1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COLO.COM
David H. Stanley and Denise St.Onge certify that:
1. They are the duly elected and acting Secretary and Vice President -
Finance, respectively, of COLO.COM, a California corporation.
2. The Articles of Incorporation of this corporation are hereby restated
in full to read as set forth in Exhibit A attached hereto.
3. The attached restatement of the Articles of Incorporation of this
corporation has been duly approved by the Board of Directors of this
corporation.
4. The attached restatement of the Articles of Incorporation has been
approved by the holders of the requisite number of shares of this corporation in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of each class entitled to vote with respect to the
attached restatement was 13,617,138 shares of Common Stock, 4,261,730 shares of
Series A Preferred Stock, 24,500,000 shares of Series B Preferred Stock and
20,408,164 shares of Series C Preferred Stock. The number of shares voting in
favor of the attached restatement equaled or exceeded the vote required, such
required vote being a majority of the outstanding shares of Common Stock, a
majority of the outstanding shares of Preferred Stock and a majority of the
outstanding shares of Series C Preferred Stock. No shares of Series D Preferred
Stock were outstanding.
The undersigned further declare under penalty of perjury that the
matters set forth in this certificate are true and correct of their own
knowledge.
Executed at Brisbane, California on April 14, 2000.
/s/ David H. Stanley
------------------------------------
David H. Stanley, Secretary
/s/ Denise St. Onge
------------------------------------
Denise St. Onge, Vice President -
Finance
2
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COLO.COM
I.
The name of this corporation is COLO.COM
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares that this corporation is authorized to issue is 152,474,439 shares,
without par value, of which 100,000,000 shares are Common Stock and 52,474,439
shares are Preferred Stock. The first series of Preferred Stock shall be
designated Series A Preferred Stock ("Series A Preferred Stock") and shall
consist of 5,250,000 shares. The second series of Preferred Stock shall be
designated Series B Preferred Stock ("Series B Preferred Stock") and shall
consist of 24,500,000 shares. The third series of Preferred Stock shall be
designated Series C Preferred Stock ("Series C Preferred Stock") and shall
consist of 21,000,000 shares. The fourth Series of Preferred Stock shall be
designated Series D Preferred Stock ("Series D Preferred Stock") and shall
consist of 1,724,439 shares.
IV.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
A. Dividends. The holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled, when and if declared by the board of directors of the corporation, to
dividends out of assets of the corporation legally available therefor at the
rate of $0.04 per share of Series A Preferred Stock, $0.04 per share of Series B
Preferred Stock, $0.784 per share of Series C Preferred Stock and $1.20 per
share of Series D Preferred Stock per annum (8%). Dividends on the Preferred
Stock shall be payable in preference
-1-
3
and prior to any payment of any dividend on the Common Stock of the corporation.
Thereafter, the holders of Common Stock and Preferred Stock shall be entitled,
when and if declared by the board of directors of the corporation, to dividends
out of assets of the corporation legally available therefor, provided, however,
that no such dividend may be declared or paid on any shares of Common Stock or
Preferred Stock unless at the same time an equivalent dividend is declared or
paid on all outstanding shares of Common Stock and Preferred Stock, and provided
further that the dividend on any series of any Preferred Stock shall be payable
at the same rate per share as would be payable on the shares of Common Stock or
other securities into which such series of Preferred Stock is convertible
immediately prior to the record date of such dividend. The right to dividends on
shares of the Common Stock and Preferred Stock shall not be cumulative, and no
right shall accrue to holders of Common Stock or Preferred Stock by reason of
the fact that dividends on said shares are not declared in any prior period.
B. Liquidation Preference.
1. Preference. In the event of any liquidation, dissolution or
winding up of the corporation, either voluntarily or involuntarily, the holders
of the Series C Preferred Stock and Series D Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the assets or
surplus funds of the corporation to the holders of the Series A Preferred Stock,
the Series B Preferred Stock or the Common Stock an amount equal to $9.80 per
share of Series C Preferred Stock (the "Series C Original Purchase Price") and
$15.00 per share of Series D Preferred Stock (the "Series D Original Purchase
Price"), plus a further amount equal to any dividends declared but unpaid on
such shares. The Series C Preferred Stock and Series D Preferred Stock shall
rank on a parity as to the receipt of the respective preferential amounts for
each such series upon the occurrence of such event. After the payment of such
amounts to the holders of the Series C Preferred Stock and Series D Preferred
Stock, the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the corporation to the holders of Common
Stock, an amount equal to $0.50 per share of Series A Preferred Stock (the
"Series A Original Purchase Price") and $0.50 per share of Series B Preferred
Stock (the "Series B Original Purchase Price"), respectively, plus a further
amount equal to any dividends declared but unpaid on such shares. The Series A
Preferred Stock and Series B Preferred Stock shall rank on a parity as to the
receipt of the respective preferential amounts for each such series upon the
occurrence of such event.
If upon such liquidation, dissolution or winding up of the
corporation, the assets of the corporation are insufficient to provide for the
cash payment described above to the holders of the Series C Preferred Stock and
Series D Preferred Stock, then the entire amount of the assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series C Preferred Stock and Series D Preferred Stock
in such a manner that the amount to be distributed to each holder of Series C
Preferred Stock and Series D Preferred Stock shall equal the amount obtained by
multiplying the entire remaining assets and funds of the corporation legally
available for distribution to such holders by a fraction, the numerator of which
shall be the sum of the products obtained by multiplying the number of shares of
Series C Preferred Stock and Series D Preferred Stock then held by the holder by
the respective liquidation preference of each such series of Preferred Stock,
and the denominator of which shall be the sum of the products obtained by
-2-
4
multiplying the total then outstanding number of shares of Series C Preferred
Stock and Series D Preferred Stock by the respective liquidation preference of
each such series of Preferred Stock.
If upon such liquidation, dissolution or winding up of the
corporation, and after the cash payment described above to the holders of the
Series C Preferred Stock and Series D Preferred Stock, the remaining assets of
the corporation are insufficient to provide for the cash payment described above
to the holders of the Series A Preferred Stock and the Series B Preferred Stock,
then the remaining assets shall be distributed ratably among the holders of the
Series A Preferred Stock and Series B Preferred Stock in such a manner that the
amount to be distributed to each holder of Series A Preferred Stock and Series B
Preferred Stock shall equal the amount obtained by multiplying the entire
remaining assets and funds of the corporation legally available for distribution
to such holders by a fraction, the numerator of which shall be the sum of the
products obtained by multiplying the number of shares of Series A Preferred
Stock and Series B Preferred Stock then held by the holder by the respective
liquidation preference of each such series of Preferred Stock, and the
denominator of which shall be the sum of the products obtained by multiplying
the total then outstanding number of shares of Series A Preferred Stock and
Series B Preferred Stock by the respective liquidation preference of each such
series of Preferred Stock.
2. Distribution after Payment of Liquidation Preference. After
payment has been made to the holders of the Preferred Stock of the full
preferential amount set forth in Section B.1 above, the entire remaining assets
and funds of the corporation legally available for distribution, if any, shall
be distributed ratably among the holders of Common Stock in a manner such that
the amount distributed to each holder of Common Stock shall equal the amount
obtained by multiplying the entire assets and funds of the corporation legally
available for distribution pursuant to this Section B.2 by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock then
held by the holder, and the denominator of which shall be the sum of the total
number of shares of Common Stock then outstanding.
3. Shares not Treated as Both Preferred Stock and Common Stock
in any Distribution. Shares of Preferred Stock shall not be entitled to be
converted into shares of Common Stock in order to participate in any
distribution, or series of distributions, as shares of Common Stock, without
first foregoing participation in the distribution, or series of distributions,
as shares of Preferred Stock.
4. Consolidation or Merger. A consolidation or merger of the
corporation with or into any other corporation or corporations or other entity
or person, or any consolidation or merger of any other entity into the
corporation, or a sale of all or substantially all of the assets of the
corporation, or any other corporate reorganization, transaction or series of
related transactions in which the holders of the corporation's voting securities
prior to such transaction or series of related transactions hold less than 50%
of the corporation's voting securities upon the closing of such transaction or
series of related transactions, shall be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section B.
5. Noncash Distributions. If any of the assets of the
corporation are to be distributed other than in cash under this Section B or for
any purpose, then the board of directors of the corporation shall promptly
engage independent competent appraisers to determine the value of
-3-
5
the assets to be distributed to the holders of Preferred Stock. The corporation
shall, upon receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Preferred Stock of the appraiser's valuation.
Notwithstanding the above, any securities to be distributed to the stockholders
shall be valued as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange, or the last reported sale prices on
the Nasdaq National Market as the case may be, over the 30-day period ending
three (3) trading days prior to the closing;
(B) If actively traded over-the-counter (other than on the
Nasdaq National Market), the value shall be deemed to be the average of the
closing bid prices over the 30-day period ending three (3) trading days prior to
the closing; and
(C) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the corporation and the
holders of not less than a majority of the outstanding shares of Preferred
Stock, provided that if the corporation and the holders of a majority of the
outstanding shares of Preferred Stock are unable to reach an agreement, then by
independent appraisal by an investment banker hired and paid by the corporation,
but acceptable to the holders of at least a majority of the outstanding shares
of Preferred stock.
6. Repurchase of Shares. In connection with repurchases by this
corporation of its Common Stock, pursuant to its agreements with certain
employees, directors or consultants, Section 502 and 503 of the California
General Corporation Law shall not apply in all or in part with respect to such
repurchases.
C. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
1. Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the corporation or any transfer agent
for the Preferred Stock. Each share of each series of Preferred Stock shall be
convertible into the number of fully paid and nonassessable shares of Common
Stock that results from dividing the Conversion Price (as hereinafter defined)
per share in effect for such series at the time of conversion into the per share
Conversion Value (as hereinafter defined) of such series. The initial Conversion
Price per share of Series A Preferred Stock shall be $0.50 and the per share
Conversion Value of Series A Preferred Stock shall be $0.50. The initial
Conversion Price per share of Series B Preferred Stock shall be $0.50 and the
per share Conversion Value of Series B Preferred Stock shall be $0.50. The
initial Conversion Price per share of Series C Preferred Stock shall be $9.80
and the per share Conversion Value of Series C Preferred Stock shall be $9.80.
The initial Conversion Price per share of Series D Preferred Stock shall be
$15.00 and the per share conversion Value of Series D Preferred Stock shall be
$15.00. The initial Conversion Price of each series shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a series of Preferred Stock is convertible is hereinafter
referred to as the "Conversion Rate" of such series.
-4-
6
2. Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately (a) in the event that the holders of at least 75% of
the outstanding Preferred Stock vote in favor of such conversion, or (b) upon
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, the
aggregate gross proceeds to the corporation of which exceed $40,000,000 and the
per share price to the public of which is at least $15.00 (as adjusted for stock
splits, dividends and the like) prior to deduction of underwriting commissions
and offering expenses.
3. Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to paragraph
C(2) hereof). The corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made immediately
before the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, (except that in the case of an automatic
conversion pursuant to paragraph C(2) such conversion shall be deemed to have
been made immediately before the closing of the offering referred to in
paragraph C(2)) and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock at such time.
4. Fractional Shares. In lieu of any fractional shares to which
the holder of Preferred Stock would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the fair market value of one share
of Preferred Stock as determined by the board of directors of the corporation.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock of each
holder at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
5. Adjustment of Conversion Price.
(A) Special Definitions. For purposes of this subsection
C.5, the following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the date on which
the first share of Series D Preferred Stock was issued.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
-5-
7
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section C.5(C), deemed to be
issued) by the corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(a) upon conversion of shares of Preferred
Stock;
(b) as a dividend or distribution on Preferred
Stock or any event for which adjustment is made pursuant to subparagraph C.5(F)
hereof;
(c) pursuant to lending or equipment lease
financing transactions approved by the Board of Directors;
(d) to directors and employees of, and
consultants to, the corporation in a manner determined by the Board of
Directors;
(e) with the consent of the holders of 75% of
the then outstanding shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock, voting together as one class, provided that
such consent expressly provides that such issuance shall not be deemed to
include Additional Shares of Common Stock; or
(f) 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 clause(s) (a), (b), (c), (d), (e) or this clause
(f).
(B) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock is convertible shall be made, by
adjustment in the Conversion Prices of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, as applicable, in respect of the
issuance of Additional Shares of Common Stock or otherwise, unless the
consideration per share for an Additional Share of Common Stock issued or deemed
to be issued by the corporation is less than the Conversion Prices of Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively, in effect on the date of, and immediately prior to, the issue of
such Additional Share of Common Stock.
(C) Deemed Issuances of Additional Shares of Common Stock.
(1) Options and Convertible Securities. In the event the
corporation at any time or from time to 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 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 the case such a record date shall have been fixed,
as of the close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued with respect to an
adjustment of the Conversion Prices for Series B
-6-
8
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock unless the
consideration per share (determined pursuant to subsection C.5(E) hereof) of
such Additional Shares of Common Stock would be less than the Conversion Prices
of Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, respectively, 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 Conversion
Prices shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the corporation, or decrease or
increase in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Prices 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 or
decrease becoming effective, be recomputed to reflect such increase or decrease
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 that
shall not have been exercised, the Conversion Prices 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 such expiration, be
recomputed as if:
1. in the case of Convertible Securities
or Options for Common Stock only the Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration actually received by
the corporation for the issue of such exercised Options plus the consideration
actually received by the corporation upon such exercise or for the issue of all
such Convertible Securities that were actually converted or exchanged, plus the
additional consideration, if any, actually received by the corporation upon such
conversion or exchange, and
2. in the case of Options for
Convertible Securities only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the corporation for the issue of such exercised Options, plus the
consideration deemed to have been received by the corporation (determined
pursuant to subsection C.5(E)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to clause (b) or
(c) above shall have the effect of increasing the Conversion Prices to an amount
that exceeds the lower of (i) the Conversion Prices on the original adjustment
date, or (ii) the Conversion Prices that would
-7-
9
have resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(e) in the case of any Options that expire by
their terms not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Prices shall be made until the expiration or exercise of all
such Options issued on the same date, whereupon such adjustment shall be made in
the same manner provided in clause (c) above; and
(f) if such record date shall have been fixed
and such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Prices that became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Conversion Prices shall be adjusted
pursuant to this subsection C.5(C) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and
Subdivisions. In the event the corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend, or make any
other distribution on the Common Stock, payable in Common Stock, or effect a
subdivision of the outstanding shares of Common Stock (by reclassification or
other than by payment of a dividend in Common Stock), then and in any such
event, Additional Shares of Common Stock shall be deemed to have been issued:
(a) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(b) in the case of any such subdivision, at the
close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend shall not
have been paid on the date fixed therefor, the adjustment previously made in the
Conversion Prices that became effective on such record date shall be cancelled
as of the close of business on such record date, and thereafter the Conversion
Prices shall be adjusted pursuant to this subsection C.5(C) as of the time of
actual payment of such dividend.
(D) 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 subsection C.5(C), but excluding Additional
Shares of Common Stock issued pursuant to subsection C.5(C)(2), which event is
dealt with in subsection C.5(F) hereof), without consideration or for a
consideration per share less than the Conversion Prices of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, respectively, in
effect on the date of and immediately prior to such issue, then and in such
event, the Conversion Prices of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock, respectively, shall be reduced, concurrently
with such issue, to prices (calculated to the nearest cent) determined by
multiplying each such Conversion Price by a fraction (x) the numerator of which
shall be (1) the number of shares of
-8-
10
Common Stock outstanding immediately prior to such issue, plus (2) the number of
shares of Common Stock that the aggregate consideration received by the
corporation for the total number of Additional Shares of Common Stock so issued
would purchase at that Conversion Price, and (y) the denominator of which shall
be (1) the number of shares of Common Stock outstanding immediately prior to
such issue plus (2) the number of such Additional Shares of Common Stock so
issued, provided that for the purposes of this subsection C.5(D), all shares of
Common Stock issuable upon exercise, conversion or exchange of outstanding
Options or Convertible Securities, as the case may be, shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to subsection C.5(C) above, such Additional Shares of
Common Stock shall be deemed to be outstanding, and provided further that the
Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction that, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.01 or more.
(E) Determination of Consideration. For purposes of this
subsection C.5, the consideration received by the corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(a) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(b) 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; and
(c) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
corporation for consideration that covers both, be the proportion of such
consideration so received, computed as provided in clauses (b) and (c) above, as
determined in good faith by the Board of Directors.
(2) 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 subsection C.5(C)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(a) the total amount, if any, received or
receivable by the corporation as consideration for the issue of such Options or
Convertible Securities, plus 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
-9-
11
exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(b) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(F) Adjustments for Subdivisions, Combinations or
Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided (by stock split, or otherwise), into a greater number
of shares of Common Stock, the Conversion Price for each series of Preferred
Stock then in effect shall, concurrently with the effectiveness of such
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 Conversion Price
for each series of Preferred Stock then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(G) Adjustments for Other Distributions. In the event the
corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section C.5, then and
in each such event provision shall be made so that the holders of Preferred
Stock shall receive upon conversion thereof, in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the date of
conversion, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section C.5 with respect to the rights of the holders of the Preferred
Stock.
(H) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Preferred Stock shall be convertible
into, in lieu of the number of shares of Common Stock that the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the holders upon conversion of the
Preferred Stock immediately before that change.
(I) Reorganization, Mergers, Consolidations, or Sales of
Assets. Subject to Section B hereof, if at any time or from time to time there
shall be a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for elsewhere in
this Section C) or a merger or consolidation of this corporation with or
-10-
12
into another corporation, or the sale of all or substantially all of this
corporation's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock held by them, the number of shares of stock or
other securities or property of this corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled to
on such capital reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section C with respect to the rights of the holders of the Preferred
Stock after the reorganization, merger, consolidation, or sale to the end that
the provisions of this Section C (including adjustment of the Conversion Prices
then in effect and the number of shares purchasable upon conversion of the
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
6. No Impairment. The corporation shall not, through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section C and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Preferred Stock against impairment.
This provision shall not restrict the corporation's right to amend its Article
of Incorporation with the requisite shareholder consent.
7. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section C,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property that at the time would
be received upon the conversion of Preferred Stock.
8. Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least twenty (20) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
9. Reservation of Stock Issuable upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all
-11-
13
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
10. Notices. Any notice required by the provisions of this
Section C to be given to the holder of shares of the Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
D. Redemption of Preferred Stock.
1. At the election of the holders of more than 50% of the
Preferred Stock, voting as a single class, the corporation shall redeem the
outstanding Preferred Stock in three equal installments; on December 31, 2003,
December 31, 2004, and December 31, 2005 (the "Redemption Dates"). Such
redemptions shall be at a purchase price equal to the Original Purchase Price
(as defined in Section B.1) for such series of Preferred Stock plus declared and
unpaid dividends. The corporation shall have no obligation to redeem shares of
the Preferred Stock as long as all 13 7/8% Senior Notes due 2010 that the
corporation has issued are still outstanding.
2. In the event insufficient funds are available to redeem all
shares of Preferred Stock, the corporation shall effect each such redemption
ratably among the holders of the Preferred Stock in such a manner that the
amount to be distributed to each holder of Preferred Stock shall equal the
amount obtained by multiplying the entire assets and funds of the corporation
legally available for redemption by a fraction, the numerator of which shall be
the sum of the products obtained by multiplying the number of shares of
Preferred Stock then held by the holder by the respective Original Purchase
Prices of each such series of Preferred Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like) plus declared
and unpaid dividends, if any (the "Redemption Prices"), and the denominator of
which shall be the sum of the products obtained by multiplying the total then
outstanding number of shares of Preferred Stock by the respective Redemption
Price of each such series of Preferred Stock.
3. In the event sufficient funds are not available to the
corporation at any time to meet the corporation's redemption obligations
pursuant to this Section D, then the corporation's obligation to redeem shares
of Preferred Stock shall be carried over to the succeeding year (subject to the
same limitations on payment as set forth above) until all shares of Preferred
Stock are redeemed. Any such carried over redemption amount shall be in addition
to the redemption amounts otherwise due hereunder. In the event that
insufficient funds are available to redeem all shares of Preferred Stock in the
three payments contemplated hereby, then the corporation shall continue to make
payments, equal to the entire assets and funds of the corporation legally
available for redemption, on the 31st day of December of each subsequent year
until all such shares have been redeemed. The shares of each series of Preferred
Stock that have not been redeemed shall continue to be entitled to the dividend,
conversion and other rights, preferences, privileges and restrictions of such
series of Preferred Stock until such shares have been redeemed and the
redemption price has been paid or set aside with respect thereto.
-12-
14
4. At least 30 days but no more than 60 days prior to the first
Redemption Date, the corporation shall send a notice (a "Redemption Notice") to
all holders of Preferred Stock to be redeemed setting forth (A) the Redemption
Price for the shares to be redeemed; and (B) the place at which such holders may
obtain payment of the Redemption Price upon surrender of their share
certificates.
5. On or prior to each Redemption Date, the corporation shall
deposit the Redemption Price of all shares to be redeemed on such Redemption
Date with a bank or trust company having aggregate capital and surplus in excess
of $100,000,000, as a trust fund, with irrevocable instructions and authority to
the bank or trust company to pay, on and after such Redemption Date, the
Redemption Price of the shares to their respective holders upon the surrender of
their share certificates. Any moneys deposited by the corporation pursuant to
this Section D.5 for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section C hereof no later than the fifth day
preceding the Redemption Date shall be returned to the corporation forthwith
upon such conversion. The balance of any funds deposited by the corporation
pursuant to this Section D.5 remaining unclaimed at the expiration of one year
following such Redemption Date shall be returned to the corporation promptly
upon its written request.
6. On or after such Redemption Date, each holder of shares of
Preferred Stock to be redeemed shall surrender such holder's certificate(s)
representing such shares to the corporation in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event that less than all the shares
represented by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after such Redemption Date, unless
there shall have been a default in payment of the Redemption Price or the
corporation is unable to pay the Redemption Price due to not having sufficient
legally available funds all rights of the holder of such shares as holder of
Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares; provided that in the event that shares of Preferred
Stock are not redeemed due to a default in payment by the corporation or because
the corporation does not have sufficient legally available funds, such shares of
Preferred Stock shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
E. Voting Rights.
1. General. The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or consent of shareholders and, except as otherwise required by
law, shall have voting rights and powers equal to the voting rights and powers
of the Common Stock. The holder of each share of Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the bylaws of
the corporation and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of
-13-
15
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half rounded upward to one).
2. Election of Directors. At each election of directors, (i) the
holders of Series A Preferred Stock, voting as a separate class, shall be
entitled to elect one member of the corporation's board of directors, (ii) the
holders of Series B Preferred Stock, voting as a separate class, shall be
entitled to elect two members of the corporation's board of directors, (iii) the
holders of Common Stock, voting as a separate class, shall be entitled to elect
one member of the corporation's board of directors and (iv) the remaining
directors shall be elected by the holders of Preferred Stock and Common Stock,
voting together as a single class. Subject to Section 302 and Section 303 of the
California Corporations Code, any director who shall have been elected by a
specified group of shareholders may be removed during the aforesaid term of
office, either for or without cause, by, and only by, the affirmative vote of
the holders of a majority of the shares of such specified group, given at a
special meeting of such shareholders duly called or by an action by written
consent for that purpose. Any vacancy in the board of directors caused by the
removal, resignation or death of any such director who shall have been elected
by a specified group of shareholders or the declaration by the board of
directors that the office of such director is vacant because such director has
been declared of unsound mind by a court or convicted of a felony may be filled
by, and only by, the vote of the holders of a majority of the shares of such
specified group given at a special meeting of such shareholders or by an action
by written consent.
F. Protective Provisions.
1. Preferred Stock. So long as 4,000,000 shares of Preferred
Stock shall be outstanding, the corporation shall not, without first obtaining
the approval of the holders of at least 50% of the outstanding Preferred Stock,
take any action that:
(A) Increases or decreases the authorized number of
shares of Common Stock or Preferred Stock;
(B) Results in the redemption of any shares of Common
Stock (other than pursuant to equity incentive agreements with service providers
giving the corporation the right to repurchase shares upon the termination of
services);
(C) Results in any merger, other corporate
reorganization, sale of control, or other transaction in which holders of the
corporation's voting securities prior to such transaction or series of related
transactions hold less than 50% of the corporation's voting securities upon the
closing of such transaction or series of related transactions, or a sale of all
or substantially all of the assets of the corporation; or
(D) Results in the payment or declaration of any
dividend (other than in Common Stock) on any shares of Common Stock.
2. Series C Preferred Stock and Series D Preferred Stock. So
long as an aggregate of 2,000,000 shares of Series C Preferred Stock and Series
D Preferred Stock shall be outstanding, the corporation shall not, without first
obtaining the approval of the holders of at least
-14-
16
50% of the outstanding Series C Preferred Stock and Series D Preferred Stock,
voting together as one class, take any action that:
(A) Alters or changes the rights, preferences or
privileges of the Series C Preferred Stock and Series D Preferred Stock;
(B) Creates (by reclassification or otherwise) any new
class or series of shares having rights, preferences or privileges senior to or
on a parity with the Series C Preferred Stock and Series D Preferred Stock; or
(C) Amends or waives any provision of the corporation's
Articles of Incorporation or Bylaws relative to the Series C Preferred Stock and
Series D Preferred Stock.
3. No Waiver of Section 903. Nothing in this subsection F shall
be construed as a waiver of any rights set forth in Section 903 of the
California Corporations Code.
G. Residual Rights. All rights accruing to the outstanding shares of
the corporation not expressly provided for to the contrary herein shall be
vested with the Common Stock.
V.
A. Limitation of Directors' Liability. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
B. Indemnification of Directors and Officers. This corporation is
authorized to indemnify the directors and officers of the corporation to the
fullest extent permissible under California law.
C. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of a director or officer of this
corporation relating to acts or omissions occurring prior to such repeal of
modification.
-15-