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Exhibit 3.1.1
ID NUMBER: 36896
FILING FEE: $70.00
BUSINESS CORPORATION
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RESTATED ARTICLES OF INCORPORATION
OF
AAi.FOSTERGRANT, INC.
Pursuant to the provisions of Section 7-1.1-59 of the General Laws, 1956,
as amended, the undersigned corporation adopts the following Restated Articles
of Incorporation:
1. The name of the corporation is AAi.FOSTERGRANT, INC.
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2. The period of its duration is (if perpetual, so state) PERPETUAL
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3. The specific purpose or purposes which the corporation is authorized to
pursue are: TO BUY, SELL, AND DISTRIBUTE OPTICAL PRODUCTS, JEWELRY, WATCHES,
CLOCKS AND OTHER ACCESSORIES AND SMALL PACKAGE PRODUCTS, AND TO TRANSACT ANY OR
ALL OTHER LAWFUL BUSINESS FOR WHICH CORPORATIONS MAY BE INCORPORATED UNDER THE
RHODE ISLAND BUSINESS CORPORATION ACT, AS THE SAME MAY BE FROM TIME TO TIME
AMENDED HEREAFTER.
4. The aggregate number of shares which the corporation has authority to
issue is:
(a) If only one class: Total number of shares _________ (If the
authorized shares consist of one class only state the par value of such shares
or a statement that all such shares are to be without par value.):
or
(b) If more than one class: Total number of shares of all classes of
stock: See below (State (A) the number of shares of each class thereof that are
to have par value and the par value of each share of each such class, and/or (B)
the number of such shares that are to be without par value, and (C) a statement
of all or any of the designations and the powers, preferences and rights,
including voting rights, and the qualifications, limitations or restrictions
thereof, which are permitted by the provisions of Chapter 7-1.1 of the General
Laws in respect of any class or classes of stock of the corporation insofar as
the same are fixed in the articles of incorporation, and a statement of any
authority vested in the board of directors to establish series and fix and
determine the variations in the relative rights and preferences as between
series):
5,000,000 SHARES, CONSISTING OF (i) 4,800,000 SHARES OF COMMON STOCK WITH A
PAR VALUE OF ONE CENT ($.01) PER SHARE (THE "COMMON STOCK"), AND (ii) 200,000
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SHARES OF PREFERRED STOCK WITH A PAR VALUE OF ONE CENT ($.01) PER SHARE (THE
"PREFERRED STOCK").
1. DESIGNATION AND AMOUNT. The Preferred Stock shall be divided into one
or more series. The designation of the first series of the Preferred Stock shall
be Series A Redeemable Convertible Preferred Stock (the "Series A Preferred
Stock"). The number of shares of Series A Preferred Stock shall be 43,700
subject to increase (but only as to shares of Preferred Stock authorized by the
Articles of Incorporation, as amended, with respect to which the powers,
designations, preferences and rights shall not then have been previously
designated) or decrease (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors.
The Series A Preferred Stock has been issued pursuant to a Securities
Purchase Agreement dated May 31, 1996 by and among the Corporation, Weston
Presidio Capital II, L.P., and certain other investors (as from time to time in
effect, the "Weston Presidio Purchase Agreement) and that certain Stock Purchase
Agreement dated as of November 13, 1996 by and among the Corporation, BEC Group,
Inc., Foster Grant Group, L.P., and Foster Grant Holdings, Inc. (as from time to
time in effect, the "Foster Grant Purchase Agreement"). The Weston Presidio
Purchase Agreement and the Foster Grant Purchase Agreement, as may be amended
from time to time, are hereinafter collectively referred to as the "Purchase
Agreements". A copy of the Purchase Agreements will be provided to any
registered holder of shares of capital stock of the Corporation following
written request directed to the Secretary of the Corporation at its registered
address.
The relative powers, preferences and rights, and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, granted to or imposed on the Series A Preferred Stock are
set forth below:
2. DEFINITIONS. Certain capitalized terms are used in these Articles of
Amendment as specifically defined below in this Section 2. Except as the context
otherwise explicitly requires, (a) the capitalized term "Section" refers to
sections of these Articles of Amendment, (b) references to a particular Section
include all subsections thereof, (c) the word "including" shall be construed as
"including without limitation", (d) accounting terms not otherwise defined
herein have the meaning provided under generally accepted accounting principles,
(e) references to a particular statute or regulation include all rules and
regulations thereunder and any successor statute, regulation or rules, in each
case as from time to time in effect and (f) references to a particular Person
include such Person's successors and assigns to the extent not prohibited by
these Articles of Amendment and the Purchase Agreements. References to "the date
hereof" mean the effective date of these Articles of Amendment.
2.1. "ACCEPTED SHARES" is defined in Section 10.2.
2.2. "ADDITIONAL SHARES OF COMMON STOCK" is defined in Section 8.4.1(d).
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2.3. "BY-LAWS" means all written rules, regulations, procedures and
by-laws and all other similar documents, relating to the management, governance
or internal regulation of a Person other than an individual, or interpretive of
the Charter of such Person, each as from time to time amended or modified.
2.4. "CALCULATION DATE" is defined in Section 4.
2.5. "COMMON STOCK" means the common stock $0.01 par value, of the
Corporation.
2.6. "CORPORATION" as defined in the Preamble.
2.7. "CONVERSION PRICE" is defined in Section 8.1.
2.8. "CONVERTIBLE SECURITIES" is defined in Section 8.4.1(c).
2.9. "FUTURE SHARES" is defined in Section 10.1.
2.10. "FUTURE SHARES EXERCISE PERIOD" is defined in Section 10.1.
2.11. "INDEBTEDNESS" means (a) all debt for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures, capitalized lease
obligations, deferred purchase price of property (other than ordinary trade
payables ) or otherwise, whether direct or indirect; and (b) all liabilities
secured by any liens existing on property owned or acquired, whether or not the
liability secured thereby shall have been assumed.
2.12. "INVESTOR AGREEMENT" is defined in the Weston Presidio Purchase
Agreement.
2.13. "NOTICE OF PURCHASE" is defined in Section 10.2.
2.14. "OFFEREE" is defined in Section 10.1.
2.15. "OPTIONS" is defined in Section 8.4.1(a).
2.16. "ORGANIC CHANGE" is defined in Section 6.2.
2.17. "ORIGINAL ISSUE DATE" is defined in Section 8.4.1(b).
2.18. "PERSON" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, business trust,
limited liability company and any governmental department or agency or political
subdivision.
2.19. "PREFERENTIAL AMOUNT" is defined in Section 4.
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2.20. "PREFERRED DIRECTOR" is defined in Section 5.3.
2.21. "PREFERRED STOCK" is defined in Section 1.
2.22. "PROPORTIONATE PERCENTAGE" is defined in Section 10.1.
2.23. "PROPOSAL" is defined in Section 10.1.
2.24. "PURCHASE AGREEMENTS" is defined in Section 1.
2.25. "QUALIFIED PUBLIC OFFERING" is defined in Section 8.2.
2.26. "RELATED AGREEMENTS" is defined in the Weston Presidio Purchase
Agreement.
2.27. "REMEDY EVENT" is defined in Section 7.
2.28. "REMEDY NOTICE" is defined in Section 5.2.2.
2.29. "REQUIRED HOLDERS" means the holders of two-thirds of the
outstanding Series A Preferred Stock.
2.30. "SERIES A PREFERRED STOCK" is defined in Section 1.
2.31. "WARRANTS" is defined in Section 6.3.
3. DIVIDENDS. No dividends of cash or other property (other than
additional shares of Common Stock) shall be paid on the Common Stock unless the
shares of Series A Preferred Stock receive the same dividends that such shares
would have received had they been converted into Common Stock immediately prior
to the record date for such dividend.
4. LIQUIDATION PREFERENCE. In the event of (a) any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
or (b) unless agreed otherwise in writing by the Required Holders, a merger or
consolidation of the Corporation, distributions to the stockholders of the
Corporation shall be made in the following manner. The holders of Series A
Preferred Stock shall first be entitled to receive, prior and in preference to
any distribution of any of the assets of the Corporation to the holders of any
other series of Preferred Stock, Common Stock or other capital stock of the
Corporation by reason of their ownership of such stock, an amount per share
equal to the sum of (a) $526.32 plus (b) an amount in the form of a dividend
which would equal a 10% rate of return compounded annually on the amount in
clause (a) above from the date of original issuance of the Series A Preferred
Stock to the date of distribution (the "CALCULATION DATE") plus (c) accrued and
unpaid dividends, if any, on the Series A Preferred Stock due under Section 3
(such sum being referred to as the "PREFERENTIAL AMOUNT"). If the assets and
funds of the Corporation shall be insufficient to permit the payment of the full
Preferential Amount to the holders of
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Series A Preferred Stock, then the entire assets of the Corporation legally
available for distribution shall be distributed ratably among the holders of
Series A Preferred Stock in accordance with the aggregate liquidation preference
of the shares of Series A Preferred Stock held by each of them. After payment
has been made to the holders of Series A Preferred Stock of the full amounts to
which they are entitled, the holders of Common Stock shall be entitled to share
ratably in the remaining assets without participation by the holders of Series A
Preferred Stock.
5. VOTING RIGHTS; REPRESENTATIVE DIRECTORS; ETC.
5.1. VOTES PER SHARE; NOTICES. Except as otherwise provided herein
(including the election of Preferred Directors pursuant to Section 5.2.1 and a
majority of the members of the Corporation's Board of Directors pursuant to
Section 5.2.2) or required by law, the holders of Series A Preferred Stock (a)
prior to December 1, 1996, shall not vote on any matter submitted to the holders
of Common Stock and (b) from and after December 1, 1996, shall vote as a single
class with the holders of Common Stock and shall have such votes in respect of
each share of Series A Preferred Stock on any matter submitted to the holders of
Common Stock as the number of shares of Common Stock into which shares of Series
A Preferred Stock may then be converted. Record holders of Series A Preferred
Stock shall be entitled to notice of any stockholders' meeting or solicitation
of stockholders' consents in the manner provided in the Bylaws of the
Corporation for general notices.
5.2. PREFERRED DIRECTORS.
5.2.1. REPRESENTATIVE DIRECTORS. In addition to the rights set forth in
Section 5.2.2, the holders of a majority of the shares of Series A Preferred
Stock, voting separately as a single class, shall be entitled to elect two
directors. Except as provided in Section 5.2.2, the number of directors of the
Corporation shall not exceed seven.
5.2.2. MAJORITY DIRECTORS
(a) In the event that any Remedy Event shall occur, then, upon
notice to the Corporation given by the Required Holders (a "REMEDY NOTICE"), the
number of directors shall be increased as provided in Section 5.2.2(b) and the
holders of Series A Preferred Stock, voting separately as a single class, shall
become entitled to elect a majority of the Board of Directors of the Corporation
until any such Remedy Event shall have been rectified or cured to the written
satisfaction of the Required Holders, whereupon such right of the holders of the
Series A Preferred Stock to elect a majority of the Board of Directors of the
Corporation shall cease, and the maximum number of directors shall be reduced to
seven, subject to being again revived from time to time upon the reoccurrence of
the conditions above described.
(b) Immediately upon receipt by the Corporation of a Remedy Notice
pursuant to paragraph (a) above, the number of directors of the Corporation
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shall automatically be increased to the minimum number sufficient to permit the
election of additional directors so that after such election a majority of
directors will have been elected by the holders of the Series A Preferred Stock.
Upon such increase, the directors of the Corporation shall thereupon be divided
into classes. One class shall consist of a number of directors equal to a
majority of all of the directors and shall be elected solely by the holders of
Series A Preferred Stock, voting separately as a single class, and the other
class shall consist of the remaining directors and shall be elected by the
holders of the capital stock of the Corporation entitled to vote generally in
elections of directors. Subject to Section 7, any director then in office who
was elected pursuant to Section 5.2.1 shall automatically become a member of the
class of directors elected solely by the holders of Series A Preferred Stock.
5.3. TENURE. Each Director elected by the holders of Series A Preferred
Stock pursuant to Section 5.2 (a "PREFERRED DIRECTOR") shall serve for a term of
the lesser of (a) one year and until such Preferred Director's successor is
elected and qualified, or (b) until the right to elect such Preferred Director
ceases (at which time such Preferred Director will be deemed to be removed). So
long as the holders of Series A Preferred Stock are entitled to elect Preferred
Directors, any vacancy in the position of a Preferred Director may be filled
only by vote of the holders of a majority of the shares of Series A Preferred
Stock entitled to vote thereon. A Preferred Director may, during such Preferred
Director's term of office, be removed at any time, with or without cause, only
by the affirmative vote of the holders of a majority of the outstanding shares
of Series A Preferred Stock.
6. REDEMPTION.
6.1. MANDATORY REDEMPTION. Except as set forth in Section 6.3,
irrespective of any other redemptions or acquisitions of shares of the Series A
Preferred Stock, the Corporation will redeem at a price equal to the
Preferential Amount that number of shares of Series A Preferred Stock equal to
5% of the total number of issued and outstanding shares of Series A Preferred
Stock as of March 31, 2002 (or such lesser number as is then outstanding) on the
last day of each March, June, September and December, commencing in June, 2002.
6.2. MANDATORY CONTINGENT REDEMPTION. Upon the earliest to occur of:
(a) the sale by the Corporation of all or a substantial portion of
its assets,
(b) the merger of the Corporation with, or the consolidation of the
Corporation into, any other corporation as a result of which the stockholders of
the Corporation immediately prior to such merger or consolidation do not own
stock having more than 50% of the outstanding voting power (assuming conversion
of all convertible securities and exercise of all outstanding options and
warrants) of the surviving corporation,
(c) The dissolution or liquidation of the Corporation,
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(d) Gerald Cerce ceasing for any reason to be Chairman of, and
actively involved in the executive management of, the Corporation and a
replacement satisfactory to the Required Holders shall not be in place within
180 days,
(e) except as a result of a Qualified Public Offering and stock
passing by death, more than 50% of the outstanding voting stock of the
Corporation becomes owned by Persons other than (i) holders of Series A
Preferred Stock and their transferees and (ii) stockholders of record on the
Original Issue Date (the foregoing events described in clauses (a) through (e)
shall constitute an "ORGANIC CHANGE"), or
(f) a Remedy Event,
each holder of Series A Preferred Stock may require the Corporation to redeem
all or any portion of the then outstanding shares of the Series A Preferred
Stock of such holder, at the holder's option either (A) at a price equal to the
preferential Amount or (B) at a price equal to the sum of (1) the Conversion
Price PLUS (2) accrued and unpaid dividends, if any, on the Series A Preferred
Stock due under Section 3, together with, for purposes only of this clause (B),
Warrants on the same terms as described in Section 6.3.
6.3. VOLUNTARY REDEMPTION. Pursuant to the consent or vote of a majority
of the disinterested directors of the Corporation, the Corporation may redeem at
the Preferential Amount pro rata from all holders of Series A Preferred Stock an
aggregate number of shares of Series A Preferred Stock specified in the notice
delivered pursuant to Section 6.4. Such redemption shall take place at the time
and on the date set forth in such notice. At the closing of such redemption, the
Corporation shall deliver to each holder of Series A Preferred Stock whose
shares are being redeemed warrants in substantially the form of Exhibit 2.1A to
the Weston Presidio Purchase Agreement (the "WARRANTS") to purchase the number
of shares of Common Stock into which the shares of Series A Preferred Stock so
redeemed could at the time have been converted at a purchase price per share
equal to the aggregate cash consideration received by the holder in connection
with the redemption divided by such number of shares of Common Stock. The number
of shares for which each Warrant shall be exercisable shall be reduced in
proportion to the mandatory redemption of Series A Preferred Stock under Section
6.1. At the option of the Corporation, any redemption under this Section 6.3 may
be applied against, and shall relieve the Corporation of, the next succeeding
redemption obligations under Section 6.1 to the extent of the shares redeemed
under this Section 6.3.
6.4. NOTICE OF REDEMPTION: PRO RATA TREATMENT. Written notice of
redemption of Series A Preferred Stock pursuant to Sections 6.1 and 6.3 shall be
given not fewer than 30 days prior to the redemption date by first class mail,
postage prepaid, to each holder of record of shares of the Series A Preferred
Stock, at such holder's address on the books of the Corporation. Each such
notice shall state: (a) the
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redemption date; (b) the number of shares of the Series A Preferred Stock to be
redeemed; (c) the Preferential Amount; (d) the place or places where
certificates for such shares are to be surrendered for payment of the
Preferential Amount; and (e) that dividends on the shares to be redeemed will
cease to accrue on such redemption date. Redemptions under Sections 6.1 and 6.3
shall be made pro rata among all holders of Series A Preferred Stock.
6.5. SPECIFIC PERFORMANCE. If any holder becomes obligated so to deliver
any shares of Series A Preferred Stock to the Corporation upon any redemption
under this Section 6 and fails to deliver the certificate therefor in accordance
with these Articles of Amendment, the Corporation may, at its option, in
addition to all other remedies it may have, cancel on its books such certificate
representing such shares to be redeemed.
6.6. SUSPENSION OF REDEMPTION OBLIGATION. Notwithstanding any provision
of this Section 6 to the contrary, if at any time the Corporation shall have
outstanding any Indebtedness (as hereinafter defined) the terms of which
restrict the Corporation's ability to redeem, in whole or in part, the Series A
Preferred Stock ("Restrictive Indebtedness"), then in such event the
Corporation's obligations under Section 6.1 and Section 6.2 to redeem any shares
of Series A Preferred Stock shall be suspended until ninety-one (91) days after
the date that such Restrictive Indebtedness is no longer outstanding. The
Corporation shall notify the holders of the Series A Preferred Stock in writing
within ten (10) days of its incurrence of any Restrictive Indebtedness which
under this Section 6.6 would require the suspension of its redemption
obligations under Sections 6.1 and 6.2 hereof. Within ten days after the
expiration of ninety-one (91) days after the date of the payment of such
Restrictive Indebtedness in full, the Corporation shall issue a written notice
of redemption in accordance with Section 6.5 hereof for such number of shares of
Series A Preferred Stock as the Corporation would have been obligated to redeem,
pursuant to the provisions of Sections 6.1 or 6.2 hereof, on or prior to such
notice date, but for the provisions of this Section 6.6. Nothing in this Section
6.6 shall affect or impair the rights granted the holders of Series A Preferred
Stock pursuant to Section 5 hereof, nor shall it affect or impair any of the
provisions relating to conversion set forth in Section 8 hereof. Notwithstanding
any other provision of this Section 6 to the contrary, unless approved by the
Preferred Directors, the aggregate principal amount of Restrictive Indebtedness
shall not exceed at any time $150 million. For purposes of this Section 6.6,
"Indebtedness" shall mean (i) any obligation of the Corporation or its
subsidiaries for borrowed money, (ii) any obligation of the Corporation or its
subsidiaries evidenced by bonds, debentures, notes or similar instruments, and
(iii) any reimbursement obligation of the Corporation or its subsidiaries with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Corporation and/or its subsidiaries, in each case, other
than any obligation owed to a Person who directly or indirectly is controlling
or controlled by or under direct or indirect common control with the
Corporation.
7. REMEDY EVENT. The term "REMEDY EVENT" shall mean the occurrence and
continuance of any of the following events for a period exceeding
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30 days (unless otherwise specified below) after written notice of the
occurrence of such event has been furnished to the Corporation at its registered
address:
(a) The Corporation shall fail to make any payment in respect of
dividends on or redemptions of any shares of Series A Preferred Stock as the
same shall become due.
(b) The Corporation shall fail to perform or observe any of the
material covenants, agreements or other provisions set forth in these Articles
of Amendment.
(c) Any written representation or warranty of or with respect to the
Corporation made in, or pursuant to the express requirements of, the Weston
Presidio Purchase Agreement shall prove to have been false in any material
respect on the date as of which it was made without reference to whether such
representation or warranty was made with knowledge or without knowledge.
(d) The Corporation or any of its Subsidiaries shall fail to make any
required payment on any indebtedness exceeding $100,000 in principal amount of
(or guaranteed by) the Corporation or any of its Subsidiaries or with respect to
any share of capital stock (whether because funds are not legally available
therefor or otherwise), or the Corporation or any of its Subsidiaries shall fail
to perform or observe any of the covenants or provisions required to be
performed or observed by it pursuant to any senior lending agreement (as from
time to time in effect), and (i) such failure shall continue, without having
been duly cured, waived or consented to, beyond the period of grace, if any,
therein specified or (ii) any security interest in or other lien on any property
securing any such indebtedness shall be enforced, unless contested in good faith
by the Corporation by appropriate proceedings or (iii) any such indebtedness
shall become due and payable prior to stated maturity.
(e) The Corporation shall fail to keep reserved a sufficient number
of shares of Common Stock for issuance upon conversion of the Series A Preferred
Stock or shall fail to issue an amount of shares of Common Stock upon the
conversion by the holders thereof of the Series A Preferred Stock.
(f) An Organic Change shall occur.
(g) The sum of (i) consolidated stockholders' equity of the
Corporation and its subsidiaries, and (ii) (to the extent not included in the
stockholders' equity) the Series A Preferred Stock and (iii) up to $5 million
outstanding in respect of notes issued by the Corporation on the Original Issue
Date to its stockholders on such date and to the initial purchasers of the
Series A Preferred Stock, all determined in accordance with generally accepted
accounting principles consistently applied, shall at any time be less than
$19,500,000 (the "Minimum Amount") provided, however, that the Minimum Amount
shall be reduced dollar for dollar by any payments with respect of the principal
balance of the notes referred to in clause (iii) hereof.
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(h) A final judgment which, in the aggregate with other outstanding
final judgments against the Corporation or any of its Subsidiaries, exceeds
$500,000 above insurance coverage shall be rendered against the Corporation or
any of its Subsidiaries and, within 30 days after entry thereof, such judgment
shall not have been discharged or stayed pending appeal, or within 30 days after
expiration of such stay such judgment shall not have been discharged.
(i) The Corporation or any of its Subsidiaries or their Affiliates
shall fail to perform or observe any other covenant, other agreement or
provision to be performed or observed by it under the Purchase Agreements or any
Investor Agreement to which the Corporation is a party and such failure shall
not be rectified or cured to the satisfaction of the Required Holders within 30
days after actual knowledge by an executive officer of the Corporation;
PROVIDED, HOWEVER, that the breach by an employee of any employment agreement
between the Corporation and such employee shall not in any event constitute a
Remedy Event.
(j) The Corporation or any of its subsidiaries owning at least 20% of
the assets, or contributing over the past fiscal year at least 20% of the cash
flow, of the Corporation and its subsidiaries on a consolidated basis shall:
(i) commence a voluntary case under Title 11 of the United States
as from time to time in effect, or authorize, by appropriate proceedings of its
board of directors or other governing body, the commencement of such a voluntary
case;
(ii) have filed against it a petition commencing an involuntary
case under such Title 11 and such petition is not dismissed within 30 days;
(iii) seek relief as a debtor under any applicable law, other
than such Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or consent to or acquiesce in such relief;
(iv) have entered against it any order by a court of competent
jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors, or (C) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property; or
(v) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its property.
8. CONVERSION
8.1. RIGHT OF CONVERSION. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof at any time at the office of
the Corporation or any transfer agent for the Series A Preferred Stock into the
number of shares of the Common Stock of the Corporation obtained by dividing
$526.32 by
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the then effective conversion price of the Series A Preferred Stock (as from
time to time adjusted by this Section 8, the "CONVERSION PRICE"). The initial
Conversion Price shall be $52.63 per share. All calculations under this Section
8 shall be made to the nearest one hundredth of a cent.
8.2. AUTOMATIC CONVERSION. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price at any time upon the closing of an underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, with managing underwriters reasonably satisfactory to the Required
Holders, covering the offer and sale of Common Stock for the account of the
Corporation to the public generally providing net proceeds to the Corporation
(after underwriter commissions and discounts, but before other offering
expenses) of not less than $20,000,000 and at a price per share of Common Stock
equal to 137.8% of the initial Conversion Price if such underwritten public
offering shall be consummated on or before May 31, 1999, and thereafter 175% of
the initial Conversion Price, in each case adjusted for stock splits and stock
dividends after the Original Issue Date (a "QUALIFIED PUBLIC OFFERING").
8.3. MECHANICS OF CONVERSION. Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the Series A
Preferred Stock certificates, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series A Preferred Stock, and shall give written
notice to the Corporation at such office that such holder elects to convert the
same; PROVIDED, HOWEVER, that in the event of an automatic conversion pursuant
to Section 8.2, the outstanding shares of Series A Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; and PROVIDED, FURTHER that the
Corporation shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon such automatic conversion unless the certificates
evidencing such shares of Series A Preferred Stock are either delivered to the
Corporation or its transfer agent as provided above, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or execution of such agreement in the case of a lost
certificate, issue and deliver at such office to such holder of Series A
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Series A Preferred Stock so converted. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred Stock
to be converted, or in the case of automatic conversion immediately upon closing
of the Qualified Public Offering, and the person entitled to receive the shares
of Common Stock issuable
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upon such conversion shall be treated for all purposes as the record holder of
such shares of Common Stock on such date.
8.4. ADJUSTMENT OF CONVERSION PRICE DUE TO ISSUANCE OF ADDITIONAL SHARES.
The Conversion Price shall be subject to adjustment as follows:
8.4.1. SPECIAL DEFINITIONS.
(a) "OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(b) "ORIGINAL ISSUE DATE" shall mean the date on which the Series A
Preferred Stock is first issued by the Corporation.
(c) "CONVERTIBLE SECURITIES" shall mean any indebtedness, shares or
other securities convertible into or exchangeable for Common Stock.
(d) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued (or, pursuant to Section 8.4.5, deemed to be issued) by the
Corporation after the Original Issue Date, other than shares of Common Stock
issued or issuable (or, pursuant to Section 8.4.5, deemed to be issued) at any
time:
(i) upon conversion of the Series A Preferred Stock authorized
herein or upon exercise or conversion of the Warrants or the other options and
warrants set forth in Exhibit 4.3.1 to the Weston Presidio Purchase Agreement;
(ii) as a stock dividend, stock split or similar distribution on
the Series A Preferred Stock or any other event for which adjustment is made
pursuant to Section 8.4.3;
(iii) pursuant to a stock option, stock bonus or other employee
stock plan permitted by Section 5.14 of the Weston Presidio Purchase Agreement
or approved by the Preferred Directors at a meeting or by unanimous written
consent of the Board of Directors or approved by the Required Holders, which
approval shall specify the numbers of Common Stock available for distribution
under any such plan; or
(iv) by way of dividend or other distribution on shares of
Common Stock excluded from the definition of Additional Shares of Common Stock
by the foregoing clauses (i), (ii), (iii) or this clause (iv); or
(v) in connection with sales of Common Stock or other Future
Shares to the holders of the Series A Preferred Stock pursuant to the exercise
by such holders of their rights under Section 10.1.
8.4.2. NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
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Stock (a) unless the consideration per share (determined pursuant to Section
8.4.6) for an Additional Share of Common Stock issued or deemed to be issued by
the Corporation is less than the applicable Conversion Price in effect on the
date of, and immediately prior to, such issue or (b) if prior to such issuance
the Required Holders give a written waiver of such adjustment.
8.4.3. ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF
COMMON STOCK. In the event the Corporation shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 8.4.5) for a consideration per share less than the
applicable Conversion Price of the Series A Preferred Stock in effect on the
date of and immediately prior to such issue, then and in such event, the
applicable Conversion Price shall be reduced, concurrently with such issue
(calculated to the nearest one hundredth of a cent), to a new Conversion Price
obtained by dividing (a) an amount equal to the sum of (i) the number of shares
of Common Stock outstanding immediately prior to such issue multiplied by the
then applicable Conversion Price and (ii) the consideration, if any, deemed
received by the Corporation upon such issue by (b) the total number of shares of
Common Stock deemed to be outstanding immediately after such issue; PROVIDED,
HOWEVER, that, for purposes of any calculation under this Section 8.4.3, all
shares of Common Stock outstanding and issuable upon conversion of outstanding
Options, Convertible Securities and the Series A Preferred Stock immediately
prior to giving affect to such calculation shall be deemed to be outstanding. In
no event will the Conversion Price be adjusted as the result of any issuance of
any Additional Shares of Common Stock to any amount higher than the Conversion
Price in effect immediately prior to such issuance.
8.4.4. ADJUSTMENTS FOR SUBDIVISIONS, STOCK DIVIDENDS, COMBINATIONS OR
CONSOLIDATION OF COMMON STOCK. In the event the outstanding shares of Common
Stock shall be increased by way of stock issued as a dividend for no
consideration of subdivided (by stock split or otherwise) into a greater number
of shares of Common Stock, the respective Conversion Prices then in effect
shall, concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the respective Conversion Prices then
in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
8.4.5. DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK - OPTIONS AND
CONVERTIBLE SECURITIES. Except as provided in Section 8.4.3 or Section 8.4.4, in
the event the Corporation at any time after the Original Issue Date shall issue
any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options
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therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date; PROVIDED, HOWEVER, that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 8.4.6) of such Additional Shares of
Common Stock would be less than the applicable Conversion Price in effect on the
date of, and immediately prior to, such issue, or such record date, as the case
may be; and PROVIDED, FURTHER, that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(a) no further adjustment in the applicable Conversion Price shall
be made upon the subsequent issue of shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities of upon
the subsequent issue of each Convertible Securities or Options;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or any increase in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(c) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon shall remain in effect upon and after such
expiration, but the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Option or rights shall not be deemed issued
for the purposes of any subsequent adjustment to the Conversion Price;
(d) in the event of any changes in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of such Options or
Convertible Securities, including a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in effect shall be readjusted to
the Conversion Price that would have been in effect if the adjustment which was
made upon the issuance of such Options or Convertible Securities had been made
upon the basis of such change;
(e) no readjustment pursuant to clauses (b) or (d) above shall have
the effect of increasing the applicable Conversion Price to an amount which
exceeds the lower of (i) the applicable Conversion Price on the original
adjustment date, or (ii) the applicable Conversion Price that resulted from the
issuance or
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deemed issuance of other Additional Shares of Common Stock between the original
adjustment date and such readjustment date; and
(f) in the event the Corporation amends the terms of any Options or
Convertible Securities (whether such Options or Convertible Securities were
outstanding on the Original Issue Date or were issued after the Original Issue
Date), then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the provisions of
this Section 8.4.5 shall apply.
8.4.6. DETERMINATION OF CONSIDERATION. For purposes of this Section 8.4,
the consideration received by the Corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(a) CASH AND PROPERTY: Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate
amount of net cash proceeds received by the Corporation excluding amounts paid
or payable for accrued interest or accrued dividends;
(ii) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Corporation; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, which is allocated
to the Additional shares of Common Stock as determined in good faith by the
Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES: The consideration per share
received by the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 8.4.5, relating to Options and Convertible
Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus, subject to Section 8.4.5(b), the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision contained
therein
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for a subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion of exchange of such Convertible Securities.
8.4.7. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
other provisions of this Section 8.4 are not strictly applicable, but the
failure to make any adjustment in the Conversion Price would not fairly protect
the conversion rights represented by the Series A Preferred Stock in accordance
with the intention of this Section 8, then, upon request of the Required
Holders, the Board of Directors of the Corporation shall appoint a firm of
independent public accountants of recognized national standing (which may be the
regular auditors of the Corporation) to give their opinion as to the adjustment,
if any, on a basis consistent with the intention of this Section 8, necessary to
preserve without dilution the conversion rights represented by the Series A
Preferred Stock. Upon receipt of such opinion, the Corporation will promptly
furnish a copy thereof to the holders of the Series A Preferred Stock and the
Conversion Price shall be adjusted in accordance therewith to the extent
recommended by such accountants. The fees and expenses of such accountants shall
be paid by the Corporation; PROVIDED, HOWEVER, that if such accountants opine
that the total adjustment per share of Series A Preferred Stock is less than 10%
of the previous per share Conversion Price, such fees and expenses will be paid
by the holders of the Series A Preferred Stock.
8.5. OTHER DISTRIBUTIONS. In the event the Corporation shall declare a
distribution payable in securities of the Corporation (other than shares of
Common Stock), securities of other entities, securities evidencing indebtedness
issued by the Corporation or other entities, assets (including cash dividends)
or options or rights, then, in each such case for the purpose of this Section 8,
the holders of the Series A Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of such Series
A Preferred Stock were convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
8.6. SUBSEQUENT EVENTS. In the event of any recapitalization,
consolidation or merger of the Corporation or its successor which does not
require redemption of the Series A Preferred Stock pursuant to Section 6.2, the
shares of Series A Preferred Stock shall be convertible into such shares or
other interests as the Series A Preferred Stock would have been entitled if the
Series A Preferred Stock had been converted into Common Stock immediately prior
to such event.
8.7. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 8,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Series A Preferred Stock, furnish or cause to be furnished to such holder a
certificate
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setting forth (a) all such adjustments and readjustments previously made, (b)
the Conversion Price at the time in effect, and (c) the number of shares of
Common Stock and the amount, if any, of other property which at such time would
be received upon the conversion of Series A Preferred Stock.
8.8. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon conversion of Series A Preferred Stock shall be made without charge to the
holders thereof for any issuance tax; PROVIDED, HOWEVER, that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the name of the holder of the Series A Preferred Stock which is being
converted.
9. COVENANTS.
9.1. SPECIAL RESTRICTIONS. At any time when shares of Series A Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by the
Articles of Incorporation, as amended, and in addition to any other vote
required by law or the Articles of Incorporation, as amended, without the
consent of the Required Holders, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, the Corporation
will not:
(a) create or authorize the creation of any additional class or
series of shares of stock, or issue any shares thereof, unless the same ranks
junior to the Series A Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation or increase the
authorized amount of the Series A Preferred Stock or increase the authorized
amount of any additional class or series of shares of stock unless the same
ranks junior to the Series A Preferred Stock as the distribution of assets on
the liquidation, dissolution or winding up of the Corporation, or create or
authorize any instrument or security convertible into shares of Series A
Preferred Stock or into shares of any other class or series of stock unless the
same ranks junior to the Series A Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation, whether
any such creation, authorization or increase shall be by means of amendment to
the Articles of Incorporation or by merger, consolidation or otherwise:
(b) amend, alter or repeal its Articles of Incorporation or By-Laws
in a manner that is adverse to the holders of Series A Preferred Stock in any
respect or for which the holders of Series A Preferred Stock did not receive
prior written notice;
(c) purchase or set aside any sums for the purchase of any shares of
stock other than the Series A Preferred Stock, except for the purchase of shares
of Common Stock from former employees of the Corporation who acquired such
shares directly from the Corporation or the Stock Option Plan (as defined in the
Weston Presidio Purchase Agreement), if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
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employment of any such former employee and the total purchase price does not
exceed $200,000 plus any applicable life insurance payments for all such
purchases from each such former employee;
(d) redeem or otherwise acquire any shares of Series A Preferred
Stock except as expressly authorized in Section 6 or pursuant to a purchase
offer made pro rata to all holders of the shares of Series A Preferred Stock on
the basis of the aggregate number of outstanding shares of Series A Preferred
Stock then held by each such holder;
(e) consent to any liquidation, dissolution or winding up of the
Corporation; or
(f) consolidate or merge into or with any other entity or entities
or sell or transfer all or substantially all its assets, except that the
Corporation may, without the consent of the holders of at least a majority of
the then outstanding shares of Series A Preferred Stock, effectuate a merger in
which (i) the Corporation is the surviving corporation and (ii) the stockholders
of the Corporation immediately prior to the merger hold more than 50% of the
outstanding voting power of the surviving corporation (assuming conversion fall
convertible securities and exercise of all outstanding options and warrants).
9.2. NO IMPAIRMENT. The Corporation will not by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer of
all or a substantial portion of its assets, consolidation, merger, dissolution,
issue or sale of securities, closing of transfer books or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed under these Articles of Amendment by the
Corporation, but will at all times in good faith assist in carrying out all the
provisions of these Articles of Amendment and in taking all such action as may
be necessary or appropriate in order to protect the conversion and other rights
of the holders of Series A Preferred Stock against impairment.
9.3. RESERVATION OF SHARES. So long as any share of Series A Preferred
Stock shall remain outstanding, the Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its authorized capital
stock, for the purpose of issuance upon conversion of the Series A Preferred
Stock, the full number of shares of Common Stock then issuable upon exercise of
all outstanding shares of Series A Preferred Stock. If the Corporation's Common
Stock shall be listed on any national stock exchange, the Corporation at its
expense shall include in its listing application all of the shares of Common
Stock reserved for issuance upon conversion of the Series A Preferred Stock
(subject to issuance or notice of issuance to the exchange) and will similarly
procure the listing of any further Common Stock reserved for issuance upon
conversion of the Series A Preferred Stock at any subsequent time as a result of
adjustments in the outstanding Common Stock or otherwise.
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9.4. VALIDITY OF SHARES. The Corporation will from time to time take all
such action as may be required to assure that all shares of Common Stock which
may be issued upon conversion of any share of the Series A Preferred Stock will,
upon issuance, be legally and validly issued, fully paid and non-assessable and
free from all taxes, liens and charges with respect to the issuance thereof.
Without limiting the generality of the foregoing, the Corporation will from time
to time take all such action as may be required to assure that the par value per
share, if any, of the Common Stock is at all times equal to or less than the
lowest quotient obtained by dividing the then current par value of the Series A
Preferred Stock by the number of shares of Common Stock into which each shares
of Series A Preferred Stock can, from time to time, be converted.
9.5. NOTICE OF CERTAIN EVENTS. If at any time:
(a) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(b) the Corporation shall offer for subscription pro rata to the
holders of Common Stock any additional shares of stock of any class or any other
rights;
(c) any recapitalization of the Corporation, or consolidation or
merger of the Corporation with, or sale of all or substantially all of its
assets to, another corporation or business organization shall occur; or
(d) a voluntary or involuntary dissolution, liquidation or winding
up of the Corporation shall occur;
then, in any one or more of such cases, the Corporation shall give the
registered holders of the Preferred Stock written notice, by registered mail, of
the date on which a record shall be taken for such dividend, distribution or
subscription rights or for determining stockholders entitled to vote upon such
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding up and of the date when any such transaction shall take place, as the
case may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such recapitalization,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given 20 days prior to the record date with
respect thereto.
9.6. NO REISSUANCE OF PREFERRED STOCK. No shares of Series A 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. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of
Preferred Stock accordingly.
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10. PREEMPTIVE RIGHTS.
10.1. RIGHT OF FIRST OFFER. Until the closing, including the closing under
any over-allotment option, under a Qualified Public Offering, the Corporation
shall not issue or sell any Common Stock (including securities convertible into,
or options, warrants or other rights to purchase Common Stock, but excluding the
shares described in Section 10.7) (collectively, the "FUTURE SHARES") to any
Person (an "OFFEREE") without first providing each holder of Series A Preferred
Stock the right to subscribe for its Proportionate Percentage of the Future
Shares at a price and on such other terms which are at least as favorable as
shall have been offered or are proposed to be offered by the Corporation to such
Offeree and which shall have been specified by the Corporation in a notice
delivered to each holder of Series A Preferred Stock (the "PROPOSAL"); PROVIDED,
HOWEVER, that the holder of Series A Preferred Stock shall have the option to
purchase Future Shares with cash, regardless of the method of purchase offered
to such Offeree. The Proposal by its terms shall remain open and irrevocable for
a period of 30 days from the date it is delivered by the Corporation to each
holder of Series A Preferred Stock (the "FUTURE SHARES EXERCISE PERIOD"). The
Proposal shall also certify that the Corporation has either (a) received a bona
fide offer from a prospective purchaser, who shall be identified in such
certification, and that the Corporation in good faith believes a binding
agreement of sale is obtainable for consideration having a fair market, cash
equivalent or present value set forth in such certification; or (b) intends in
good faith to make an offering of its securities to prospective purchasers, who
shall be identified to the extent possible in such certification at the price
and on the terms set forth in such certification.
"PROPORTIONATE PERCENTAGE" means, for any holder of Series A Preferred
Stock, the percentage of Future Shares covered by the Proposal equal to (i) the
number of shares of Common Stock into which the shares of Series A Preferred
Stock held by such holder would then be convertible divided by (ii) the total
number of shares of Common Stock outstanding at the time of delivery of the
Proposal PLUS the aggregate number of shares of Common Stock into which all
shares of Series A Preferred Stock would then be convertible.
10.2. NOTICE. Notice of each holder of Series A Preferred Stock's
intention to accept the Proposal made pursuant to Section 10.1 shall be
evidenced by writing signed by such holder and delivered to the Corporation
prior to the end of the Future Shares Exercise Period (the "NOTICE OF PURCHASE")
setting forth that portion of the Future Shares such holder elects to purchase
(the "ACCEPTED SHARES"). The failure of a holder to deliver such a Notice of
Purchase shall constitute a rejection of the Proposal.
10.3. FULL ACCEPTANCE. In the event that each holder of Series A Preferred
Stock elects to purchase all of the shares offered to such holder in the
Proposal, the Corporation shall sell to each such holder, pursuant to Section
10.6, the number of Accepted Shares set forth in such holder's Notice of
Purchase.
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10.4. PARTIAL ACCEPTANCE. In the event that one or more holders of
Series A Preferred Stock do not elect to purchase all of the shares offered to
such holders in the Proposal, the Corporation shall sell to each such holder,
pursuant to Section 10.6, the number of Accepted Shares, if any, set forth in
such holder's Notice of Purchase. Holders of Series A Preferred Stock may
purchase pursuant to Section 10.6 any remaining shares offered in the Proposal
not purchased by the other holders of Series A Preferred Stock pro rata based on
the respective Proportionate Percentages of such holders wishing to purchase
additional shares, or as they may otherwise agree.
10.5. NO FRACTIONAL SHARES. For the purpose of avoiding fractions as to
Future Shares, the Corporation may adjust upward or downward by not more than
one full share the number of Future Shares which any holder of Series A
Preferred Stock would otherwise be entitled to purchase.
10.6. SALE OF SHARES. No later than 30 days after the expiration of the
Future Shares Exercise Period, the Corporation shall deliver to each holder of
Series A Preferred Stock who has submitted a Notice of Purchase to the
Corporation a notice indicating the number of Future Shares which the
Corporation shall sell to such holder pursuant to this Section 10 and the terms
and conditions of such sale, which shall be in all respects (including unit
price and interest rates) the same as specified in the proposal. The sale to
such holders of such Future Shares shall take place not later than 10 days after
receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for purchase
by the holders of Series A Preferred Stock as provided above shall take place
not later than 90 days after the expiration of the Future Shares Exercise
Period. Such sale shall be upon terms and conditions in all respects (including
unit price and interest rates) which are no more favorable to such Offeree or
less favorable to the Corporation than those set forth in the Proposal. Any
refused Future Shares not purchased by the Offeree as contemplated by the
Proposal within the 90-day period specified above shall remain subject to this
Section 10.
10.7. EXCLUSION OF CERTAIN SHARES. Notwithstanding any contrary provision
of this Section 10, Future Shares shall not include:
10.7.1. shares of Common Stock issuable upon conversion of the Series A
Preferred Stock or upon exercise or conversion of the Warrants.
10.7.2. shares of Common Stock issued pursuant to the exercise of options
granted under a stock option plan described in Section 8.4.1(d).
10.7.3. shares of Common Stock issued in connection with mergers permitted
by Section 5.9 of the Weston Presidio Purchase Agreement or otherwise permitted
to be issued by Section 5.14 of the Weston Presidio Purchase Agreement.
10.7.4. shares of Common Stock issued to the original holders of Series A
Preferred Stock pursuant to the Purchase Agreements.
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11. AMENDMENTS. The provisions of these terms of the Series A Preferred
Stock may not be amended, modified or waived without the written consent or
affirmative vote of the Required Holders; PROVIDED, HOWEVER, that any amendment
reducing or postponing the payment of dividends or redemptions or postponing or
increasing the amount of the Conversion Price shall require the written consent
or affirmative vote of holders of 90% of the then outstanding shares of Series A
Preferred Stock. Except to the extent required by law, the vote of the holders
of any other class of capital stock of the Corporation is not required for the
amendment, modification or waiver of the terms of these Articles of Amendment.
12. The Corporation may issue such additional series of Preferred Stock
as the Board of Directors may establish by the adoption of a resolution or
resolutions relating thereto, each such additional series to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
series adopted by the Board of Directors pursuant to authority to do so, which
authority is hereby granted to the Board of Directors. Unless otherwise
expressly set forth in the designation therefor, no series of Preferred Stock
shall have the right to vote as a class in connection with the issuance of any
additional series of Preferred Stock, whether such additional series shall have
rights greater, lesser or identical to the rights of any existing series of
Preferred Stock.
5. Existing provisions limiting or denying to shareholders the preemptive
right to acquire additional or treasury shares of the corporation are: The
pre-emptive rights set forth in Rhode Island General Laws, (1956), as amended,
Section 7-1.1-24 are denied to the stockholders.
6. Existing provisions of the charter for the regulation of the internal
affairs of the corporation are:
a. WRITTEN CONSENT OF SHAREHOLDERS. Except as otherwise provided by the
Rhode Island Business Corporation Act, as amended, (the "Act"), any action
required or permitted to be taken at a meeting of shareholders by the Act, by
these Articles of Incorporation or by the By-laws of the Corporation may be
taken without a meeting upon the written consent of less than all of the
shareholders entitled to vote thereon if the shareholders who so consent would
be entitled to cast at least the minimum number of votes which would be required
to take such action at a meeting at which all shareholders entitled to vote
thereon are present.
b. ELIMINATION OF DIRECTORS' LIABILITY. A director of the Corporation
shall not be personally liable to the Corporation or its shareholders for
monetary damages for breach of the director's duty as a director, except for (i)
liability for any breach of the director's duty of loyalty to the Corporation or
its shareholders, (ii) liability for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
liability imposed pursuant to the
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provisions of Section 43 of the Act, or (iv) liability for any transaction from
which the director derived an improper personal benefit (unless said transaction
is permitted by Section 37.1 of the Act). If the Act is amended to authorized
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Act. Any repeal or
modification of this Section (b) of Article 6 by the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
c. INDEMNIFICATION.
(i) BY-LAW AND INDEMNITY AGREEMENTS: STATUTORY PROVISIONS. The Board
of Directors of the Corporation may include provisions in its By-laws, or may
authorize agreements to be entered into with each director, officer, employee or
other agent of the Corporation (an "Indemnified Person") for the purpose of
indemnifying an Indemnified Person in the manner and to the extent permitted by
Section 4.1 of the Act.
(ii) BY-LAW AND INDEMNITY AGREEMENTS: OTHER PROVISIONS. In addition
to the authority conferred upon the Board of Directors of the Corporation by
Paragraph c(i) hereof, the Board of Directors of the Corporation may include
provisions in its By-laws, or may authorize agreements to be entered into with
each Indemnified Person, for the purpose of indemnifying such person in the
manner and to the extent provided herein:
(1) The By-law provisions or agreements authorized hereby may
provide that the Corporation shall, subject to the provisions of this Section
(c) of Article 6, pay, on behalf of an Indemnified Person any Loss or Expenses
arising from any claim or claims which are made against the Indemnified Person
(whether individually or jointly with other Indemnified Persons) by reason of
any Covered Act of the Indemnified Person.
(2) For the purposes of this Section (c) of Article 6, when used
herein:
(a) "Loss" means any amount which an Indemnified Person is legally
obligated to pay for any claim for Covered Acts and shall include, without being
limited to, damages, settlements, fines, penalties or, with respect to employee
benefit plans, excise taxes;
(b) "Expenses" means any expenses incurred in connection with the
defense against any claim for Covered Acts, including, without being limited to,
legal, accounting or investigative fees and expenses; and
(c) "Covered Act" means any act or omission of an Indemnified Person
in the Indemnified Person's capacity as a official capacity with the
Corporation.
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(3) The By-law provisions or agreements authorized hereby may cover
Loss or Expenses arising from any claims made against a retired Indemnified
Person, the estate, heirs or legal representative of a deceased Indemnified
Person or the legal representative of an incompetent, insolvent or bankrupt
Indemnified Person, where the Indemnified Person was an Indemnified Person at
the time the Covered Act upon which such claims are based occurred.
(4) Any By-law provisions or agreements authorized hereby may
provide for the advancement of Expenses to an Indemnified Person prior to the
final disposition of any action, suit or proceeding, or any appeal therefrom,
involving such Indemnified Person and based on the alleged commission by such
Indemnified Person of a Covered Act, subject to an undertaking by or on behalf
of such Indemnified Person to repay the same to the Corporation if the Covered
Act involves a claim for which indemnification is not permitted under clause
(e), below, and the final disposition of such action, suit, proceeding or appeal
results in an adjudication adverse to such director or officer.
(5) The By-law provisions or agreements authorized hereby may not
indemnify an Indemnified Person from and against any Loss, and the Corporation
shall not reimburse for any Expenses, in connection with any claim or claims
made against an Indemnified Person: (1) any breach of the Indemnified Person's
duty of loyalty to the Corporation or its shareholders; (2) acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law; (3) action contravening Section 43 of the Act; (4) the realization by
the Indemnified Person of profits subject to the provisions of Section 16(b) of
the Securities Exchange Act of 1934; or (5) a transaction from which the person
seeking indemnification derived improper personal benefit (unless the
transaction is permitted by Section 37.1 of the Act).
(6) The By-law provisions or agreements authorized hereby may
contain such other terms and conditions as the Board of Directors, in its sole
discretion, determines to be consistent with the provisions of this Article.
d. DISTRIBUTION OF CAPITAL SURPLUS. The Board of Directors shall have the
authority to make distributions to shareholders from the capital surplus of the
Corporation without the approval of the holders of shares of any class.
e. AMENDMENT OF BY-LAWS. The Board of Directors may from time to time
make, amend, supplement or repeal the By-laws; PROVIDED, HOWEVER, that the
shareholders may change or repeal any By-law adopted by the Board of Directors;
and PROVIDED, FURTHER, that no amendment or supplement to the By-laws adopted by
the Board of Directors shall vary or conflict with any amendment or supplement
adopted by the shareholders.
f. AMENDMENT OF ARTICLES OF INCORPORATION. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in these
Articles of Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon shareholders herein are granted subject to this
reservation.
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7. The restated charter correctly sets forth without change the
corresponding provisions of the charter as heretofore amended, and supersedes
the original charter and all amendments thereto.
8. The restated charter correctly sets forth without change the
corresponding provisions of the charter as heretofore amended, and supersedes
the original charter and all amendments thereto.
Dated: August 4, 1998 AAi.FOSTERGRANT, Inc.
By /s/ Gerald F. Cerce
--------------------------
Gerald F. Cerce, President
and /s/ Duane M. DeSisto
--------------------------
Duane M. DeSisto,
Assistant Secretary
STATE OF RHODE ISLAND
SC.
COUNTY OF PROVIDENCE
At Smithfield, RI in said county on this 4th day of August, 1998,
personally appeared before me Duane M. DeSisto, who being by me first duly
sworn, declared that he is the Assistant Secretary of AAi.FOSTERGRANT, Inc.,
that he signed the foregoing document as Secretary of the corporation, and that
the statements therein contained are true.
/s/ Laurie C. Wilkins
------------------------------
Notary Public
My Commission Expires: _______
(NOTARIAL SEAL)
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