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EXHIBIT 4.3
FEDERAL IDENTIFICATION
NO. 04-2997834
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THE COMMONWEALTH OF MASSACHUSETTS
- ----------- WILLIAM FRANCIS GALVIN
Examiner Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
CERTIFICATE OF VOTE OF DIRECTORS
ESTABLISHING A CLASS OR SERIES OF STOCK
(GENERAL LAWS, CHAPTER 156B, SECTION26)
We, Spiros Jamas *President
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and D. Davidson Easson, Jr. *Clerk
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of ALPHA-BETA TECHNOLOGY, INC.
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(Exact name of corporation)
located at: One Innovation Drive, Worcester, Massachusetts 01605
-----------------------------------------------------,
(Street Address of corporation in Massachusetts)
do hereby certify that at a meeting of the directors of the
corporation held on October 5, 1998, the following vote amending
and restating the relative rights and preferences of a series of
stock prior to issuance was duly adopted:
See attached pages 2A through 28A and 2B
*Delete the inapplicable words.
- ----------- NOTE: VOTES FOR WHICH THE SPACE PROVIDED ABOVE IS NOT SUFFICIENT
P.C. SHOULD BE PROVIDED ON ONE SIDE OF SEPARATE 8 1/2 x 11 SHEETS OF
WHITE PAPER, NUMBERED 2A, 2B, ETC., WITH A LEFT MARGIN OF AT LEAST
1 INCH.
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CERTIFICATE OF VOTE OF DIRECTORS
OF ALPHA-BETA TECHNOLOGY, INC.
AMENDING AND RESTATING TERMS OF SERIES F
CONVERTIBLE PREFERRED STOCK
PRIOR TO ISSUANCE
WHEREAS, on October 16, 1998, Alpha-Beta Technology, Inc. (the
"COMPANY"), a corporation organized and existing under the Massachusetts
Business Corporation Law (the "MBCL"), filed a Certificate of Vote of Directors
Establishing Series F Convertible Preferred Stock with the Secretary of State of
The Commonwealth of Massachusetts certifying that the Board of Directors of the
Company adopted votes (i) authorizing three thousand (3,000) shares of the
Company's Series F Convertible Preferred Stock out of the Company's previously
authorized preferred stock, par value $0.01 per share (the "PREFERRED STOCK"),
and (ii) providing for the designations, preferences and relative participating,
optional or other rights, and the qualifications, limitations or restrictions
(collectively, "RIGHTS AND RESTRICTIONS") thereof;
WHEREAS, the Company has not yet issued any shares of the Series F
Convertible Preferred Stock; and
WHEREAS, the Company has decided to amend and restate the Rights and
Restrictions of the Series F Convertible Preferred Stock.
NOW THEREFORE, the Company does hereby certify that pursuant to
authority conferred upon the Company's Board of Directors by the Company's
Restated Articles of Organization, as amended, and pursuant to Section 26 of the
MBCL, the Board of Directors of the Company authorized the amendment and
restatement of the Rights and Restrictions of the Series F Convertible Preferred
Stock as follows:
VOTED, to amend and restate the Rights and
Restrictions of the Company's Series F Convertible Preferred
Stock (the "Preferred Shares"), par value $0.01 per share as
follows:
(1) DIVIDENDS. The Preferred Shares shall not bear any dividends.
(2) HOLDER'S CONVERSION OF PREFERRED SHARES. A holder of Preferred
Shares shall
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have the right, at such holder's option, to convert the Preferred Shares into
shares of the Company's common stock, $0.01 par value per share (the "COMMON
STOCK"), on the following terms and conditions:
(a) CONVERSION RIGHT. At any time or times on or after
the Issuance Date (as defined below), any holder of Preferred Shares
shall be entitled to convert any whole number of Preferred Shares into
fully paid and nonassessable shares (rounded to the nearest whole share
in accordance with Section 2(h)) of Common Stock, at the Conversion
Rate (as defined below); provided, however, that in no event shall any
holder be entitled to convert Preferred Shares in excess of that number
of Preferred Shares which, upon giving effect to such conversion, would
cause the aggregate number of shares of Common Stock beneficially owned
by the holder and its affiliates to exceed 4.99% of the outstanding
shares of the Common Stock following such conversion. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the
Preferred Shares with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining,
nonconverted Preferred Shares beneficially owned by the holder and its
affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including,
without limitation, any warrants or convertible preferred stock)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the holder and its
affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 2(a), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended.
(b) CONVERSION RATE AND OTHER DEFINITIONS. The number of
shares of Common Stock issuable upon conversion of each of the
Preferred Shares pursuant to Sections (2)(a) and 2(g) shall be
determined according to the following formula (the "CONVERSION RATE"):
(.06)(N/365)(1,000) + 1,000
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Conversion Price
For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
(i) "CONVERSION PRICE" means, as of any
Conversion Date (as defined below) or other date of
determination, the lower of the Fixed Conversion Price and the
Floating Conversion Price, each in effect as of such date and
subject to adjustment as provided herein;
(ii) "FIXED CONVERSION PRICE" means (A) during
the period beginning on the initial Issuance Date of the
Preferred Shares and ending on the Additional Closing Date,
$1.50 and (B) on and after the Additional Closing Date (as
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defined in the Securities Purchase Agreement, an amount equal
to the sum of the Market Price on the Measurement Date and the
Spread Adjustment, subject to adjustment as provided herein;
(iii) "FLOATING CONVERSION PRICE" means, as of any
date of determination, the lower of (A) the amount obtained by
multiplying the Conversion Percentage in effect as of such
date by the Market Price for the Common Stock and (B) the
Closing Bid Price on the Conversion Date (as defined in
Section 2(g)(i) below),each subject to adjustment as provided
herein;
(iv) "CONVERSION PERCENTAGE" means 85%, subject
to adjustment as provided herein;
(v) "MARKET PRICE" means, with respect to any
security for any date of determination, the price which shall
be computed as the arithmetic average of the Closing Sale
Price of the Common Stock for the 5 consecutive trading days
immediately preceding such date;
(vi) "MEASUREMENT DATE" means the business day
after the date of the meeting of the Company's stockholders
approving the proposals contained in Section 4(j) of the
Securities Purchase Agreement between the Company and the
initial holders of the Preferred Shares (the "SECURITIES
PURCHASE AGREEMENT");
(vii) "CLOSING SALE PRICE" means, for any security
as of any date, the last closing trade price for such security
on the Principal Market (as defined below) as reported by
Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the
last closing trade price of such security on the principal
securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing
do not apply, the last closing trade price of such security in
the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last
closing trade price is reported for such security by
Bloomberg, the last closing bid price of such security as
reported by Bloomberg, or, if no last closing bid price is
reported for such security by Bloomberg, the average of the
bid prices of any market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If
the Closing Sale Price cannot be calculated for such security
on such date on any of the foregoing bases, the Closing Sale
Price of such security on such date shall be the fair market
value as mutually determined by the Company and the holders of
a majority of the shares of Series F Preferred Stock. If the
Company and the holders of Preferred Shares are unable to
agree upon the fair market value of the Common Stock, then
such dispute shall be resolved pursuant to Section 2(f)(iii)
with the term "Closing Sale Price" being substituted for the
term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock, split or
other similar transaction during such period);
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(viii) "CLOSING BID PRICE" means, for any security
as of any date, the last closing bid price for such security
on the Principal Market as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or
trading market for such security, the last closing bid price
of such security on the principal securities exchange or
trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the
last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last
closing trade price of such security as reported by Bloomberg,
or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing
Bid Price cannot be calculated for such security on such date
on any of the foregoing bases, the Closing Bid Price of such
security on such date shall be the fair market value as
mutually determined by the Company and the holders of a
majority of the shares of Series F Preferred Stock. If the
Company and the holders of Preferred Shares are unable to
agree upon the fair market value of the Common Stock, then
such dispute shall be resolved pursuant to Section 2(f)(iii)
with the term "Closing Bid Price" being substituted for the
term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock, split or
other similar transaction during such period);
(ix) "N" means the number of days from, but
excluding, the Issuance Date through and including the
Conversion Date for the Preferred Shares for which conversion
is being elected;
(x) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the applicable
Preferred Share;
(xi) "SEC" means the Securities and Exchange
Commission;
(xii) "REGISTRATION RIGHTS AGREEMENT" means that
certain Registration Rights Agreement among the Company and
the initial purchasers of the Preferred Shares;
(xiii) "REGISTRATION STATEMENT" means a
Registration Statement (as defined in the Registration Rights
Agreement);
(xiv) "RESERVE NUMBER" means the number of shares
of Common Stock reserved for issuance upon the conversion of
the Preferred Shares as set by the Company on the Measurement
Date, provided, however, that such Reserve Number shall not be
less than 200% of the sum of (A) the number of
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Conversion Shares issuable on the Measurement Date upon the
conversion of all of the outstanding Initial Preferred Shares
and the Additional Preferred Shares to be issued by the
Company and (B) the number of Conversion Shares held by Buyers
on the Measurement Date;
(xv) "SPREAD ADJUSTMENT" means the Market Price
on the Measurement Date minus the Base Price;
(xvi) "BASE PRICE" means the aggregate purchase
price for the Initial Preferred Shares and the Additional
Preferred Shares pursuant to the Securities Purchase Agreement
divided by the Reserve Number; and
(xvii) "PRINCIPAL MARKET" means the Nasdaq National
Market, The New York Stock Exchange, Inc. or The American
Stock Exchange, Inc.
(c) INTENTIONALLY OMITTED.
(d) ADJUSTMENT TO CONVERSION PRICE - DILUTION AND OTHER
EVENTS. In order to prevent dilution of the rights granted under this
Certificate of Designations, the Conversion Price will be subject to
adjustment from time to time as provided in this Section 2(d).
(i) ADJUSTMENT OF FIXED CONVERSION PRICE UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the date
of issuance of the Preferred Shares, the Company issues or
sells, or is deemed to have issued or sold, any shares of
Common Stock (other than shares of Common Stock deemed to have
been issued by the Company in connection with Approved
Issuances (as defined below)) for a consideration per share
less than the Market Price in effect immediately prior to such
time (the "APPLICABLE PRICE"), then immediately after such
issue or sale, the Fixed Conversion Price shall be reduced to
an amount equal to the product of (x) the Fixed Conversion
Price in effect immediately prior to such issue or sale and
(y) the quotient determined by dividing (1) the sum of (I) the
product of the Applicable Price and the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately
prior to such issue or sale, and (II) the consideration, if
any, received by the Company upon such issue or sale, by (2)
the product of (I) the Applicable Price and (II) the number of
shares of Common Stock Deemed Outstanding immediately after
such issue or sale. For purposes of determining the adjusted
Fixed Conversion Price under this Section 2(d)(i), the
following shall be applicable:
(A) ISSUANCE OF OPTIONS. If the
Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock (other than
in connection with an Approved Issuance or upon
conversion of the Preferred Shares) or any stock or
other securities convertible into or exchangeable for
Common Stock (such rights or
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options being herein called "OPTIONS" and such
convertible or exchangeable stock or securities being
herein called "CONVERTIBLE SECURITIES") and the price
per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than
the Applicable Price, then the total maximum number
of shares of Common Stock issuable upon the exercise
of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For
purposes of this Section 2(d)(i)(A), the "price per
share for which Common Stock is issuable upon
exercise of such Options or upon conversion or
exchange of such Convertible Securities" is
determined by dividing (I) the total amount, if any,
received or receivable by the Company as
consideration for the granting of such Options, plus
the minimum aggregate amount of additional
consideration payable to the Company upon the
exercise of all such Options, plus in the case of
such Options which relate to Convertible Securities,
the minimum aggregate amount of additional
consideration, if any, payable to the Company upon
the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (II) the
total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the
conversion or exchange of all such Convertible
Securities issuable upon the exercise of such
Options. No adjustment of the Fixed Conversion Price
shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance
of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) ISSUANCE OF CONVERTIBLE SECURITIES.
If the Company in any manner issues or sells any
Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion
or exchange is less than the Applicable Price, then
the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to
have been issued and sold by the Company for such
price per share. For the purposes of this Section
2(d)(i)(B), the "price per share for which Common
Stock is issuable upon such conversion or exchange"
is determined by dividing (I) the total amount
received or receivable by the Company as
consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable
to the Company upon the conversion or exchange
thereof, by (II) the total maximum number of shares
of
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Common Stock issuable upon the conversion or exchange
of all such Convertible Securities. No adjustment of
the Fixed Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is
made upon exercise of any Options for which
adjustment of the Fixed Conversion Price had been or
are to be made pursuant to other provisions of this
Section 2(d)(i), no further adjustment of the Fixed
Conversion Price shall be made by reason of such
issue or sale.
(C) CHANGE IN OPTION PRICE OR RATE OF
CONVERSION. If the purchase price provided for in any
Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any
Convertible Securities, or the rate at which any
Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, the
Fixed Conversion Price in effect at the time of such
change shall be readjusted to the Fixed Conversion
Price which would have been in effect at such time
had such Options or Convertible Securities still
outstanding provided for such changed purchase price,
additional consideration or changed conversion rate,
as the case may be, at the time initially granted,
issued or sold; provided that no adjustment shall be
made if such adjustment would result in an increase
of the Fixed Conversion Price then in effect.
(D) CERTAIN DEFINITIONS. For purposes
of determining the adjusted Fixed Conversion Price
under this Section 2(d)(i), the following terms have
meanings set forth below:
(I) "APPROVED ISSUANCES" shall
mean (i) the issuance of Common Stock in a
firm commitment, underwritten public
offering with commissions, underwriting
discounts and allowances not in excess of
7.0% of the gross proceeds, (ii) the
issuance of securities upon exercise or
conversion of the Company's options,
warrants or other convertible securities
outstanding as of the date hereof or (iii)
the grant of additional options or warrants,
or the issuance of additional securities,
under any Company stock option plan,
restricted stock plan, stock purchase plan
or other plan or written compensation
contract for the benefit of the Company's
employees or directors.
(II) "COMMON STOCK DEEMED
OUTSTANDING" means, at any given time, the
number of shares of Common Stock actually
outstanding at such time, plus the number of
shares of Common Stock deemed to be
outstanding pursuant to Sections 2(d)(i)(A)
and 2(d)(i)(B) hereof regardless of whether
the Options or Convertible Securities are
actually exercisable at such time, but
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excluding any shares of Common Stock
issuable upon conversion of the Preferred
Shares.
(E) TREATMENT OF EXPIRED OPTIONS AND
UNEXERCISED CONVERTIBLE SECURITIES. If, in any case,
the total number of shares of Common Stock issuable
upon the exercise of any Option or upon exercise,
conversion or exchange of any Convertible Security is
not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such
Convertible Securities shall have expired or
terminated, the Fixed Conversion Price then in effect
will be readjusted to the Fixed Conversion Price
which would have been effect at the time of such
expiration or termination had such Option or
Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination
(other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion
thereof), never been issued.
(F) EFFECT ON FIXED CONVERSION PRICE OF
CERTAIN EVENTS. For purposes of determining the
adjusted Fixed Conversion Price under this Section
2(d)(i), the following shall be applicable:
(I) CALCULATION OF
CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued
or sold or deemed to have been issued or
sold for cash, the consideration received
therefor will be deemed to be the amount
received by the Company therefor, before
deduction of reasonable commissions,
underwriting discounts or allowances or
other reasonable expenses paid or incurred
by the Company in connection with such
issuance or sale. In case any Common Stock,
Options or Convertible Securities are issued
or sold for a consideration other than cash,
the amount of the consideration other than
cash received by the Company will be the
fair value of such consideration, except
where such consideration consists of
securities, in which case the amount of
consideration received by the Company will
be the Market Price of such security on the
date of receipt. In case any Common Stock,
Options or Convertible Securities are issued
to the owners of the non-surviving entity in
connection with any merger in which the
Company is the surviving entity the amount
of consideration therefor will be deemed to
be the fair value of such portion of the net
assets and business of the non-surviving
entity as is attributable to such Common
Stock, Options or Convertible Securities, as
the case may be. The fair value of any
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consideration other than cash or securities
will be determined jointly by the Company
and the holders of a majority of the
Preferred Shares then outstanding. If such
parties are unable to reach agreement within
ten (10) days after the occurrence of an
event requiring valuation (the "VALUATION
EVENT"), the fair value of such
consideration will be determined within
forty-eight (48) hours of the tenth (10th)
day following the Valuation Event by an
independent, reputable appraiser selected by
the Company. The determination of such
appraiser shall be deemed binding upon all
parties absent manifest error.
(II) INTEGRATED TRANSACTIONS.
In case any Option is issued in connection
with the issue or sale of other securities
of the Company, together comprising one
integrated transaction in which no specific
consideration is allocated to such Options
by the parties thereto, the Options will be
deemed to have been issued for a
consideration of $.01.
(III) TREASURY SHARES. The
number of shares of Common Stock outstanding
at any given time does not include shares
owned or held by or for the account of the
Company, and the disposition of any shares
so owned or held will be considered an issue
or sale of Common Stock.
(IV) RECORD DATE. If the
Company takes a record of the holders of
Common Stock for the purpose of entitling
them (1) to receive a dividend or other
distribution payable in Common Stock,
Options or in Convertible Securities or (2)
to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such
record date will 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.
(ii) ADJUSTMENT OF FIXED CONVERSION PRICE UPON
SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of
shares, the Fixed Conversion Price in effect immediately prior
to such subdivision will be proportionately reduced. If the
Company at any time combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the
Fixed Conversion Price in effect immediately prior to such
combination will be proportionately increased.
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(iii) ADJUSTMENT OF FLOATING CONVERSION PRICE UPON
ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells Convertible Securities that are
convertible into Common Stock at a price which varies with the
market price of the Common Stock (the formulation for such
variable price being herein referred to as, the "VARIABLE
PRICE") and such Variable Price is not calculated using the
same formula used to calculate the Floating Conversion Price
in effect immediately prior to the time of such issue or sale,
the Company shall provide written notice thereof via facsimile
and overnight courier to each holder of the Preferred Shares
("VARIABLE NOTICE") on the date of issuance of such
Convertible Securities. If the holders of Preferred Shares
representing at least two-thirds (2/3) of the Preferred Shares
then outstanding provide written notice via facsimile and
overnight courier (the "VARIABLE PRICE ELECTION NOTICE") to
the Company within five (5) business days of receiving a
Variable Notice that such holders desire to replace the
Floating Conversion Price then in effect with the Variable
Price described in such Variable Notice, the Company shall
prepare and deliver to each holder of the Preferred Shares via
facsimile and overnight courier a copy of an amendment to this
Certificate of Designations (the "VARIABLE PRICE AMENDMENT")
that substitutes the Variable Price for the Floating
Conversion Price (together with such modifications to this
Certificate of Designations as may be required to give full
effect to the substitution of the Variable Price for the
Floating Conversion Price) within five (5) business days after
receipt of the requisite number of Variable Price Election
Notices set forth above. The Company shall file such Variable
Price Amendment with the Secretary of State of The
Commonwealth of Massachusetts within five (5) business days
after delivery of the Variable Price Amendment to the holders
of the Preferred Shares; provided that in the event that the
Company receives a notice prior to the filing of the Variable
Price Amendment from any holder who has delivered a Variable
Price Election Notice in connection with such Variable Price
Amendment that such holder objects to the form of the Variable
Price Amendment, the Company shall not file such Variable
Price Amendment until such time as the Variable Price
Amendment has been revised to the reasonable satisfaction of
such holder and approved in writing by the holders of the
Preferred Shares representing at least two-thirds (2/3) of the
Preferred Shares then outstanding. Except as provided in the
preceding proviso, a holder's delivery of a Variable Price
Election Notice shall serve as the consent required to amend
this Certificate of Designation pursuant to Section 12 below.
(iv) REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION, MERGER OR SALE. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets to another
Person (as defined below) or other transaction which is
effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent
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liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "ORGANIC
CHANGE." Prior to the consummation of any Organic Change, the
Company will make appropriate provision (in form and substance
reasonably satisfactory to the holders of a majority of the
Preferred Shares then outstanding) to insure that each of the
holders of the Preferred Shares will thereafter have the right
to acquire and receive in lieu of or in addition to (as the
case may be) the shares of Common Stock otherwise acquirable
and receivable upon the conversion of such holder's Preferred
Shares, such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with
respect to or in exchange for the number of shares of Common
Stock which would have been acquirable and receivable upon the
conversion of such holder's Preferred Shares had such Organic
Change not taken place (without taking into account any
limitations or restrictions on the timing or amount of
conversions). In any such case, the Company will make
appropriate provision (in form and substance reasonably
satisfactory to the holders of a majority of the Preferred
Shares then outstanding) with respect to such holders' rights
and interests to insure that the provisions of this Section
2(d) and Section 2(e) will thereafter be applicable to the
Preferred Shares (including, in the case of any such
consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate
adjustment of the Fixed Conversion Price to the value for the
Common Stock reflected by the terms of such consolidation,
merger or sale, if the value so reflected is less than the
Fixed Conversion Price in effect immediately prior to such
consolidation, merger or sale and an immediate revision to the
Floating Conversion Price to reflect the price of the common
stock of the surviving entity and the market in which such
common stock is traded). The Company will not effect any such
consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the
Company) resulting from consolidation or merger or the entity
purchasing such assets assumes, by written instrument (in form
and substance reasonably satisfactory to the holders of a
majority of the Preferred Shares then outstanding), the
obligation to deliver to each holder of Preferred Shares such
shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to
acquire. "PERSON" shall mean an individual, a limited
liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(v) CERTAIN EVENTS. If any event occurs of the
type contemplated by the provisions of this Section 2(d) but
not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights
of the holders of the Preferred Shares; provided that no such
adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 2(d).
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(vi) NOTICES.
(A) Immediately upon any adjustment of the
Conversion Price as provided in Section 2(d)(i), the
Company will give written notice thereof to each
holder of the Preferred Shares, setting forth in
reasonable detail and certifying the calculation of
such adjustment.
(B) The Company will give written notice to
each holder of the Preferred Shares at least twenty
(20) days prior to the date on which the Company
closes its books or takes a record (I) with respect
to any dividend or distribution upon the Common
Stock, (II) with respect to any pro rata subscription
offer to holders of Common Stock or (III) for
determining rights to vote with respect to any
Organic Change, dissolution or liquidation and in no
event shall such notice be provided to such holder
prior to such information being made known to the
public.
(C) The Company will also give written
notice to each holder of Preferred Shares at least
twenty (20) days prior to the date on which any
Organic Change, dissolution or liquidation will take
place and in no event shall such notice be provided
to such holder prior to such information being made
known to the public.
(e) PURCHASE RIGHTS. In addition to any
adjustments of the Conversion Price pursuant to Section 2(d),
if at any time after the Issuance Date the Company grants,
issues or sells any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property pro
rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then the holders of the Preferred Shares
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number
of shares of Common Stock acquirable upon complete conversion
of the Preferred Shares (without taking into account any
limitations or restrictions on the timing or amount of
conversions) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the
record holders of the Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
(f) FIXING OF CONVERSION PRICE - MAJOR CORPORATE
EVENT ANNOUNCEMENT. Notwithstanding anything contained in
Section 2(b) above, in the event (i) the Company makes a
public announcement that it intends to consolidate or merge
with or into another Person or engage in a business
combination involving the issuance or exchange of 40% or more
of the
14
Company's outstanding Common Stock (ii) the Company makes a
public announcement that it intends to sell or transfer
substantially all of the Company's assets, or (iii) any
person, group or entity (including the Company) publicly
announces a purchase, tender or exchange offer for 50% or more
of the Company's outstanding Common Stock (the transactions
described in clauses (i), (ii) and (iii) above are hereinafter
referred to as "MAJOR CORPORATE EVENTS" and the date of the
announcement referred to in clause (i), (ii) or (iii) is
hereinafter referred to as the "ANNOUNCEMENT DATE"), then the
Fixed Conversion Price shall, effective upon the Announcement
Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the
Conversion Price which would have been applicable for a
conversion by the holder pursuant to Section 2(a) occurring on
the Announcement Date. From and after the Adjusted Conversion
Price Termination Date, the Conversion Price shall be
determined as set forth in Section 2(a). For purposes hereof,
"ADJUSTED CONVERSION PRICE TERMINATION DATE" shall mean, with
respect to any proposed Major Corporate Event for which a
public announcement as contemplated by this Section 2(f) has
been made, the date upon which the Company or the person,
group or entity (in the case of clause (iii) above) publicly
announces the consummation, termination or abandonment of the
proposed Major Corporate Event which was the subject of the
previous public announcement.
(g) MECHANICS OF CONVERSION.
(i) HOLDER'S DELIVERY REQUIREMENTS. To
convert Preferred Shares into full shares of Common
Stock on any date (the "CONVERSION DATE"), the holder
thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m.,
Eastern Time on such date, a copy of a fully executed
notice of conversion in the form attached hereto as
EXHIBIT I (the "CONVERSION NOTICE"), to the Company
or its designated transfer agent (the "TRANSFER
AGENT") and (B) surrender to a common carrier for
delivery to the Company, as soon as practicable
following such date, the original certificate(s)
representing the Preferred Shares being converted (or
an indemnification undertaking reasonably
satisfactory to the Company with respect to such
shares in the case of their loss, theft or
destruction) (the "PREFERRED STOCK CERTIFICATE(S)").
(ii) COMPANY'S RESPONSE. Upon receipt by
the Company of a facsimile copy of a Conversion
Notice, the Company shall as soon as practicable, but
in any event no later than the next business day,
send, via facsimile, a confirmation of receipt of
such Conversion Notice to such holder. Upon receipt
by the Company of the Preferred Stock Certificate(s)
to be converted pursuant to a Conversion Notice, the
Company shall, on the next business day following the
date of receipt, (I) issue and surrender to a common
carrier for overnight delivery to the address
specified in the Conversion Notice, a certificate,
registered in the
15
name of the holder or its designee, for the number of
shares of Common Stock to which the holder shall be
entitled, or (II) credit such aggregate number of
shares of Common Stock to which the holder shall be
entitled to the holder's or its designee's balance
account with The Depository Trust Company. If the
number of Preferred Shares represented by the
Preferred Stock Certificate(s) submitted for
conversion is greater than the number of Preferred
Shares being converted, then the Company or Transfer
Agent, as the case may be, shall, as soon as
practicable and in no event later than two business
days after receipt of the Preferred Stock
Certificate(s) and at its own expense, issue and
deliver to the holder a new Preferred Stock
Certificate representing the number of Preferred
Shares not converted.
(iii) DISPUTE RESOLUTION. In the case of
a dispute as to the determination of the Market Price
or the arithmetic calculation of the Conversion Rate,
the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed
and shall submit the disputed determinations or
arithmetic calculations to the holder via facsimile
within one business day of receipt of such holder's
Conversion Notice. If such holder and the Company are
unable to agree upon the determination of the Market
Price or arithmetic calculation of the Conversion
Rate within one (1) business day of such disputed
determination or arithmetic calculation being
submitted to the holder, then the Company shall
within one (1) business day submit via facsimile (A)
the disputed determination of the Market Price to an
independent, reputable investment bank or (B) the
disputed arithmetic calculation of the Conversion
Rate to its independent, outside accountant. The
Company shall cause the investment bank or the
accountant, as the case may be, to perform the
determinations or calculations and notify the Company
and the holder of the results no later than
forty-eight (48) hours from the time it receives the
disputed determinations or calculations. Such
investment bank's or accountant's determination or
calculation, as the case may be, shall be binding
upon all parties absent manifest error.
(iv) RECORD HOLDER. The person or
persons entitled to receive the shares of Common
Stock issuable upon a conversion of Preferred Shares
shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on
the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY
CONVERT. If within five (5) business days after the
Company's or the Transfer Agent's receipt of the
Preferred Stock Certificates to be converted the
Company shall fail (I) to issue a certificate for the
number of shares of Common Stock to which a holder is
entitled or to credit the holder's balance account
with The Depository Trust Company for such number of
shares of Common Stock to which the holder is
entitled upon such holder's conversion of
16
Preferred Shares or (II) to issue a new Preferred
Stock Certificate representing the number of
Preferred Shares to which such holder is entitled
pursuant to Section 2(f)(ii), in addition to all
other available remedies which such holder may pursue
hereunder and under the Securities Purchase Agreement
(including indemnification pursuant to Section 6
thereof), the Company shall pay additional damages to
such holder on each date after the fifth business day
that such conversion or delivery of such Preferred
Stock Certificates, as the case may be, is not timely
effected in an amount equal to 0.5% of the product of
(A) the sum of the number of shares of Common Stock
not issued to the holder on a timely basis pursuant
to Section 2(f)(ii) and to which such holder is
entitled and, in the event the Company has failed to
deliver a Preferred Stock Certificate to the holder
on a timely basis pursuant to Section 2(f)(ii), the
number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by
such Preferred Stock Certificate, as of the last
possible date which the Company could have issued
such Preferred Stock Certificate to such holder
without violating Section 2(f)(ii) and (B) the
Closing Sale Price of the Common Stock on the last
possible date which the Company could have issued
such Common Stock and the Preferred Stock
Certificate, as the case may be, to such holder
without violating Section 2(f)(ii). In addition to
the foregoing, if for any reason a holder has not
received all of the shares of Common Stock prior to
the tenth (10th) business day after the expiration of
the share delivery period with respect to a
conversion of Preferred Shares, then the Fixed
Conversion Price in respect of any Preferred Shares
held by such holder (including Preferred Shares
submitted for conversion, but for which shares of
Common Stock have not been issued to such holder)
shall thereafter be the lesser of (i) the Fixed
Conversion Price on the Conversion Date specified in
the Conversion Notice which resulted in the
Conversion Failure and (ii) the lowest Conversion
Price in effect during the period beginning on, and
including, such Conversion Date through and including
the day such shares of Common Stock are delivered to
the holder. The Fixed Conversion Price shall
thereafter be subject to further adjustment for any
other events described in this Section 2. If the
Company fails to pay the additional damages set forth
in this Section 2(g)(v) within five (5) business days
of the date incurred, then the holder entitled to
such payments shall have the right at any time, so
long as the Company continues to fail to make such
payments, to require the Company upon written notice,
to immediately issue, in lieu of the cash additions
damages set forth in this Section 2(g)(v), the number
of shares of Common Stock equal to the quotient of
(X) the aggregate amount of the additional damages
payments described above divided by (Y) the
Conversion Price in effect on such Conversion Date
17
as is specified by the holder in writing to the
Company
(h) MANDATORY CONVERSION AT MATURITY. If any
Preferred Shares remain outstanding on the Maturity Date (as
defined below), then all such Preferred Shares shall be
converted as of such date in accordance with this Section 2 as
if the holders of such Preferred Shares had given the
Conversion Notice on the Maturity Date; provided, however,
that if a Triggering Event (other than a Triggering Event
resulting from the Section 3(d)(vi) due to the Company's
breach of a representation) has occurred and is continuing on
the Maturity Date, then the Company shall, within five
business days following the Maturity Date (unless otherwise
notified in writing by the holder of its request to have the
Preferred Shares converted into Common Stock), pay to each
holder of Preferred Shares then outstanding, in immediately
available funds, an amount equal to the Triggering Event
Redemption Price as of the Maturity Date. All holders of
Preferred Shares shall thereupon surrender all Preferred Stock
Certificates, duly endorsed for cancellation, to the Company
or the Transfer Agent, provided that the Company has complied
with its obligations under this Section 2(g). Notwithstanding
the foregoing, if the Common Stock is not designated for
quotation or listed on the Principal Market but such event
does not constitute Triggering Event, then the Mandatory
Conversion Date shall be extended until the Common Stock is so
designated or listed. "MATURITY DATE" means the date which is
four years after the applicable Issuance Date for the
Preferred Shares.
(i) FRACTIONAL SHARES. The Company shall not
issue any fraction of a share of Common Stock upon any
conversion. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one Preferred
Share by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after
the aforementioned aggregation, the issuance would result in
the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock
up or down to the nearest whole share.
(j) TAXES. The Company shall pay any and all
taxes that may be payable with respect to the issuance and
delivery of Common Stock upon the conversion of Preferred
Shares.
(3) REDEMPTION AT OPTION OF HOLDERS.
(a) REDEMPTION OPTION UPON MAJOR TRANSACTION. In addition
to all other rights of the holders of Preferred Shares contained
herein, simultaneous with or after the occurrence of a Major
Transaction (as defined below), each holder of Preferred
18
Shares shall have the right, at such holder's option, to require the
Company to redeem all or a portion of such holder's Preferred Shares at
a price per Preferred Share equal to the greater of (i) 130% of the
Liquidation Value (as defined in Section 8) and (ii) the product of (A)
the Conversion Rate on the date the Notice of Redemption at Option of
Buyer Upon Major Transaction is given and (B) the Closing Sale Price on
the date of the public announcement of such Major Transaction or the
next date on which the exchange or market on which the Common Stock is
traded is open if such public announcement is made (X) after 12:00
p.m., Central Time, time on such date or (Y) on a date on which the
exchange or market on which the Common Stock is traded is closed
("MAJOR TRANSACTION REDEMPTION PRICE").
(b) REDEMPTION OPTION UPON TRIGGERING EVENT. In addition
to all other rights of the holders of Preferred Shares contained
herein, simultaneous with or after the occurrence of a Triggering Event
(as defined below), each holder of Preferred Shares shall have the
right, at such holder's option, to require the Company to redeem all or
a portion of such holder's Preferred Shares at a price per Preferred
Share equal to the greater of (i) 130% of the Liquidation Value and
(ii) the product of (A) the Conversion Rate on the date of such
holder's delivery of a Notice of Redemption at Option of Holder Upon
Triggering Event (as defined below) and (B) the greater of (I) the
Closing Sale Price on the trading day immediately preceding such
Triggering Event or (II) the Closing Sale Price on the date of the
holder's delivery to the Company of a Notice of Redemption at Option of
Holder Upon Triggering Event (as defined below) or, if such date of
delivery is not a trading day, the next date on which the exchange or
market on which the Common Stock is traded is open ("TRIGGERING EVENT
REDEMPTION PRICE" and, collectively with "MAJOR TRANSACTION REDEMPTION
PRICE," the "REDEMPTION PRICE").
(c) "MAJOR TRANSACTION". A "MAJOR TRANSACTION" shall be
deemed to have occurred at such time as any of the following events:
(i) the consolidation, merger or other business
combination of the Company with or into another Person (other
than pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the
Company);
(ii) the sale or transfer of all or substantially
all of the Company's assets; or
(iii) a purchase, tender or exchange offer made to
and accepted by the holders of more than 40% of the
outstanding shares of Common Stock.
(d) "TRIGGERING EVENT". A "TRIGGERING EVENT" shall be
deemed to have occurred at such time as any of the following events:
19
(i) the failure of the Registration Statement to
be declared effective by the SEC on or prior to the date that
is 120 days after the Issuance Date to which such Registration
Statement is related;
(ii) while the Registration Statement is required
to be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is
unavailable to the holder of the Preferred Shares for sale of
the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or
unavailability continues for a period of at least ten
consecutive days or for an aggregate of at least twenty days
in any 180 day period;
(iii) the suspension from trading or quotation or
failure of the Common Stock to be listed or quoted on the
Principal Market for a period of five consecutive days or for
an aggregate of at least ten days in any 365 day period;
20
(iv) the Company's notice to any holder of
Preferred Shares, including by way of public announcement, at
any time, of its intention not to comply with requests for
conversion of any Preferred Shares into shares of Common
Stock, including due to any of the reasons set forth in
Section 4(a), or the Company's failure to deliver Conversion
Shares within ten days of the Conversion Date;
(v) upon the Company's receipt of a Conversion
Notice, the Company shall not be obligated to issue the
Conversion Shares due to the provisions of Section 11;
(vi) any representation or warranty by the
Company was not true and correct at the time made (including
the Issuance Date) or the Company breaches any covenant or
other term or condition of the Securities Purchase Agreement,
the Registration Rights Agreement, this Certificate of
Designations, the Irrevocable Transfer Agent Instructions (as
defined in the Securities Purchase Agreement), or any other
agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated thereby or
hereby, except (i) to the extent that such breach would not
have a Material Adverse Effect (as defined in Section 3(a) of
the Securities Purchase Agreement) or would materially impair
the value of the Preferred Shares (it being agreed and
acknowledged that the breach of the covenant contained in
Section 4(f) of the Purchase Agreement will be deemed to
materially impair the value of the Preferred Shares), and (ii)
in the case of a breach of a covenant which is curable, such
breach continues for a period of less than ten days; or
(vii) the Company's shareholders fail to approve
the proposals contemplated by Section 4(j) of the Securities
Purchase Agreement on or before the earlier of the first
meeting of the Company's shareholders after the initial
Issuance Date and 120 days after the initial Issuance Date.
(e) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON
MAJOR TRANSACTION. No sooner than fifteen days nor later than ten days
prior to the consummation of a Major Transaction, but not prior to the
public announcement of such Major Transaction, the Company shall
deliver written notice thereof via facsimile and overnight courier (a
"NOTICE OF MAJOR TRANSACTION") to each holder of Preferred Shares. At
any time after receipt of a Notice of Major Transaction (or, in the
event a Notice of Major Transaction is not delivered at least ten days
prior to a Major Transaction, at any time on or after the date which is
ten days prior to a Major Transaction), any holder of the Preferred
Shares then outstanding may require the Company to redeem all or a
portion of the holder's Preferred Shares, which redemption shall be
effective concurrent with the consummation of the Major Transaction,
then outstanding by delivering written notice thereof via facsimile and
overnight courier (a
21
"NOTICE OF REDEMPTION AT OPTION OF HOLDER UPON MAJOR TRANSACTION") to
the Company, which Notice of Redemption at Option of Holder Upon Major
Transaction shall indicate (i) the number of Preferred Shares that such
holder is submitting for redemption and (ii) the applicable Major
Transaction Redemption Price, as calculated pursuant to Section 3(a).
(f) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON
TRIGGERING EVENT. Within one business day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF TRIGGERING EVENT") to
each holder of Preferred Shares. At any time after the earlier of a
holder's receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any holder of the Preferred
Shares then outstanding may require the Company to redeem all or a
portion of the holder's Preferred Shares then outstanding by delivering
written notice thereof via facsimile and overnight courier (a "NOTICE
OF REDEMPTION AT OPTION OF HOLDER UPON TRIGGERING EVENT") to the
Company, which Notice of Redemption at Option of Holder Upon Triggering
Event shall indicate (i) the number of Preferred Shares that such
holder is submitting for redemption and (ii) the applicable Triggering
Event Redemption Price, as calculated pursuant to Section 3(b).
(g) PAYMENT OF REDEMPTION PRICE. Upon the Company's
receipt of a Notice(s) of Redemption at Option of Holder Upon
Triggering Event or a Notice(s) of Redemption at Option of Holder Upon
Major Transaction from any holder of Preferred Shares, the Company
shall immediately notify each holder of Preferred Shares by facsimile
of the Company's receipt of such Notice(s) of Redemption at Option of
Holder Upon Triggering Event or Notice(s) of Redemption at Option of
Holder Upon Major Transaction and each holder which has sent such a
notice shall promptly submit to the Company or its Transfer Agent such
holder's Preferred Stock Certificates which such holder has elected to
have redeemed. The Company shall deliver the applicable Triggering
Event Redemption Price, in the case of a redemption pursuant to Section
3(f), to such holder within five business days after the Company's
receipt of a Notice of Redemption at Option of Holder Upon Triggering
Event and, in the case of a redemption pursuant to Section 3(e), the
Company shall deliver the applicable Major Transaction Redemption Price
concurrent with the consummation of the Major Transaction; provided
that a holder's Preferred Stock Certificates shall have been so
delivered to the Company; and provided further that if the Company is
unable to redeem all of the Preferred Shares to be redeemed, the
Company shall redeem an amount from each holder of Preferred Shares
being redeemed equal to such holder's pro rata amount (based on the
number of Preferred Shares held by such holder relative to the number
of Preferred Shares outstanding) of all Preferred Shares being
redeemed. If the Company shall fail to redeem all of the Preferred
Shares submitted for redemption in addition to any remedy such holder
of Preferred Shares may have under this Certificate of Designations,
the Securities Purchase Agreement and the Registration Rights
Agreement, the applicable Redemption Price payable in respect of such
22
unredeemed Preferred Shares shall bear interest at the rate of 2.5% per
month (prorated for partial months) until paid in full. Until the
Company pays such unpaid applicable Redemption Price in full to a
holder of Preferred Shares submitted for redemption, such holder shall
have the option (the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu of
redemption, require the Company to promptly return to such holder(s)
all of the Preferred Shares that were submitted for redemption by such
holder(s) under this Section 3 and for which the applicable Redemption
Price has not been paid, by sending written notice thereof to the
Company via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the
Company's receipt of such Void Optional Redemption Notice(s) and prior
to payment of the full applicable Redemption Price to such holder, (i)
the Notice(s) of Redemption at Option of Holder Upon Triggering Event
or the Notice(s) of Redemption at Option of Holder Upon Major
Transaction, as the case may be, shall be null and void with respect to
those Preferred Shares submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by
each holder for redemption under this Section 3(g) and for which the
applicable Redemption Price has not been paid, (iii) the Fixed
Conversion Price of such returned Preferred Shares shall be adjusted to
the lesser of (A) the Fixed Conversion Price in effect on the date on
which the Void Optional Redemption Notice(s) is delivered to the
Company and (B) the lowest Closing Bid Price during the period
beginning on the date on which the Notice(s) of Redemption of Option of
Buyer Upon a Major Transaction or the Notice(s) of Redemption at Option
of Buyer Upon Triggering Event, as the case may be, is delivered to the
Company and ending on the date which the Void Optional Redemption
Notice is delivered to the Company; provided that no adjustment shall
be made if such adjustment would result in an increase of the Fixed
Conversion Price then in effect, (iv) the Conversion Percentage in
effect at such time shall be reduced by a number of percentage points
equal to the product of (A).50 and (B) the number of days in the period
beginning on the date which is the last date on which the Triggering
Event Redemption Price or Major Transaction Redemption Price, as the
case may be, is required to be delivered in accordance with the
foregoing provisions of this Section 3(g) and ending on the date on
which the Void Optional Redemption Notice(s) is delivered to the
Company and (v) if the redemption was caused by a Triggering Event
involving the Company's inability to issue Conversion Shares because of
the Exchange Cap (as defined in Section 11), the holders of at least
two-thirds of the Preferred Shares then outstanding, including
Preferred Shares submitted for redemption pursuant to this Section 3
with respect to which the applicable Redemption Price has not been
paid, may direct the Company to immediately delist the Common Stock
from the exchange or automated quotation system on which the Common
Stock is traded and have the Common Stock, at such holders' option,
traded in the electronic bulletin board or the "pink sheets."
Notwithstanding the foregoing, in the event of a dispute as to the
determination of the Closing Sale Price or the arithmetic calculation
of the Redemption Price, such dispute shall be resolved pursuant to
Section 2(f)(iii) above with the term "Closing Sale Price" being
substituted for the term "Market Price" and the term "Redemption Price"
being substituted for the term "Conversion Rate". A holder's delivery
of a Void Optional Redemption Notice and exercise of its rights
following such notice shall not effect the Company's obligations to
make any payments which have
23
accrued prior to the date of such notice. Payments provided for in this
Section 3 shall have priority to payments to other stockholders in
connection with a Major Transaction.
(4) INABILITY TO FULLY CONVERT.
(a) HOLDER'S OPTION IF COMPANY CANNOT FULLY CONVERT. If,
upon the Company's receipt of a Conversion Notice or on the Maturity
Date, the Company cannot issue shares of Common Stock registered for
resale under the Registration Statement (or which are exempt from the
registration requirements under the 1933 Act pursuant to Rule 144(k)
under the 1933 Act) for any reason, including, without limitation,
because the Company (x) does not have a sufficient number of shares of
Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its Securities, including without
limitation the Exchange Cap (as defined below), from issuing all of the
Common Stock which is to be issued to a holder of Preferred Shares
pursuant to a Conversion Notice or (z) fails to have a sufficient
number of shares of Common Stock registered for resale under the
Registration Statement, then the Company shall issue as many shares of
Common Stock as it is able to issue in accordance with such holder's
Conversion Notice and pursuant to Section 2(f) and, with respect to the
unconverted Preferred Shares, the holder, solely at such holder's
option, can elect to:
(i) require the Company to redeem from such
holder those Preferred Shares for which the Company is unable
to issue Common Stock in accordance with such holder's
Conversion Notice ("MANDATORY REDEMPTION") at a price per
Preferred Share (the "MANDATORY REDEMPTION PRICE") equal to
the Triggering Event Redemption Price as of such Conversion
Date;
(ii) if the Company's inability to fully convert
Preferred Shares is pursuant to Section 4(a)(z), require the
Company to issue restricted shares of Common Stock in
accordance with such holder's Conversion Notice and pursuant
to Section 2(f);
(iii) void its Conversion Notice and retain or
have returned, as the case may be, the nonconverted Preferred
Shares that were to be converted pursuant to such holder's
Conversion Notice (provided that a holder's voiding its
Conversion Notice shall not effect the Company's obligations
to make any payments which have accrued prior to the date of
such notice); or
(iv) if the Company's inability to fully convert
Preferred Shares is pursuant to Section 4(a)(y), require the
Company to issue shares of Common Stock in accordance with
such holder's Conversion Notice and pursuant to Section 2(f)
at a Conversion Price equal to the average of the Closing Sale
Prices of the Common Stock on the five consecutive trading
days immediately
24
preceding such holder's Notice in Response to Inability to Convert (as
defined below).
(b) MECHANICS OF FULFILLING HOLDER'S ELECTION. The
Company shall immediately send via facsimile to a holder of Preferred
Shares, upon receipt of a facsimile copy of a Conversion Notice from
such holder which cannot be fully satisfied as described in Section
4(a), a notice of the Company's inability to fully satisfy such
holder's Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE").
Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such holder's Conversion
Notice, (ii) the number of Preferred Shares which cannot be converted
and (iii) the applicable Mandatory Redemption Price. Such holder shall
notify the Company of its election pursuant to Section 4(a) above by
delivering written notice via facsimile to the Company ("NOTICE IN
RESPONSE TO INABILITY TO CONVERT").
(c) PAYMENT OF MANDATORY REDEMPTION PRICE. If such holder
shall elect to have its shares redeemed pursuant to Section 4(a)(i),
the Company shall pay the Mandatory Redemption Price in cash to such
holder within five (5) days of the Company's receipt of the holder's
Notice in Response to Inability to Convert. If the Company shall fail
to pay the applicable Mandatory Redemption Price to such holder on a
timely basis as described in this Section 4(c) (other than pursuant to
a dispute as to the determination of the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under this Certificate of Designations, the Securities
Purchase Agreement and the Registration Rights Agreement, such unpaid
amount shall bear interest at the rate of 2.5% per month (prorated for
partial months) until paid in full. Until the full Mandatory Redemption
Price is paid in full to such holder, such holder may void the
Mandatory Redemption with respect to those Preferred Shares for which
the full Mandatory Redemption Price has not been paid and (i) receive
back such Preferred Shares and (ii) the Fixed Conversion Price of such
returned Preferred Shares shall be adjusted to the lesser of (A) the
Fixed Conversion Price as in effect on the date on which the holder
voided the Mandatory Redemption and (B) the lowest Closing Bid Price
during the period beginning on the Conversion Date and ending on the
date the holder voided the Mandatory Redemption. Notwithstanding the
foregoing, if the Company fails to pay the applicable Mandatory
Redemption Price within such five (5) days time period due to a dispute
as to the determination of the Mandatory Redemption Price, such dispute
shall be resolved pursuant to Section 2(f)(iii) with the term
"MANDATORY REDEMPTION PRICE" being substituted for the term "Conversion
Rate".
(d) PRO-RATA CONVERSION AND REDEMPTION. In the event the
Company receives a Conversion Notice, Notice of Redemption at Option of
Holder Upon Major Transaction or Notice of Redemption at Option of
Holder Upon Triggering Event from more than one holder of Preferred
Shares on the same day and the Company can convert and/or redeem some,
but not all, of the Preferred Shares pursuant to this Section 4, the
Company shall convert and/or redeem from each holder of Preferred
Shares electing to have Preferred Shares converted and redeemed at such
time an
25
amount equal to such holder's pro-rata amount (based on the number of
Preferred Shares held by such holder relative to the number of
Preferred Shares outstanding) of all Preferred Shares being converted
and redeemed at such time.
(5) REISSUANCE OF CERTIFICATES. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all of the
Preferred Shares represented by a particular Preferred Stock Certificate, the
Company shall promptly cause to be issued and delivered to the holder of such
Preferred Shares a preferred stock certificate representing the remaining
Preferred Shares which have not been so converted or redeemed.
(6) RESERVATION OF SHARES. The Company shall, so long as any of
the Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding (without regard to any limitations on
conversions); provided that the number of shares of Common Stock so reserved
shall at no time be less than 200% of the number of shares of Common Stock for
which the Preferred Shares are at any time convertible. The initial number of
shares of Common Stock reserved for conversions of the Preferred Shares and each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Preferred Shares based on the number of Preferred Shares held
by each holder at the time of issuance of the Preferred Shares or increase in
the number of reserved shares, as the case may be. In the event a holder shall
sell or otherwise transfer any of such holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and which remain allocated to any person or entity which does not hold
any Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holder.
(7) VOTING RIGHTS. Holders of Preferred Shares shall have no
voting rights, except as required by law, including but not limited to the MBCL,
and as expressly provided in this Certificate of Designations.
(8) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "PREFERRED FUNDS"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and winding up of
the Company, an amount per Preferred Share equal to the sum of (i) $1,000 and
(ii) an amount equal to the product of (.06) (N/365) ($1,000) (such sum being
referred to as the "LIQUIDATION VALUE"); provided that, if the Preferred Funds
are insufficient to pay the full amount due to the holders of Preferred Shares
and holders of shares of other classes or series of preferred stock of the
Company that are of equal rank with the Preferred Shares as to payments of
Preferred Funds (the "PARI PASSU SHARES"), then each holder of Preferred Shares
and Pari Passu Shares shall receive a percentage of the Preferred Funds equal to
the full amount of Preferred Funds
26
payable to such holder as a liquidation preference, in accordance with their
respective Certificate of Designations, as a percentage of the full amount of
Preferred Funds payable to all holders of Preferred Shares and Pari Passu
Shares. The purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other Person, nor the sale or transfer
by the Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up of the
Company. No holder of Preferred Shares shall be entitled to receive any amounts
with respect thereto upon any liquidation, dissolution or winding up of the
Company other than the amounts provided for herein; provided that a holder of
Preferred Shares shall be entitled to all amounts previously accrued with
respect to amounts owed hereunder.
(9) PREFERRED RANK; PARTICIPATION.
(a) All shares of Common Stock shall be of junior rank to
all Preferred Shares in respect to the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the
Company. The rights of the shares of Common Stock shall be subject to
the preferences and relative rights of the Preferred Shares. Without
the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, the Company
shall not hereafter authorize or issue additional or other capital
stock that is of senior or equal rank to the Preferred Shares in
respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the
prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, the Company
shall not hereafter authorize or make any amendment to the Company's
Restated Articles of Organization or bylaws, or file any resolution of
the board of directors of the Company with the Secretary of State of
The Commonwealth of Massachusetts containing any provisions, which
would adversely affect or otherwise impair the rights or relative
priority of the holders of the Preferred Shares relative to the holders
of the Common Stock or the holders of any other class of capital stock.
In the event of the merger or consolidation of the Company with or into
another corporation, the Preferred Shares shall maintain their relative
powers, designations and preferences provided for herein and no merger
shall result inconsistent therewith.
(b) Subject to the rights of the holders, if any, of the
Pari Passu Shares, the holders of the Preferred Shares shall, as
holders of Preferred Stock, be entitled to such dividends paid and
distributions made to the holders of Common Stock to the same extent as
if such holders of Preferred Shares had converted the Preferred Shares
into Common Stock (without regard to any limitations on conversion
herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions. Payments under the
preceding sentence shall be made concurrently with
27
the dividend or distribution to the holders of Common Stock.
(10) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS WITH RESPECT TO
OTHER CAPITAL STOCK. Until all of the Preferred Shares have been converted or
redeemed as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its Common Stock
without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares.
(11) LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding any
other provision herein, the Company shall not be obligated to issue any shares
of Common Stock upon conversion of the Preferred Shares if the issuance of such
shares of Common Stock would exceed 4,094,894 (the "EXCHANGE CAP") without
breaching the Company's obligations under the rules or regulations, of the
Principal Market requiring the approval of the Company's stockholders for the
issuance of a certain number of shares of Common Stock, except that such
limitation shall not apply in the event that the Company (i) obtains the
approval of its stockholders as required by applicable rules and regulations, of
the Principal Market for issuances of Common Stock in excess of the Exchange Cap
or (ii) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the
holders of a majority of the Preferred Shares then outstanding. To the extent
that the above limitation is applicable to the Company, until such approval or
written opinion is obtained, no purchaser of Preferred Shares pursuant to the
Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
conversion of Preferred Shares, shares of Common Stock in an amount greater than
the product of (x) the Exchange Cap amount multiplied by (y) a fraction, the
numerator of which is the number of Preferred Shares issued to such Purchaser
pursuant to the Securities Purchase Agreement and the denominator of which is
the aggregate amount of all the Preferred Shares issued to the Purchasers
pursuant to the Securities Purchase Agreement (the "CAP ALLOCATION AMOUNT"). In
the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Preferred Shares, the transferee shall be allocated a pro rata
portion of such Purchaser's Cap Allocation Amount. In the event that any holder
of Preferred Shares shall convert all of such holder's Preferred Shares into a
number of shares of Common Stock which, in the aggregate, is less than such
holder's Cap Allocation Amount, then the difference between such holder's Cap
Allocation Amount and the number of shares of Common Stock actually issued to
such holder shall be allocated to the respective Cap Allocation Amounts of the
remaining holders of Preferred Shares on a pro rata basis in proportion to the
number of Preferred Shares then held by each such holder.
(12) VOTE TO CHANGE THE TERMS OF OR ISSUE PREFERRED SHARES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares, shall be required for (a) any change to
this Certificate of Designations or the Company's Restated Articles of
Organization which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Preferred Shares, or (b) any
issuance of Preferred Shares other than pursuant to the Securities Purchase
Agreement.
(13) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of
28
an indemnification undertaking by the holder to the Company and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.
(14) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the
Preferred Shares and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
(15) SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designations shall limit or modify
any more general provision contained herein. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and the initial holders of
the Preferred Shares and shall not be construed against any person as the
drafter hereof.
(16) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of a holder of Preferred Shares in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof (except to the extent that
such power, right or privilege must, in accordance with the terms of this
Certificate of Designations, be exercised within a specified period of time and
such period of time has lapsed without such power, right or privilege being
exercised), nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
(17) NOTICES. Any notice required to be delivered pursuant to the
terms of this Certificate of Designations shall be delivered, unless otherwise
provided in these Certificate of Designations, in accordance with the terms, and
subject to the notice provisions of, the Securities Purchase Agreement.
29
ALPHA-BETA TECHNOLOGY, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights, of the Series F Convertible Preferred Stock of Alpha-Beta Technology,
Inc. (the "CERTIFICATE OF DESIGNATIONS"). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series F Convertible Preferred Stock, par value $0.01 per share
(the "PREFERRED SHARES"), of Alpha-Beta Technology, Inc., a Massachusetts
corporation (the "COMPANY"), indicated below into shares of Common Stock, par
value $0.01 per share (the "COMMON STOCK"), of the Company, by tendering the
stock certificate(s) representing the Preferred Shares specified below as of the
date specified below.
Date of Conversion: ___________________________________________________
Number of Preferred Shares to be converted: ___________________________
Stock certificate no(s). of Preferred Shares to be converted: _________
Please confirm the following information:
Conversion Price: _____________________________________________________
Number of shares of Common Stock
to be issued: _________________________________________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: _____________________________________________________
_____________________________________________________
_____________________________________________________
Facsimile Number: _____________________________________________________
Authorization: _____________________________________________________
By: _________________________________________________
30
Title: ______________________________________________
Dated: _____________________________________________________
Account Number:
(if electronic book entry transfer): _________________________________
Transaction Code Number
(if electronic book entry transfer): _________________________________
31
SIGNED UNDER THE PENALTIES OF PERJURY, this 21st day of October, 1998
---- ------- --
/s/ Spiros Jamas *President
- --------------------------------------------------------,
Spiros Jamas
/s/ Davidson Easson, Jr. *Clerk
- --------------------------------------------------------,
D. Davidson Easson, Jr.
*Delete the inapplicable words.
32
THE COMMONWEALTH OF MASSACHUSETTS
CERTIFICATE OF VOTE OF DIRECTORS
ESTABLISHING A SERIES OF A CLASS OF STOCK
(GENERAL LAWS, CHAPTER 156B, SECTION 26)
=============================================================
I hereby approve the within Certificate of Vote of Directors
and, the filing fee in the amount of $_______________ having
been paid, said certificate is deemed to have been filed with
me this __________ day of ____________________, 19__.
Effective date:______________________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Robert E. Bishop, Esq.
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Goodwin, Procter & Hoar LLP
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Exchange Place, Boston, Massachusetts 02109
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Telephone: (617) 570-1000
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