights
to exchange or convert any such Convertible Securities are immediately
exercisable, 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, as of the date of the issue or sale of such Convertible
Securities (and thereafter shall be deemed to be outstanding), at a price per
share equal to the amount determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock
deemed to have been so issued; provided, that (1) except as otherwise provided
in Section 5.5.3, no adjustment of the
5
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (2) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.
5.5.3 Change in Option Price or Conversion Rate. If there shall occur
a change in (A) the maximum number of shares of Common Stock issuable in
connection with any Option referred to in Section 5.5.1 or any Convertible
Securities referred to in Section 5.5 or 5.6, (B) the purchase price provided
for in any Option referred to in Section 5.5, (C) the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Securities
referred to in Section 5.5 or 5.6 or (D) the rate at which Convertible
Securities referred to in Section B.5.5 or (2) are convertible into or
exchangeable for Common Stock (in each case, other than in connection with an
event described in Section 5.6, then the Conversion Price in effect at the time
of such event shall be readjusted to the Conversion Price that would have been
in effect at such time had such Options or Convertible Securities that are still
outstanding provided for such changed maximum number of shares, 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 Conversion Price then in effect is thereby reduced; and on the termination
or repricing of any such Option or any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder shall be
increased to the Conversion Price that would have been in effect at the time of
such termination or repricing had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination (i.e., to the extent
that fewer than the number of shares of Common Stock deemed to have been issued
in connection with such Option or Convertible Securities were actually issued),
never been issued or issued at such higher price, as the case may be.
5.5.4 Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities or other
property of the Corporation other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of the Series D Preferred
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities or other property
of the Corporation that they would have received had the Series D Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series D
Preferred Stock; and provided further, however, that no such adjustment shall be
made if the holders of Series D Preferred simultaneously receive a dividend or
other distribution of such securities or other property in an amount equal to
the amount of such securities as they would have received if all outstanding
share of Series D Preferred Stock had been converted into Common Stock on the
date of such event.
6
5.5.5 Consideration for Stock. In case any shares of Common Stock
shall be issued or sold, or deemed issued or sold, for cash, the consideration
received therefor shall be deemed to be the amount received or to be received by
the Corporation therefor (determined with respect to deemed issuances and sales
in connection with Options and Convertible Securities in accordance with clause
(A) of Section 5.5.1 or 2, as appropriate. In case any shares of Common Stock
shall be issued or sold, or deemed 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 received
or to be received by the Corporation (determined with respect to deemed
issuances and sales in connection with Options and Convertible Securities in
accordance with clause (A) of Section 5.5.1 or 2 as appropriate) as determined
in good faith by the Board of Directors of the Corporation. 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.
5.5.6 Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (B) 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.
5.5.7 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; provided, that the disposition of any such
shares shall be considered an issue or sale of Common Stock for the purpose of
this Section 5.
5.6 Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Closing Date of (i) shares of Common Stock upon conversion of shares of
Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock
or the Convertible Note or upon exercise of warrants to purchase Common Stock
outstanding as of December 31, 2000, (ii) shares issued in exchange for the
stock or assets of another company in connection with the acquisition of or
merger into such company; provided, that such actions shall have been approved
by a majority of the members of the Board of Directors, which shall include the
Series B Preferred Stock Director Designee, or (iii) up to an aggregate of
7,500,000 shares of Common Stock (subject to appropriate adjustment for any
stock split, stock dividend or similar event) 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 or to the National Advisory Board, in each case
authorized by the Board of Directors and issued pursuant to the Corporation's
2000 Incentive Compensation Plan or any other equity incentive plan approved by
a Majority
7
Interest ("Excluded Share"), plus such number of Excluded Shares that are
repurchased by the Corporation from such persons after such Closing Date in
accordance with the Amended and Restated Certificate of Incorporation of the
Corporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section 5.7 paid by such persons to the Corporation therefor).
5.7 Other Adjustments.
5.7.1. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time after the Closing Date subdivide its outstanding
shares of Common Stock into a greater number of shares (by any stock split,
stock dividend or otherwise), 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 Section 5.5.4 by reason thereof.
5.7.2. Repayment of Convertible Note. In the event that the
convertible Note shall be repaid, in whole or in part, the Conversion Price
shall be appropriately increased to the Conversion Price that would have been in
effect on the Closing Date had the portion of the repaid Convertible Note been
excluded in calculating the diluted ownership represented by the Series D
Preferred Stock, as follows:
Conversion Price = 102,000,000/X (rounded to the nearest penny)
Where: W = 5,100,000 + the principal amount of Convertible
Note outstanding after repayment
Y = W/102,000,000
X = CSE /(1 - Y)
CSE= 38,441,668 (Common Stock Outstanding) + 500,000 (Series A Preferred
Stock) + 3,800,000 (Series B Preferred Stock) + 4,995,353 (options) +
cumulative effect of anti-dilution adjustments to the Series A Preferred
Stock and Series B Preferred Stock up to and including the issuance of the
Series D Preferred Stock, giving effect to the calculation of Y (excluding
any dilutive issuances after the issuance of the Series D Preferred Stock
or the Convertible Note).
It is agreed that if the entire Convertible Note were repaid immediately after
the Closing Date, the Conversion Price would be adjusted to $2.02 per share.
5.7.3. Exercise of Warrants. Upon the date the Series B Warrants
become exercisable, the Conversion Price shall be appropriately decreased to the
Conversion Price that would have been in effect on the Closing Date had the
Series B Warrants been exercised immediately prior to the Closing Date and
included in calculating the diluted ownership
8
represented by the Series D Preferred Stock, in the manner set forth in Section
in 5.7.2, except that W = 5,100,000 + the then outstanding principal amount of
the Convertible Note, and CSE shall also include the number of shares of Common
Stock issuable upon exercise of the Series B Warrants. For this calculation, the
treasury method shall be used for calculating the number of shares issuable upon
exercise of the Series B Warrant and the "Liquidity Event Price", as defined in
the Series B Warrants shall be deemed to be the price at which Common Stock is
purchased back under the Series B Warrants.
5.8 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 Series D
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 Series D Preferred Stock, as the case may be, 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.
5.9 Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series D Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series D Preferred Stock would
have been entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in Section 5 set forth with
respect to the rights and interests thereafter of the holders of the Series D
Preferred Stock, to the end that the provisions set forth in Section 5
(including provisions with respect to changes in and other adjustments of the
Series D Preferred Stock Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Series D Preferred
Stock. Notwithstanding anything to the contrary contained herein, each holder of
shares of Series D Preferred Stock shall have the right to elect to give effect
to the conversion rights contained in Sections 5.1 or Section 5.2 instead of
giving effect to the provisions contained in this Section 5.9 with respect to
the shares of Series D Preferred Stock owned by such holder.
9
5.10 Mechanics of Conversion.
5.10.1 Elective Conversion. Before any holder of shares of Series D
Preferred Stock shall be entitled to convert the same into shares of Conversion
Stock pursuant to Section 5.1 hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed or in blank, at the office
of the Corporation or of any transfer agent for the Series D Preferred Stock
(or, in addition to the aforementioned places, at such other place as the Board
of Directors may reasonably designate), and shall give written notice to the
Corporation (in the manner described in Section 10.2 hereof) at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of
Conversion Stock are to be issued. The Corporation shall use its commercially
reasonable efforts promptly to (subject to Section 5.13 hereof), issue and
deliver at such office to such holder of shares of Series D Preferred Stock, or
to the nominee or nominees of such holder, (x) a certificate or certificates for
the number of shares of Conversion Stock to which such holder shall be entitled
as herein provided, (y) a certificate representing any shares of Series D
Preferred Stock not so converted and (z) an amount of cash equal to declared but
unpaid dividends on the shares converted, calculated through the date of such
conversion and, if applicable, the payment required by Section 5.11 and Section
5.12 hereof. Any conversion shall be deemed to have been made immediately prior
to the close of business on (i) the date such written notice is given (provided
that such holder's certificate or certificates are delivered to the Corporation
within two business days after such notice is given) or (ii) in any other case,
on the date of such surrender of the shares of Series D Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Conversion Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Conversion Stock on such date.
Notwithstanding the foregoing, no written notice of election to convert or
surrender of certificates shall be required in the event of an automatic
conversion pursuant to Section 5.10.2.
5.10.2 Automatic Conversion. Immediately prior to the closing of a
Qualified IPO (the "Automatic Conversion Date"), all outstanding shares of
Series D Preferred Stock shall be converted into shares of Common Stock without
any further action by the holders of such shares and whether or not the
certificates representing such shares of Series D Preferred Stock are
surrendered to the Corporation or its transfer agent. On the Automatic
Conversion Date, all rights with respect to the Series D Preferred Stock so
converted shall terminate, except any of the rights of the holders thereof upon
surrender of their certificate or certificates therefor or delivery of an
affidavit of loss thereof to receive certificates for the number of shares of
Common Stock into which such Series D Preferred Stock has been converted. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his, her or its attorney duly authorized in writing. Upon surrender of such
certificates or affidavit of loss, the Corporation shall issue and deliver to
such holder, promptly (and in any event in such time as is sufficient to enable
such holder to participate in such Qualified IPO) at such office and in its name
as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of
10
Common Stock into which the shares of the Series D Preferred Stock surrendered
are convertible on the Automatic Conversion Date.
5.11 Fractional Shares. No fractional shares shall be issued upon
conversion of the Series D Preferred Stock into Conversion Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, in its
reasonable discretion, the Board of Directors may cause the Corporation to pay
cash to such holder equal to such fraction (calculated as to each conversion to
the nearest 1/100th of a share) multiplied by the applicable Conversion Price or
may round the number of shares of Conversion Stock to be issued to the nearest
whole share as follows: (i) any fractional shares equal to at least one-half
shall be rounded upward; and (ii) any fractional shares equal to less than
one-half shall be rounded downward.
5.12 Declared, but Unpaid Dividends. Promptly upon conversion, the
Corporation shall also pay to the former holders of shares of the Series D
Preferred Stock so converted an amount in cash equal to any and all declared but
unpaid dividends on the shares of Series D Preferred Stock surrendered for
conversion through the date of such conversion (whether or not declared) out of
funds legally available for such payment; provided, however, that if the funds
of the Corporation legally available for payment of such dividends are
insufficient to pay all such dividends required to be paid on such date, those
funds which are legally available and not subject to such restrictions shall be
used to pay the maximum possible amount of such dividends and the remaining
dividends shall be paid as soon as practicable when additional funds of the
Corporation not subject to such restrictions become legally available therefor.
5.13 Transfer Taxes. The Corporation will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Conversion Stock on
conversion of shares of the Series D Preferred Stock pursuant to this Section 5.
The Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue or transfer and
delivery of shares of Conversion Stock in a name other than that in which the
shares of the Series D Preferred Stock so converted were registered, and no
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
5.14 No Impairment; Cooperation. The Corporation will not avoid or seek to
avoid the observance or performance of the conversion rights of the holders of
Series D Preferred Stock into Common Stock as set forth in Section 5. Subject to
Section 4.1, this provision shall not restrict the Corporation from effecting an
amendment to its Certificate of Incorporation in accordance with the General
Corporation Law of the State of Delaware. The Corporation shall assist and
cooperate with any holder of shares of Series D Preferred Stock required to make
any filings or obtain any approvals, governmental or otherwise, prior to or in
connection with any conversion of such shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
5.15 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section 5, the Corporation at its expense shall promptly compute such
11
adjustment or readjustment in accordance with the terms hereof and shall prepare
and cause to be furnished to holders of Series D Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in reasonable detail
the facts upon which such adjustment or readjustment is based. The Corporation
also shall, upon written request of any holder of record of Series D Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (a) such adjustments and readjustments and (b) the Conversion
Price at the time in effect.
5.16 Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution or to vote on any matter upon which
such stockholders may be entitled to vote, the Corporation shall give notice to
each holder of shares of Series D Preferred Stock and to each holder of
outstanding warrants, options or other rights to acquire Series D Preferred
Stock at least 10 days prior to the date specified therein, specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or vote.
5.17 Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Conversion Stock solely for the purpose of effecting the conversion of
the outstanding shares of Series D Preferred Stock and convertible notes
convertible into shares of Series D Preferred Stock and all shares of Series D
Preferred Stock issuable upon exercise of outstanding convertible notes,
warrants and options, such number of shares of Conversion Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series D Preferred Stock and all shares of Series D Preferred Stock issuable
upon exercise of outstanding convertible notes, warrants and options. All shares
of Conversion Stock that shall be so issued shall be duly and validly issued,
fully paid, nonassessable and free from all taxes, liens and charges arising out
of or by reason of the issue thereof.
Section 6. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series D Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series D Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 7. Notice; Adjustments.
7.1 Liquidation Events, Extraordinary Transactions, Etc. In the event (i)
the Corporation establishes a record date to determine the holders of any class
of securities who are entitled to receive any dividend or other distribution or
who are entitled to vote at a meeting (or by written consent)
12
in connection with any of the transactions identified in clause (ii) hereof, or
(ii) the Board of Directors of the Corporation shall determine in good faith
that a Liquidating Merger, Qualified IPO or any other public offering is
reasonably likely to occur, the Corporation shall mail or cause to be mailed by
first class mail (postage prepaid) to each holder of Series D Preferred Stock at
least thirty (30) days prior to such record date specified therein or the
expected effective date of any such transaction, whichever is earlier, a notice
specifying (A) the date of such record date for the purpose of such dividend or
distribution or meeting or consent and a description of such dividend or
distribution or the action to be taken at such meeting or by such consent, (B)
the date on which any such Liquidating Merger, Qualified IPO or other public
offering is expected to become effective, and (C) the date on which the books of
the Corporation shall close or a record shall be taken with respect to any such
event. Such notice shall be accompanied by a certificate prepared by the chief
financial officer of the Corporation describing in detail (1) the facts of such
transaction, (2) the amount(s) per share of Series D Preferred Stock each holder
of Series D Preferred Stock would receive pursuant to the applicable provisions
of this Amended and Restated Certificate of Incorporation, and (3) the facts
upon which such amounts were determined.
7.2 Waiver of Notice. The holders of a majority of the outstanding Series D
Preferred Stock may, at any time upon written notice to the Corporation, waive
any notice or certificate delivery provisions specified herein for the benefit
of such holders, and any such waiver shall be binding upon all holders of such
securities.
Section 8. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Series D Preferred Stock shall be
deemed contract rights enforceable by them, including, without limitation, one
or more actions for specific performance.
Section 9. Redemption. Upon the election of holders of a majority of the
outstanding shares of Series D Preferred Stock, upon each date whereby holders
of the Series B Preferred Stock properly require the Corporation to redeem
shares of Series B Preferred Stock under Article Fourth Section B.5 of the
Amended and Restated Certificate of Incorporation, as amended from time to time,
the Corporation shall redeem, out of funds legally available therefore, up to a
percentage of the Series D Preferred Stock as corresponds to the percentage of
Series B Preferred Stock which holders of Series B Preferred Stock may elect to
have redeemed by the Corporation at such time under such Article Fourth Section
B.5. The redemption price per share for Series D Preferred Stock in connection
with any redemption made pursuant this Section 9 shall be equal to the
Liquidation Value of the Series D Preferred Stock, and all payments to the
holders of Series D Preferred Stock and Series B Preferred Stock shall be
proportionate to the Liquidation Value of the Series D Preferred Stock and the
Series B Redemption Amount of the Series B Preferred Stock with respect to the
shares to be redeemed under this Section 9 and such Article Fourth Section B.5.
Other than with respect to the redemption price, which for the Series D
Preferred Stock shall be the Liquidation Value of Series D Preferred Stock, the
Corporation shall provide to the holders of the Series D Preferred Stock the
same rights, preferences and privileges with respect to redemption as provided
to holders of the Series B Preferred Stock under such Article Fourth Section B.5
and the Corporation shall follow corresponding procedures with respect to the
same.
13
The redemption rights under this Section 9 shall be subject to all the
limitations, terms and conditions applicable to the holders of Series B
Preferred Stock as set forth under such Article Fourth Section B.5, and the
other conditions set forth in this Section 9.
Section 10. Miscellaneous.
10.1 Definitions. For the purposes of Section 1 through Section 10 of this
Article Fourth:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the
Corporation. For purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock preferred stock
or any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Corporation's common stock, par
value $.0001 per share, and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value with respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
"Conversion Price" shall have the meaning assigned to it in Section 5.4
hereof.
"Conversion Ratio" shall have the meaning assigned to it in Section 5.3
hereof
"Conversion Stock" means shares of the Common Stock issuable upon
conversion of the Series D Preferred Stock, provided that if there is a change
such that the securities issuable upon conversion of the Series D Preferred
Stock are issued by a Person other than the Corporation or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
the number of shares of the securities issuable upon conversion of the Series D
Preferred Stock if such securities are issuable in shares, or the units in which
such securities are issuable if such securities are not issuable in shares.
14
"Convertible Note" shall mean the Convertible Promissory Note of the
Corporation dated August 13, 2003 in the aggregate principal amount of
$5,100,000.
"Liquidation Value" of any share of Series D Preferred Stock as of any
particular date shall be equal to the Original Liquidation Price per share of
Series D Preferred Stock, plus any and all declared and unpaid dividends,
including those dividends required to be paid thereon under Section 2 hereof.
"Liquidating Merger" shall mean any merger, consolidation or sale or
exchange of all or substantially all of the property and assets of the
Corporation which will result in the stockholders of the Corporation immediately
prior to such transaction not holding (by virtue of such shares or securities
issued solely with respect thereto) at least 50% of the combined voting power of
the surviving, continuing or purchasing entity, provided, that, such events
shall not be deemed a Liquidating Merger if the Series A Preferred Stock and the
Series B Preferred Stock waive their respective rights and do not elect to treat
such events as a Liquidating Merger or Liquidating Event under Article Fourth
Section A.3 and Article Fourth Section B.3.3 of the Amended and Restated
Certificate of Incorporation, as amended from time to time.
"Original Liquidation Price" of any share of Series D Preferred Stock shall
be equal to $1.90 per share.
"Person" means any individual, sole proprietorship, company, partnership,
unincorporated organization, association, limited liability company, trust,
joint venture or other business or not for profit entity or government.
"Qualified IPO" means a sale of the Common Stock to the public in a firm
commitment public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended (together with any successor
thereto, the "Securities Act"), at per share price (before deducting
underwriting discounts and other customary offering expenses) of not less than
$1.90 per share (as adjusted for stock dividends, splits, divisions or
combinations and the like) or such lesser amount as shall approved by the
holders of the Series A Preferred Stock and Series B Preferred Stock voting as a
single class, provided that all shares of Series A Preferred Stock and Series B
Preferred Stock convert into Common Stock in such transaction.
"Series B Warrants" shall mean Common Stock purchase warrants entitling the
holders to purchase an aggregate of $23,750,000 of Common Stock issued in
connection with the sale of Series B Preferred Stock.
10.2 Notices. Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be deemed given upon the
earlier of delivery thereof if by hand, or upon receipt if sent by mail
(registered or certified mail, return receipt requested and postage prepaid), or
on the next business day after deposit if sent by reputable overnight courier
service, charged prepaid, or upon transmission if sent by telecopy or facsimile
transmission (with request of assurance of receipt in a manner customary for
communication of such type), and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal
15
executive offices, and (ii) to any holder of shares of Series D Preferred Stock
or of Conversion Stock, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
10.3 Severability. If any right, preference or limitation of the Series D
Preferred Stock set forth in this Certificate of Incorporation is finally
adjudicated by a court of competent jurisdiction to be invalid, unlawful or
incapable of being enforced by any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of
Incorporation which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation, shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be dependent upon any other such right, preference or limitation unless so
expressed herein.
[The signature page follows]
16
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Chairman and attested by its Secretary this
12th day of August, 2003.
By: /s/ Valentin P. Gapontsev
------------------------------------
Chairman of the Board
and Chief Executive Officer
Attest:
/s/ Angelo P. Lopresti
- -------------------------------------
Angelo P. Lopresti
Secretary
17
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted a resolution to amend the Certificate of Incorporation of
the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting Article FOURTH, B, Section 7.2 in its entirety and
substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance from
and after the Closing Date of (i) shares of Common Stock upon conversion
of shares of Series A Preferred Stock and Series B Preferred Stock or
upon exercise of warrants for purchase Common Stock outstanding as of
August 25, 2000, (ii) shares issued in exchange for the stock or assets
of another company in connection with the acquisition of or merger into
such company; provided, that such actions shall have been approved by a
majority of the members of the Board of Directors, which shal1 include
the Series B Preferred Stock Director Designee, or (iii) up to an
aggregate of 8,750,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) 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 or to the National Advisory Board, in each case authorized
by the Board of Directors and issued pursuant to the Corporation's 2000
Incentive Compensation Plan or any other equity incentive plan approved
by a Majority Interest ("Excluded Shares"), plus such number of Excluded
Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with this Amended and Restated
Certificate of Incorporation, pursuant to contractual rights held by the
Corporation and at purchase prices not exceeding the respective original
purchase prices (appropriately adjusted to reflect the occurrence of any
event described in Section B.7.3) paid by such persons to the
Corporation therefor.
SECOND: That as of the date hereof, the Corporation has received approval of a
majority of Series B Convertible Participating Preferred Stockholders of
the Corporation.
THIRD: That the aforesaid amendment was duly adopted by the Series B
Convertible Participating Preferred Stockholders of the Corporation at a
meeting in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of July,
2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board
and Chief Executive Officer
2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted a resolution to amend the Certificate of Incorporation of
the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting in its entirety Section 5.6 of the Certificate of
Designation of Series D Preferred Stock of the Corporation and
substituting therefor the following new Section 5.6:
Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance from
and after the Closing Date of (i) shares of Common Stock upon conversion
of shares of Series A Preferred Stock, Series B Preferred Stock and
Series D Preferred Stock or the Convertible Note or upon exercise of
warrants to purchase Common Stock outstanding as of December 31, 2000,
(ii) shares issued in exchange for the stock or assets of another
company in connection with the acquisition of or merger into such
company; provided, that such actions shall have been approved by a
majority of the members of the Board of Directors, which shall include
the Series B Preferred Stock Director Designee, or (iii) up to an
aggregate of 8,750,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) 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 or to the National Advisory Board, in each case authorized
by the Board of Directors and issued pursuant to the Corporation's 2000
Incentive Compensation Plan or any other equity incentive plan approved
by a Majority Interest ("Excluded Share"), plus such number of Excluded
Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with the Amended and Restated
Certificate of Incorporation of the Corporation, pursuant to contractual
rights held by the Corporation and at repurchase prices not exceeding
the respective original purchase prices (appropriately adjusted to
reflect the occurrence of any event described in Section 5.7 paid by
such persons to the Corporation therefor); and
SECOND: That as of the date hereof, the Corporation has received approval of the
Series D Preferred Stockholder of the Corporation.
THIRD: That the aforesaid amendment was duly adopted by the Series D Preferred
Stockholder of the Corporation by written consent without a meeting
pursuant to Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of September,
2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board
and Chief Executive Officer
2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted a resolution to amend the Certificate of Incorporation of
the Corporation, as set forth on Exhibit A hereto.
SECOND: That as of the date hereof, the Corporation has received approval of the
holders of a majority of the outstanding Series B Convertible
Participating Preferred Stock of the Corporation and holders of a
majority of the outstanding stock of the Corporation entitled to vote
thereon.
THIRD: That the aforesaid amendments were duly adopted by the stockholders of
the Corporation in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware by consent
of stockholders in lieu of meeting without a meeting in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of December,
2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev
------------------------------------
Name: Valentin P. Gapontsev
Title: Chairman of the Board
and Chief Executive Officer
Exhibit A
RESOLVED, that Article Fourth, Section B of the Corporation's Amended and
Restated Certificate of Incorporation be amended by deleting in its
entirety Section B, and substituting a new Section B as follows:
B. Series B Preferred Stock.
Section 1. Designation and Amount. A total of 3,800,000 shares of the
Corporation's Preferred Stock shall be designated as a series known as Series B
Convertible Participating Preferred Stock, par value $0.0001 per share (the
"Series B Preferred Stock").
Section 2. Dividends and Distributions. The holders of Series B Preferred
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as the Board of Directors may
determine in its sole discretion; provided, however, that no such dividend may
be declared or paid on any shares of Common Stock or Series A Preferred Stock
unless at the same time a dividend is declared or paid on all outstanding shares
of Series B Preferred Stock, with holders of Series A Preferred Stock, Series B
Preferred Stock and Common Stock sharing in any such dividends as, if they
constituted a single class of stock and with each holder of shares of Series B
Preferred Stock entitled to receive such dividends based on the number of shares
of Common Stock into which such shares of Series B Preferred Stock are then
convertible in accordance with Section B.6 hereof.
Section 3. Liquidation: Merger, etc.
3.1 Series B Liquidation Preference. Upon any liquidation, dissolution
or winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary (a "Liquidation Event"), each holder of outstanding shares of Series
B Preferred Stock shall be entitled to be paid, on a pari passu basis to the
Series A Preferred, before any amount shall be paid or distributed to the
holders of the Common Stock and any other capital stock ranking on liquidation
junior to the Series B Preferred Stock (the Common Stock and such other capital
stock being referred to collectively as, "Junior Stock"), an amount per share of
Series B Preferred Stock, payable in cash, equal to the sum of (i) $25.00 plus
any declared but unpaid dividends on such shares of Series B Preferred Stock
(such amount to be adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like) (the "Series B Participation Amount") and (ii)
such amount of the remaining assets of the Corporation as would have been
payable per share of Series B Preferred Stock had each such share been converted
to Common Stock immediately prior to such Liquidation Event pursuant to the
provisions of Section B.6 hereof (the sum of (i) and (ii), the "Series B
Preference Amounts"); provided, however, that in the event that the Series B
Preference Amount determined pursuant to the foregoing formula would result in
amount equal to or greater than $100.00 per share (such amount to be adjusted
appropriately for stock splits, stock dividends, recapitalizations and the
like), the Series B Participation Amount shall be adjusted in a linear fashion
such that the adjusted Series B Participation Amount equals the product of (x)
the Series B Participation Amount prior to the adjustment and (y) the Adjustment
Factor (as defined below). "Adjustment Factor" shall be a
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number not less than zero and not greater than one determined by the following
formula:
Adjustment Factor = 1 - (x - y)
-------
z
where:
x = the Series B Preference Amount prior to any adjustment to the
Series B Participation Amount (but adjusted appropriately for
stock splits, stock dividends, recapitalizations and the like);
y = $100.00 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like);
z = $25.00 per share (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like);
If the amounts available for distribution to holders of Series A Preferred
Stock and Series B Preferred Stock upon a Liquidation Event are not sufficient
to pay all amounts due, such holders shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled.
3.2 Remaining Assets. After the payment of all preferential amounts
required to be paid to the holders of the Series B Preferred Stock and any other
class or series of stock of the Corporation ranking on liquidation on a parity
with the Series B Preferred Stock, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
3.3 Amount Payable in Mergers, etc. The holders of not less than a
Majority Interest may elect to have treated as a Liquidation Event (i) any
merger or consolidation of the Corporation into or with another corporation
(except one in which the holders of capital stock of the Corporation immediately
prior to such merger or consolidation continue to hold at least a majority of
the voting power of the capital stock of the surviving corporation), (ii) any
sale of all or substantially all of the assets or capital stock of the
Corporation, or (iii) any other transaction by or as a result of which a single
person (or group of affiliated persons) newly acquires or holds stock
representing a majority of the Corporation's outstanding voting power (a "Change
of Control Transaction"). In such event, all consideration payable to the
stockholders of the Corporation by the relevant purchaser or the Corporation in
connection with a merger, consolidation or Change of Control Transaction, or all
consideration payable to the Corporation and distributable to its stockholders,
together with all other available assets of the Corporation (net of obligations
owed by the Corporation), in the case of an asset sale, shall be paid by the
purchaser or distributed by the Corporation in redemption of the Series B
Preferred Stock, as applicable, to the holders of capital stock of the
Corporation in accordance with the preferences and priorities set forth in
Sections B.3.1 and B.3.2 above, with such preferences and priorities
specifically intended to be applicable in any such merger, consolidation, asset
sale or Change of
3
Control Transaction as if the same were a Liquidation Event. The Corporation
shall promptly provide to the holders of shares of Series B Preferred Stock such
information concerning the terms of such merger, consolidation, asset sale or
Charge of Control Transaction and the value of the assets of the Corporation as
may reasonably be requested by the holders of Series B Preferred Stock. If
applicable, the Corporation shall cause the agreement or plan of merger,
consolidation or Change of Control Transaction agreement to provide for a rate
at which the shares of capital stock of the Corporation are converted into or
exchanged for cash, new securities or other property, or redeemed, on a basis
which gives effect to the provisions of this Section B.3. The amount deemed
distributed to the holders of Series B Preferred Stock upon any such transaction
shall be the cash or the value of the property, rights or securities distributed
to such holders by the Corporation or the acquiring person, firm or other
entity, as applicable; provided, however, that in the event the amount per share
to be paid in any such transaction is $25.00 or less (such amount to be adjusted
appropriately for stock splits, stock dividends, recapitalizations and the
like), such amount shall be paid in cash. The value of such property, rights or
other securities shall be determined as provided below in good faith by
agreement of the Board of Directors of the Corporation and a Majority Interest.
Notwithstanding anything to the contrary contained herein, the holders of shares
of Series B Preferred Stock shall have the right to elect by vote of a Majority
Interest to give effect o the conversion rights contained in Section B.6 (or by
vote of a Majority Interest to give effect to the rights contained in Section
B.7.5, if applicable) instead of giving effect to the provisions contained in
this Section B.3.3 with respect to the shares of Series B Preferred Stock owned
by them. Any election pursuant to this Section B.3.3 shall be made by written
notice to the Corporation at least 5 days prior to the closing of the relevant
transaction, and any such election shall bind all holders of this Series B
Preferred Stock.
For purposes of valuing any securities or other noncash or consideration to
be delivered to the holders of the Series B Preferred Stock any transaction to
which this Section B.3 is applicable, the following shall apply:
(i) If traded on a nationally recognized securities exchange or
inter-dealer quotation system, the value shall be deemed to be the average
of the closing prices of the securities on such exchange or system over the
30-day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be
the average of the closing bid prices over the 30-day period ending three
(3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the Corporation and
the holders of not less than a Majority Interest; provided that if the
Corporation and the holders of a Majority interest are unable to reach
agreement, then by independent appraisal by a mutually agreed to investment
banker, the fees of which shall be paid by the Corporation.
4
Section 4. Election of Directors: Voting.
4.1.1 Election of Directors. The holders of outstanding shares of
Series B Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director of the Corporation. Such Director shall
be the candidate receiving the greatest number of affirmative votes (with
each holder of Series B Preferred Stock entitled to cast one vote, for or
against each candidate with respect to each share of Series B Preferred
Stock held by such holder) of the outstanding shares of Series B Preferred
Stock (the "Series B Preferred Stock Director Designee"), with votes cast
against such candidate and votes withheld having no legal effect. The
election of the Series B Preferred Stock Director Designee shall occur (i)
at the annual meeting of holders of capital stock, (ii) at any special
meeting of holders of capital stock, (iii) at any special meeting of
holders of Series B Preferred Stock called by holders of not less than a
majority interest of the outstanding shares of the Series B Preferred Stock
(a "Majority Interest") or (iv) by the written consent of the holder or
holders of not less than a Majority Interest. If at any time when any share
of Series B Preferred Stock is outstanding any Series B Preferred Stock
Director Designee should cease to be a Director for any reason, the vacancy
shall only be filled by the vote or written consent of the holders of the
outstanding shares of Series B Preferred Stock, voting together as a
separate class, in the manner and on the basis specified above or as
otherwise provided by law. The holders of outstanding shares of Series B
Preferred Stock shall also be entitled to vote for all other Directors of
the Corporation together with holders of all other shares of the
Corporation's outstanding capital stock entitled to vote thereon, voting as
a single class, with each outstanding share entitled to the same number of
votes specified in Section B.4.2. Notwithstanding the foregoing, the
holders of outstanding shares of Series B Preferred Stock, may, in their
sole discretion, determine to elect no Series B Preferred Stock Director
Designee from time to time, and during any such period the Board of
Directors nonetheless shall be deemed duly constituted.
4.2 Voting Generally. Each outstanding share of Series B Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such share of Series B Preferred Stock is then
convertible pursuant to Section B.6 hereof as of the record date for the vote or
written consent of stockholders, if applicable. Each holder of shares of Series
B Preferred Stock shall be entitled to notice of any stockholder's meeting in
accordance with the by-laws of the Corporation and shall vote with holders of
the Common Stock, voting together as single class, upon all matters submitted to
a vote of stockholders, excluding those matters required to be submitted to a
class or series vote pursuant to the terms hereof (including without limitation,
Section B.8) or by law.
Section 5. Redemption.
5.1 Redemption.
5.1.1 At any time on or after April 15, 2007, upon the election
of the holder or holders of not less a Majority Interest, the Corporation
shall redeem, out of funds legally available therefor, up to thirty-three
and one-third percent (33 1/3%) of the originally issued and outstanding
shares of Series B Convertible Preferred Stock held by each holder of
Series B Convertible Preferred Stock at such time;
5
5.1.2 At any time on or after August 25, 2007, upon the election
of the holder or holders of not less than a Majority Interest the
Corporation shall redeem, out of funds legally available therefor, up to
that percentage of outstanding shares of Series B Convertible Preferred
Stock that would, when combined with any prior redemptions pursuant to
Section B.5.1.1 above, result in the redemption by the Corporation of up to
sixty-six and two-thirds percent (66 2/3%) of the originally issued and
outstanding shares of Series B Convertible Preferred Stock held by each
holder of Series B Convertible Preferred Stock at such time; and
5.1.3 At any time on or after August 25, 2008, upon the election
of the holder or holders of not less than a Majority Interest, the
Corporation shall redeem, out of funds legally available therefor, up to
that percentage of outstanding shares of Series B Convertible Preferred
Stock that would, when combined with any prior redemptions pursuant to
Section B.5.1.1 and Section B.5.1.2 above, result in the redemption by the
Corporation of up to one hundred percent (100%) of the outstanding shares
of Series B Convertible Preferred Stock held by each holder of Series B
Convertible Preferred Stock at such time.
The foregoing elections shall be made by such holders giving the Corporation and
each of the other holders of Series B Preferred Stock not less than sixty (60)
business days prior written notice, which notice shall set forth the date for
such redemption and the percentage of such shares of Series B Preferred Stock to
be redeemed from each holder (which percentage so elected on each redemption
date shall be the same for each holder). The price per share for Series B
Preferred Stock in connection with any redemption made pursuant to Section B.5.1
shall equal the Series B Participation Amount (the "Series B Redemption Price").
5.2 Redemption Date and Price Determination. Upon the election of the
holders of not less than a Majority Interest to cause the Corporation to redeem
Series B Preferred Stock pursuant to Section B.5.1, each holder of Series B
Preferred Stock shall be deemed to have elected to cause the applicable
percentage of such shares held by such holder to be so redeemed or to so
participate. The date upon which a redemption is to occur in accordance with
Section B.5.1 shall be specified in the notice of redemption pursuant to Section
B.5.1 and shall be referred to as a "Redemption Date". Subject to Section B.5.3,
the aggregate Series B Redemption Price shall be payable in cash in immediately
available funds to the respective holders on the Redemption Date in the amount
specified in Section B.5.1.
5.3 Insufficient Funds. If the funds of the Corporation legally
available for the redemption of shares of Series B Preferred Stock on the
Redemption Date are insufficient to redeem the total number of such shares
required to be redeemed on such date, the Corporation shall (i) take such action
as shall be necessary or appropriate, to the extent reasonably within its
control, to remove promptly any impediments to its ability to redeem the total
number of shares of Series B Preferred Stock required to be so redeemed,
including without limitation, (A) reducing the stated capital of the Corporation
or causing a revaluation of the assets of the Corporation under Section 154 of
the Delaware General Corporation Law, to the extent permissible under applicable
law, to create sufficient surplus to make such
6
redemption and (B) incurring any indebtedness necessary to make such redemption,
and (ii) in any event, use any funds that are legally available to redeem the
maximum possible number of such shares from the holders of such shares to be
redeemed in proportion to the respective number of such shares that otherwise
would have been redeemed if all such shares had been redeemed in full. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Series B Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that the Corporation
became obligated to redeem on the Redemption Date (but which it has not yet
redeemed) at the Series B Redemption Price.
In the event that the Corporation fails for any reason to redeem shares for
which redemption is required pursuant to this Section B.5, including without
limitation due to a prohibition of such redemption under the Delaware General
Corporation Law, then such shares shall continue to be outstanding and entitled
to all of the rights and preferences provided herein, and during the period from
the applicable Redemption Date through the date on which such shares are
redeemed, the applicable redemption price shall increase at the rate per annum
equal to 3% in excess of the rate established from time to time by Citibank,
N.A. as its prime rate (the "Prime Rate") providing, however, that in no event
shall such interest exceed the maximum permitted rate of interest under
applicable law (the "Maximum Permitted Rate"). In the event that fulfillment of
any provision hereof results in such rate of interest being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess; provided, however, that, to the extent
permitted by law, any subsequent increase in the Maximum Permitted Rate shall be
retroactively effective to the applicable Redemption Date.
5.4 Surrender of Certificates. Each holder of shares of Series B
Preferred Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), or, in the event the certificate or certificates are lost,
stolen or missing, shall deliver an affidavit or agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith (an "Affidavit of Loss"), at the principal executive office
of the Corporation or such other place as the Corporation may from time to time
designate by notice to the holders of Series B Preferred Stock, and each
surrendered certificate shall be canceled and retired and the Corporation shall
thereafter make payment of the applicable Series B Redemption Price by certified
check or wire transfer; provided, however, that if the Corporation has
insufficient funds legally available to redeem all shares of Series B Preferred
Stock required to be redeemed, each such holder shall, in addition to receiving
the payment of the portion of the applicable Series B Redemption Price that the
Corporation is not prohibited from paying by certified check or wire transfer,
receive a new stock certificate for those shares of Series B Preferred Stock not
so redeemed.
Section 6. Conversion. The holders of Series B Preferred Stock shall have
the following conversion rights:
6.1 Right to Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time
7
after the date of issuance of such share and on or prior to the fifth (5th) day
prior to a Redemption Date, if any, at the office of the Corporation or any
transfer agent for such series, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $25.00 by the Conversion
Price at the time in effect for such series (the "Conversion Rate"). In
addition, the holders of shares of Series B Preferred Stock shall be entitled at
any time, upon the written election of the holder or holders of not less than a
Majority Interest, without the payment of any additional consideration, to cause
all (but not less than all) of the outstanding shares of Series B Preferred
Stock to be converted into Common Stock on the basis that each outstanding share
of Series B Preferred Stock shall be converted into the number of fully paid and
nonassessable shares of Common Stock which results from dividing $25.00 by the
Conversion Price in effect at the time of such conversion, and upon the election
to so convert in the manner and on the basis specified in this sentence, all
holders of the Series B Preferred Stock shall be deemed to have elected to
voluntarily convert all outstanding shares of Series B Preferred Stock pursuant
to this Section B.6.1. The "Conversion Price" per share for shares of Series B
Preferred Stock shall be $25.00, subject to adjustment as set forth in Section
B.7 for event subsequent to the August 25, 2000.
6.2 Automatic Conversion. All shares of Series B Preferred Stock shall
automatically be converted into the right to receive a pro rata portion of the
QPO Consideration (as defined below) as of, and in all cases subject to, the
closing of the Corporation's first underwritten offering to the public pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering the offer and sale of shares of the
Corporation's common stock (i) in which proceeds received by the Corporation
(before deduction of underwriter discounts and commissions) equal or exceed
$75,000,000, (ii) with respect to which such common stock is listed for trading
on either the New York Stock Exchange or the NASDAQ National Market, (iii) at an
initial public offering price per share of common stock (before deduction of
underwriter discounts and commissions), of not less than $3.00 per share
(appropriately adjusted for any stock split, stock dividend, combination,
recapitalization and the like) and (iv) in which either (A) the Warrants (as
defined below) are purchased by the Corporation or its assignee at the closing
of the offering for the Warrant Payment Amount (as defined below) or, at the
option of the Corporation (B) the holders of the Warrants are permitted to
exercise all of the outstanding Warrants on a net exercise basis and are
permitted to sell all such shares of common stock issuable upon such exercise of
the Warrants in the offering (a "QPO" or "Qualified Public Offering"). If a
closing of a QPO occurs, all outstanding shares of Series B Preferred Stock
shall be deemed to have been converted into QPO Consideration immediately prior
to such closing. For the avoidance of doubt, if the Corporation's underwritten
offering to the public pursuant to an effective registration statement under the
Securities Act does not meet the requirements for a QPO set forth above, the
shares of Series B Preferred Stock shall remain outstanding and shall not be
converted as provided in this Section 6.2 upon the closing of such underwritten
offering to the public, and there shall be no adjustment of the Conversion Price
pursuant to this Section 6.2 because of the offering and any adjustments
required by Section 7 shall be made.
"Warrants" shall mean those certain Common Stock Purchase Warrants
entitling the holders to purchase an aggregate of $23,750,000.00 of Common
8
Stock issued from August to December 2000 in connection with the sale of Series
B Preferred Stock, as amended from time to time.
"QPO Consideration" shall mean the QPO Notes (as defined below) and the QPO
Shares (as defined below).
"QPO Shares" shall mean a number of duly and validly issued, fully paid and
nonassessable shares of common stock of the Corporation equal to the quotient of
(i) the sum of the Base Share Amount less the aggregate face value of the QPO
Notes, divided by (ii) the initial public offering price per share of common
stock (before deduction of underwriter discounts and commissions).
"Base Share Amount" shall mean the greater of (x) the value the holder of
the shares of Series B Stock would have received pursuant to Section 3.1 hereof
if a Change of Control Transaction treated as Liquidation Event in the form of a
sale of all of the Corporation's stock for cash with the consideration to be
paid to the stockholders of the Corporation being equal to the pre-money QPO
valuation (as defined below) and (y) the value the holders of the Series B Stock
would receive if the Series B Stock converts to Common Stock upon the closing of
the QPO using a Conversion Price determined as follows (appropriately adjusted
for any stock split, stock dividend, combination, recapitalization and the
like):
price per share to the public in Conversion Price
the QPO (before deduction of
underwriter discounts and
commissions)
equal to or greater than $3.00 $10.00
and less than $25.00
equal to or greater than $25.00 price per share to the public in
and less than $62.50 the QPO divided by 2.5
equal to or greater than $62.50 $25.00
"QPO Notes" shall mean unsecured three (3) year term notes issued by the
Corporation to the holder of shares of Series B Preferred Stock (the "Payee")
with a principal amount equal to the product of (x) the quotient obtained by
dividing the number of shares of Series B Preferred Stock converted in a QPO by
3,800,000 and (y) $20,000,000.00, with the following terms and in a form
reasonably approved by the holder or holders of a Majority Interest; (i) the
indebtedness evidenced by the QPO Note shall be subordinate to the existing and
future senior indebtedness of the Corporation, (ii) the indebtedness evidenced
by the QPO Note shall be prepayable in whole or part at option of the
Corporation without penalty, and (iii) interest on any outstanding principal
amount shall be paid in cash annually on the anniversary of the issuance of such
note at an interest rate equal to (a) the higher of the short term (3 years or
less) applicable federal rate and 4% for the first year, (b) 7% for the second
year, and (c) 10% for the third year.
"Warrant Payment Amount" shall mean an amount equal to the product of (x)
$23,750,000.00 and (y) the difference between one (1) and the quotient
9
obtained by dividing the underwriter discount and commission per share in the
QPO by the offering price per share to the public in the QPO.
"pre-money QPO valuation" shall mean an amount equal to the product of (x)
the number of shares of common stock of the Corporation outstanding immediately
prior to the QPO on a fully-diluted basis and (y) the price per share to the
public in the QPO (before deduction of underwriter discounts and commissions).
For purposes hereof "on a fully-diluted basis" shall mean the common stock
equivalents used by the underwriters to determine the offering price per share
to the public, including (1) any outstanding shares of preferred stock that are
convertible into common stock are considered to be converted on the terms in
effect immediately prior to the QPO, (2) shares of common stock issuable upon
exercise of the Warrants shall be included only if the Warrants are not
purchased by the Corporation or its assignee, (3) shares of common stock
issuable upon conversion of outstanding notes or other convertible securities,
and (4) shares of common stock issuable upon exercise of in the money stock
options using the treasury stock method, shall be deemed to be outstanding.
6.3 Procedure for Conversion.
6.3.1 Voluntary Conversions. Upon election to convert pursuant to
Section B.6.1, the relevant holder of Series B Preferred Stock shall
surrender the certificate or certificates representing the Series B
Preferred Stock being converted to the Corporation, duly assigned or
endorsed for transfer to the Corporation (or accompanied by duly executed
stock powers relating thereto) or shall deliver an affidavit of loss to the
Corporation, at its principal executive office or such other place as the
Corporation may from time to time designate by notice to the holders of the
Series B Preferred Stock. Upon surrender of such certificate(s) or delivery
of an affidavit of loss, the Corporation shall issue and send by hand
delivery, by courier or by first class mail (postage prepaid) to the holder
thereof or to such holder's designee, at the address designated by such
holder, certificates for the number of shares of Common Stock to which such
holder shall be entitled upon conversion. The issuance of certificates for
Common Stock upon conversion of Series B Preferred Stock shall be deemed
effective as of the date of surrender of such Series B Preferred Stock
certificates or delivery of such affidavit of loss and will be made without
charge to the holders of such shares for any issuance tax in respect
thereof or other costs incurred by the Corporation in connection with such
conversion and the related issuance of such stock.
6.3.2 Automatic Conversion. As of the closing of a QPO (the
"Automatic Conversion Date"), all outstanding shares of Series B Preferred
Stock shall be converted into the right to receive QPO Consideration
without any further action by the holders of such shares and whether or not
the certificates representing such shares of Series B Preferred Stock are
surrendered to the Corporation or its transfer agent. On the Automatic
Conversion Date, all rights with respect to the Series B Preferred Stock so
converted shall terminate, except any of the rights of the holders thereof
upon surrender of their certificate or certificates therefor or delivery of
an affidavit of loss thereof to receive QPO Notes and certificates for the
number of shares of Common Stock into which such Series B Preferred Stock
has
10
been converted. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the registered holder or by his, her or its attorney duly
authorized in writing. Upon surrender of such certificates, the Warrants or
affidavit of loss, the Corporation shall issue and deliver to such holder,
promptly (and in any event in such time as is sufficient to enable such
holder to participate in such QPO) at such office and in its name as shown
on such surrendered certificate or certificates, (1) a QPO Note with a
principal amount equal to the product of (x) the quotient obtained by
dividing the number of shares of Series B Preferred Stock surrendered by
3,800,000 and (y) $20,000,000.00, (2) certificate or certificates for a
number of QPO Shares equal to the product of (x) the quotient obtained by
dividing the number of shares of Series B Preferred Stock surrendered by
3,800,000 and (y) the total number of QPO Shares, and (3) certificate or
certificates for the number of duly and validly issued, fully paid and
nonassessable shares of Common Stock issuable upon the exercise of the
Warrant surrendered and not purchased by the Corporation or its assignee in
connection with the QPO.
6.4 Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series B Preferred Stock such number of in shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the then outstanding shares of Series B Preferred
Stock, the Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, and to reserve such shares for
issuance upon such conversion.
6.5 No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of shares of Series B Preferred Stock in any manner
that would interfere with the timely conversion of any shares of Series B
Preferred Stock.
Section 7. Adjustments.
7.1 Adjustment to the Conversion Price. Except as provided in Section
B.7.2 and except in the case of an event described in Section B.7.3, if and
whenever after August 30, 2000 (the "Closing Date") the Corporation shall issue
or sell, or is, in accordance with this Section B.7.1, deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Conversion Price in effect immediately prior to the time of such issuance or
sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion
Price shall be reduced as follows:
(X) if such Dilutive Issuance occurs at any time on or prior to
August 25, 2001 (except in connection with issuances of shares of
Common Stock to strategic investors in a strategic
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alliance or other corporate partnering transaction approved by the
Board of Directors of the Corporation, (a "Strategic Investment")
which shall be subject to clause (Y) below), the Conversion Price
shall be reduced to the price so as to be equal to the lowest
consideration per share (determined as provided in Section B.7.1.1,
Section B.7.1.2 or Section B.7.1.5, as applicable) received for each
additional share upon such dilutive issuance.
(Y) if such Dilutive issuance occurs in connection with a
Strategic Investment or at any time after August 25, 2001, the
Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price and (2) the consideration, if
any, received by the Corporation upon such issue or sale (determined
as set forth below) by (ii) the total number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of
shares of Common Stock so issued or sold.
For purposes of this Section B.7.1, the following shall also be applicable:
7.1.1 Issuance of Rights or Options. If the Corporation shall, at
any time after the Closing Date, 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"), in each case for consideration per share (determined, as
provided in this paragraph and in Section B.7.1.5 less than the Conversion
Price, whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, 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 exercise of such Options, shall be
deemed to have been issued as of the date of granting of such Options (and
thereafter shall be deemed to be outstanding), at a price per share equal
to the amount determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock
deemed to have been so issued. Except as otherwise provided in Section
B.7.1.3, no adjustment of the 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.
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7.1.2 Issuance Convertible Securities. If the Corporation shall,
at any time after the Closing Date, in any manner issue or sell any
Convertible Securities for consideration per share (determined as provided
in this paragraph and in Section B.7.1.5 less than the Conversion Price,
whether or not the rights to exchange or convert any such Convertible
Securities are immediately exercisable, 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, as of the date
of the issue or sale of such Convertible Securities (and thereafter shall
be deemed to be outstanding), at a price per share equal to the amount
determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock deemed to have
been so issued; provided, that (1) except as otherwise provided in Section
B.7.13, no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities and (2) if any such issue or sale of such Convertible Securities
is made upon exercise of any Options to purchase any such Convertible
Securities, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
7.1.3 Change in Option Price or Conversion Rate. If there shall
occur a change in (A) the maximum number of shares of Common Stock issuable
in connection with any Option referred to in Section B.7.1 or any
Convertible Securities referred to in Section B.7.1 or 2, (B) the purchase
price provided for in any Option referred to in Section B.7.1, (C) the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in Section B.7.1 or 2 or (A) the
rate at which Convertible Securities referred to in Section B.7.1 or (2)
are convertible into or exchangeable for Common Stock (in each case, other
than in connection with an event described in Section B.7.2, then the
Conversion Price in effect at the time of such event shall be readjusted to
the Conversion Price that would have been in effect at such time had such
Options or Convertible Securities that are still outstanding provided for
such changed maximum number of shares, 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
Conversion Price then in effect is thereby reduced; and on the termination
or repricing of any such Option or any such right to convert or exchange
such Convertible Securities, the Conversion Price then in effect hereunder
shall be increased to the Conversion Price that would have been in effect
at the time of such termination or repricing had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination
(i.e., to the extent that fewer than the number of shares of Common Stock
deemed to have been issued in connection with such Option or Convertible
Securities were actually issued), never been issued or issued at such
higher price, as the case may be.
7.1.4 Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time shall
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make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable
in securities or other property of the Corporation other than shares of
Common Stock then and in each such event provision shall be made so that
the holders of the Series B Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities or other properly of the Corporation
that they would have received had the Series B Preferred Stock been
converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as
aforesaid during such period giving application to all adjustments called
for during such period under this paragraph with respect to the rights of
the holders of the Series B Preferred Stock; and provided further, however,
that no such adjustment shall be made if the holders of Series B Preferred
simultaneously receive a dividend or other distribution of such securities
or other property in an amount equal to the amount of such securities as
they would have received if all outstanding share of Series B Preferred
Stock had been converted into Common Stock on the date of such event.
7.1.5 Consideration for Stock. In case any shares of Common Stock
shall be issued or sold, or deemed issued or sold, for cash, the
consideration received therefor shall be deemed to be the amount received
or to be received by the Corporation therefor (determined with respect to
deemed issuances and sales in connection with Options and Convertible
Securities in accordance with clause (A) of Section B.7.1.1 or 2, as
appropriate. In case any shares of Common Stock shall be issued or sold, or
deemed 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 received or to be
received by the Corporation (determined with respect to deemed issuances
and sales in connection with Options and Convertible Securities in
accordance with clause (A) of Section B.7.1.1 or 2 as appropriate) as
determined in good faith by the Board of Directors of the Corporation. 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 and a Majority Interest.
7.1.6 Record Date. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (B) 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.
14
7.1.7 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; provided, that the disposition of any
such shares shall be considered an issue or sale of Common Stock for the
purpose of this Section B.7.
7.2 Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Closing Date of (i) shares of Common Stock upon conversion of shares of
Series A Preferred Stock and Series B Preferred Stock or upon exercise of
warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares
issued in exchange for the stock or assets of another company in connection with
the acquisition of or merger into such company; provided, that such actions
shall have been approved by a majority of the members of the Board of Directors,
which shall include the Series B Preferred Stock Director Designee, or (iii) up
to 8,750,000 shares of Common Stock or options therefor (subject to appropriate
adjustment for any stock split, stock dividend or similar event) 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 or to the National Advisory
Board, in each case authorized by the Board of Directors and issued pursuant to
the Corporation's 2000 Incentive Compensation Plan or any other equity incentive
plan approved by a Majority Interest ("Excluded Shares"), plus such number of
Excluded Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with the Corporation's Certificate of
Incorporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section B.7.3 paid by such persons to the Corporation therefor.
7.3 Subdivision or Combination of Common Stock. In case the
Corporation shall at any time after the Closing Date subdivide its outstanding
shares of Common Stock into a greater number of shares (by any stock split,
stock dividend or otherwise), 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 Section B.7.1.4 by reason thereof.
7.4 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 Series B
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 Series B Preferred Stock, as the case may be, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a
15
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.
7.5 Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series B Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series B Preferred Stock would
have been entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in Section B.7 set forth with
respect to the rights and interests thereafter of the holders of the Series B
Preferred Stock, to the end that the provisions set forth in Section B.7
(including provisions with respect to changes in and other adjustments of the
Series B Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Series B Preferred Stock
Notwithstanding anything to the contrary contained herein, each holder of shares
of Series B Preferred Stock shall have the right to elect to give effect to the
conversion rights contained in Section B.6 (or the rights contained in Section
B.3.3, if applicable) instead of giving effect to the provisions contained in
this Section B.7.3 with respect to the shares of Series B Preferred Stock owned
by such holder.
Section 8. Covenants. The Corporation shall not (whether by merger,
consolidation, operation of law or otherwise), without first having provided
written notice of such proposed action to each holder of outstanding shares of
Series B Preferred Stock and having obtained the affirmative vote or written
consent of the holders of a Majority Interest:
8.1 declare or pay any dividends or make any distributions of cash,
property or securities of the Corporation in respect of its capital stock (other
than (i) with respect to the Series A Preferred Stock or (ii) dividends that are
paid pro rata to the holders of the Series B Preferred Stock), or apply any of
its assets to the redemption, retirement, purchase or other acquisition of its
capital stock or stock appreciation, phantom stock or similar rights, directly
or indirectly, through subsidiaries or otherwise, except for (i) the redemption
of Series B Preferred Stock pursuant to and as provided in the Corporation's
Certificate of Incorporation, (ii) the repurchase of Excluded Shares pursuant to
contractual rights held by the Corporation and at repurchase prices not
exceeding the respective original purchase price (appropriately adjusted to
reflect the occurrence of any event described in Section B.7.3), or (iii)
dividends or distributions payable solely in shares of Common Stock;
16
8.2 authorize or issue, or obligate itself to issue, any convertible
debt or other debt with any equity participation or any other equity security
ranking senior to the Series B Preferred Stock as to liquidation, sale or merger
preferences, conversion, redemption or dividend rights or with any special
voting rights;
8.3 amend, alter or repeal (whether by merger, consolidation,
operation of law or otherwise) any provision of, or add any provision to,
Section B of the Corporation's Certificate of Incorporation or otherwise alter
or change the rights, preferences, privileges or powers of or restrictions
provided for the benefit or, the Series B Preferred Stock;
8.4 otherwise adopt (whether by merger, consolidation, operation of
law or otherwise) any amendment to the Corporation's Certificate of
Incorporation or by-laws that adversely affects the powers, preferences or
material rights of the Series B Preferred Stock or that results in the holders
of any other series of preferred stock of the Corporation receiving more value
in cash, securities of the Corporation or a combination thereof in a Qualified
Public Offering than such holders would have received if a Liquidation Event had
occurred under the terms of such preferred stock as they existed on December 21,
2005, assuming the assets of the Corporation are valued at an amount equal to
the pre-money IPO valuation for the QPO in such Liquidation Event;
8.5 increase the number of authorized shares of Series B Preferred
Stock or reclassify any capital stock;
8.6 change the nature of the business now conducted by the Company;
8.7 effect a recapitalization or reorganization in a form which
results in the termination of the Corporation's status as a Corporation under
the Internal Revenue Code of 1986, as amended (including without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes);
8.8 enter into any agreement to do say of the foregoing that is not
expressly made conditional on obtaining the affirmative vote or written consent
of a Majority Interest.
Further, the Corporation shall not, by amendment of the Corporation's
Certificate of Incorporation or through any Liquidation Event or other
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, agreement or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation and shall at all times in good faith
assist in the carrying out of all the provisions of this Article IV and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Series B Preferred Stock against impairment.
Any successor to the Corporation shall agree in writing, as a condition to such
succession, to carry out and observe the obligations of the Corporation
hereunder with respect to the Series B Preferred Stock.
17
Section 9. Notice: Adjustment.
9.1 Liquidation Events, Extraordinary Transactions, Etc. In the event
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote as a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or any other public offering becomes reasonably likely to
occur, the Corporation shall mail or cause to be mailed by first class mail
(postage prepaid) to each holder of Series B Preferred Stock at least thirty
(30) days prior to such record date specified therein or the expected effective
date of any such transaction, whichever is earlier, a notice specifying (A) the
date of such record date for the purpose of such dividend or distribution or
meeting or consent and a description of such dividend or distribution or the
action to be taken at such meeting or by such consent, (B) the date on which any
such Liquidation Event, event deemed a Liquidation Event pursuant to Section
3.3.3 hereof, QPO or other public offering is expected to become effective, and
(C) the date on which the books of the Corporation shall close or a record shall
be taken with respect to any such event. Such notice shall be accompanied by a
certificate prepared by the chief financial officer of the Corporation
describing in detail (1) the facts of such transaction, (2) the amount(s) per
share of Series B Preferred Stock each holder of Series B Preferred Stock would
receive pursuant to the applicable provisions of the Corporation's Certificate
of Incorporation, and (3) the facts upon which such amounts were determined.
9.2 Adjustments; Calculations. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to Section B.7, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series B Preferred Stock a certificate setting forth in detail (i) such
adjustment or readjustment, (ii) the Conversion Price before and after such
adjustment or readjustment, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Series B Preferred Stock. All such
calculations shall be made to the nearest cent or to the nearest one hundredth
(1/100) of a share as the case may be.
9.3 Waiver of Notice. The holder or holders of a Majority interest
may, at my time upon written notice to the Corporation, waive any notice or
certificate delivery provisions specified herein for the benefit of such
holders, and any such waiver shall be binding upon all holders of such
securities.
Section 10. No Reissuance of Series Preferred Stock. No share or shares of
Series B Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
Section 11. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Series B Preferred Stock shall be
deemed contract rights enforceable by them, including, without limitation, one
or more actions for specific performance.
18
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors")
duly adopted resolutions to amend the Certificate of Incorporation of
the Corporation, as set forth on Exhibit A hereto
SECOND: That as of the date hereof, the Corporation has received approval of the
holders of a majority of the outstanding Series A Convertible Preferred
Stock of the Corporation and holders of a majority of the outstanding
stock of the Corporation entitled to vote thereon.
THIRD: That the aforesaid amendments were duly adopted by the stockholders of
the Corporation in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware by consent
of stockholders in lieu of meeting without a meeting in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of January,
2006.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev
------------------------------------
Chairman of the Board and
Chief Executive Officer
Exhibit A
RESOLVED, that Article Fourth, Section A.5.4 of the Corporation's Amended
and Restated Certificate of Incorporation be amended by deleting in its entirety
Section A.5.4, and substituting a new Section A.5.4 as follows:
5.4 Conversion Price. In the event of a Qualified IPO, the Conversion
Price shall equal the lower of (i) $10.00 per share as adjusted from time to
time as set forth below or (ii) the price to the public of a share of Common
Stock (before deduction of underwriter discounts and commissions). In all other
events, the Conversion Price shall equal $10.00 per share as adjusted from time
to time as set forth below.
RESOLVED, that the definition of "Qualified IPO" in Article Fourth, Section
A.7.1 of the Corporation's Amended and Restated Certificate of Incorporation be
amended by deleting such definition its entirety, and substituting a new
definition of "Qualified IPO" in Section A.7.1 as follows:
"Qualified IPO" means the sale of the Common Stock to the public in a firm
commitment public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended (together with any successor
thereto, the "Securities Act") in which (i) the gross proceeds from primary
shares offered by the Company to equal or exceed $35 million, (ii) the per share
price in the initial public offering (before deduction of underwriter discounts
and commissions) shall equal or exceed $3.00 per share (appropriately adjusted
for any stock split, stock dividend, combination, recapitalization, and the
like), and (iii) the common stock is listed for trading on either the New York
Stock Exchange or NASDAQ National Market.
2