EXHIBIT 3.1.5
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
UNITIVE ELECTRONICS, INC.
Pursuant to North Carolina General Statutes Section 55-10-06, the
undersigned corporation (the "CORPORATION") hereby submits these Articles of
Amendment for the purpose of amending its Articles of Incorporation:
(1) The name of the Corporation is Unitive Electronics, Inc.
(2) Article IV of the Articles of Incorporation of the Corporation is
deleted.
(2) Article V of the Articles of Incorporation of the Corporation is
deleted, and a new Article V is adopted, which reads as follows:
"ARTICLE V
CAPITAL STOCK; PREFERENCES
A. The number of shares the Corporation is authorized to issue is
thirty-one million (31,000,000) of which sixteen million nine hundred
ninety-nine thousand (16,999,000) shares shall be designated as Class A Voting
Common stock (the "VOTING COMMON STOCK"), of which one thousand (1,000) shares
shall be designated as Class B Non-Voting Common stock (the "NON-VOTING COMMON
STOCK") (the Voting Common Stock and the Non-Voting Common Stock are sometimes
collectively referred to as the "COMMON STOCK"), of which thirteen million six
hundred ninety-eight thousand eight hundred seventy-five (13,698,875) shares
shall be designated Series A Preferred stock (the "SERIES A PREFERRED STOCK"),
and of which three hundred one thousand one hundred twenty-five (301,125) shares
shall be undesignated with the preferences, limitations, and relative rights
thereof to be determined by the Board of Directors of the Corporation pursuant
to North Carolina General Statutes Section 55-6-02. The Series A Preferred Stock
is hereunder sometimes referred to as the "PREFERRED STOCK." The shares of
Common Stock shall have a par value of $0.001 per share. The shares of Series A
Preferred Stock shall have a par value of $0.001 per share.
B. The preferences, limitations and relative rights relating to the Common
Stock and the Series A Preferred Stock are as set forth below.
Unless otherwise indicated, all references to sections or subsections set forth
in this Section B of Article V are deemed to refer to sections or subsections
within this Section B of Article V.
1. Dividends
(a) Dividends on Series A Preferred Stock. The holders of Series A
Preferred Stock shall be entitled to receive out of the assets of Corporation
legally available therefor, dividends when, as and if declared by the Board of
Directors of Corporation (the "SERIES A DIVIDEND PREFERENCES").
(b) Dividends on Common Stock. The holders of Common Stock shall be
entitled to receive out of the assets of Corporation legally available
therefore, dividends when, as and if declared by the Board of Directors of
Corporation, provided, however, that no dividend may be declared or paid by
Corporation upon any share of Common Stock unless equivalent dividends are then
declared and paid on the Series A Preferred Stock.
2. Liquidation Preference.
(a) Series A Preferred Stock. In the event of any liquidation, dissolution
or winding up of Corporation, either voluntary or involuntary (the "EVENT"), the
holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets or surplus funds of
Corporation to the holders of the Series A Preferred Stock or Common Stock by
reason of their ownership thereof, an amount equal to One Dollar ($1.00) per
share (as adjusted for any combination, consolidation, stock distributions or
stock dividends with respect to such shares) plus all (or any) accrued but
unpaid dividends on such shares (the "SERIES A LIQUIDATION PREFERENCE"). If upon
the occurrence of such Event, the asserts and funds to be distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full Series A Liquidation Preference, then the
entire assets and funds of Corporation legally available for distribution shall
be distributed ratably among the holders of Series A Preferred Stock based upon
the number of shares of Series A Preferred Stock then held by them.
(b) Common Stock. In the event of any Event, and subject to the payment in
full of the Series A Liquidation preference, the entire remaining assets and
funds of Corporation legally available for distribution shall be distributed
ratably among the holders of Common Stock based upon the number of shares of
Common Stock then held by them. For purposes of this subparagraph (b), the
holders of the Series A Preferred Stock shall be considered holders of the
number of shares of Common Stock as such holder would be entitled to receive if
such shares of Series A Preferred stock held by such holder were converted to
Common Stock, as set forth in Section 4 herein.
(c) Consolidation Merger, etc. A consolidation, merger of Corporation with
or into any other corporation or corporation or other corporation or other
corporate reorganization in which Corporation is not the surviving entity
(unless the stockholders of Corporation hold in excess of fifty percent (50%) of
the voting power of the surviving corporation after such merger or
reorganization), a transaction or series of related transactions in which in
excess of fifty percent (50%) of Corporation's voting power is transferred to a
third party (or group of affiliated third parties) who were not previously
stockholders of Corporation, or a sale of all or substantially all of the assets
of Corporation (unless the stockholders of Corporation holder in excess of fifty
percent (50%) of the voting power of the purchasing entity), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2, and shall entitle the holders of Series A Preferred Stock and Common Stock to
receive at the closing thereof in cash, securities (valued as provided in
subsection 2(d) hereof) or other property amounts as specified in subsections
2(a) and 2(b) hereof.
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(d) Valuation of Securities. Any securities to be delivered pursuant to
this Section 2 shall be valued as follows:
1. Securities not subject to investment letter or other similar
restrictions on from marketability covered by subsection 2(d)2 hereof:
(i) If traded on a securities exchanged, the value shall be deemed
to be the average of the closing prices of the securities on such exchange on
such exchange over the thirty (30)-day period ending three (3) business days
prior to the date of the Notice as defined in Section 2(e) below;
(ii) If actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid or sale prices (whichever are applicable)
over the thirty (30)-day period ending three (3) days prior to the closing; and
(iii) if there is no active public market, the value shall be the
fair market value thereof, as determined in good faith by either; (a) a majority
of this Board of Directors, which majority shall include at least two (2)
representatives of this holders of the Series A Preferred Stock or (b) if a
majority of the Board cannot reach consensus of the majority of the Board does
not include at least two (2) representatives of the holders of the Series A
Preferred Stock, by an independent appraiser selected by a majority of the Board
of Directors and approved by at least two (2) representatives of the holders of
the Series A Preferred Stock.
2. The method of valuation of valuation of securities subject to
investment letter or other restriction on free marketability other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate shall be to make an appropriate discount from the market
value determined as provided in clauses (i), (ii) or (iii) or subsection 2(d)1
hereof, to reflect the adjusted fair market value thereof.
(e) Notice. Written notice (the "Notice") of any such liquidation,
dissolution or winding up of Corporation within the meaning of this Section 2,
which states the payment date, the place where said payments shall be made and
the date on which Conversion Rights (as defined in Section 4 hereof) terminate
as to such shares (which shall be not less than ten (10) days after the date of
such Notice), shall be given by first class mail, postage prepaid, or by
telecopy or facsimile, not less than twenty (20) days prior to the payment date
state therein , to the then holders of record of Series A Preferred Stock and
Common Stock such Notice to be addressed to each such holder at its address as
shown on the records of Corporation.
3. Voting Rights.
(a) Generally.
(i) Except as otherwise expressly provided herein or as required by
law, the holder of each share of Series A Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Voting Common Stock into
which such share of Series A Preferred Stock could be converted on the
appropriate record date and shall have voting rights and powers equal to the
voting rights and powers of the Voting Common Stock (except as otherwise
expressly provided
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herein or as required by law, voting together with the Voting Common Stock as a
single class) and shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of Corporation. Fractional votes shall not be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Voting Common Stock into which shares of Series
A Preferred Stock held by each holder could be converted) shall be rounded to
the nearest whole number (with one-half being rounded upward).
(ii) Each holder of Voting Common Stock shall be entitled to one
vote per share of Voting Common Stock owned by such holder.
(iii) The shares of Non-Voting Common Stock shall not be entitled to
vote on any matter or to receive notice of meetings of the shareholders, except
as required by applicable law.
(iii) The shares of Non-Voting Common Stock shall not be entitled to
vote on any matter or to receive notice of meetings of the shareholders, except
as required by applicable law.
(b) Quorum. Except as otherwise required by law, the presence in person or
by proxy of the holders of a majority of the outstanding shares of Voting Common
Stock and Series A Preferred Stock shall constitute a quorum.
4. Conversion.
The holders of Series A Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
insurance of such share (but prior to the date that Conversion Rights terminate
as set forth in the liquidation Notice issued pursuant to Section 2(e), if
any,), at the office of Corporation or any transfer agent for such stock, into
fully paid and non assignable shares of Voting Common Stock. The number of
shares of Voting Common Stock into which each share of the Series A Preferred
Stock may be converted shall be determined by dividing the Series A Original
Price (as hereinafter defined) by the Series A Conversion Price (determined as
hereinafter provided ) in effect at the time of the conversion. For purposes of
this Section 4, the "Series A Original Price" is One Dollar ($1.00) per share.
The "Series A Conversion Price," before any adjustment is required pursuant to
Section 4(d), shall be equal to the Series A Original Price.
(b) Automatic Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of Voting Common Stock at the then
effective applicable Conversion Price immediately upon the closing of the sale
of Corporation's Voting Common Stock in an underwritten public offering
registered under the Securities Act of 1933, as amended (the "1933 Act") (other
than a registration relating solely to a transaction under Rule 145 under such
Act or any successor rule thereto) in which (before deduction of underwriter
commissions and selling expenses) the public offering price is equal to or
exceeds Five Dollars ($5.00) per share of Voting Common Stock (subject to
adjustment for stock splits, reverse stock splits and other similar corporate
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reorganizations) and the gross proceeds to Corporation equal or exceed Twenty
million Dollars ($20,000,000) (hereinafter, a "Qualified Public Offering").
(c) Mechanics of Voluntary Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the names into shares of Voting
Common Stock, such holder shall surrender the certificate or certificates
thereof, duly endorsed, at the office of Corporation or of any transfer agent
for such stock, and shall give written notice to Corporate at such office that
it elects to convert the same and shall state therein the name or names in which
it wishes the certificate or certificates for shares of Voting Common Stock to
be issued. Corporation shall, as soon as practicable thereafter and it its
expense, issue and deliver at such office to such older a certificate or
certificates for the number of shares of Voting Common Stock to which it shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series A Preferred Stock to be converted, and the person or persons
entitled to receive these shares of Voting Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Voting Common stock on such date.
(d) Adjustments to Conversion Price for Diluting Issues.
1. Special Definitions. For purposes of this subsection 4(d), the
following definitions apply:
(i) "Options" shall mean rights, options, or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities, as
hereinafter defined.
(ii) "Original Issue Date" shall mean the date on which the first share of
Series A Preferred Stock was first issued.
(iii) "Convertible Securities" shall mean any evidences of indebtedness,
shares or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(iv) "Additional Shares of common Stock" shall mean all shares of Common
Stock issued (or, pursuant to subsection 4(d)3, hereof, deemed to be issued) by
Corporation after the Original Issue Date, other than shares of Common Stock
issued or issuable at any time:
(1) upon conversion of shares of Series A Preferred Stock authorized
herein;
(2) to directors, officers, employees or advisors, of Corporation
pursuant to a plan or agreement approved by the Board of Directors of
Corporation (the "Management Option Plan"), not to exceed two million one
hundred forty-one thousand three hundred seventy-five (2,141,375) shares
appropriately adjusted for any stock split, stock dividend or other
recapitalization;
(3) upon exercise of that certain Stock Purchase Warrant to be
issued to MCNC by Corporation on or before May 31, 1998 in partial consideration
of the grant to Corporation of a license to corporation of certain technology
(the "MCNC Warrant");
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(4) by way of dividend or other distribution on shares excluded from
the definition of Additional Shares of Common Stock by the foregoing clauses
(1), (2), (3) or this clause (4).
2. No Adjustment of Conversion Price. No adjustment in the Conversion
Price of a particular share of Series A Preferred Stock shall be made in respect
of the issuance of Additional Shares of Common Stock unless the consideration
per share for an Additional Share of Common Stock issued or deemed to be issued
by Corporation is less than the respective Conversion price in effect on the
date of, and immediately prior to such issue, for such share of Series A
Preferred Stock.
3. Deemed Issue of Additional Shares of Common Stock. In the event
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 then 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 therefore, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the case of business on such record date. In any such case in which
Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustments in the respective Conversion Prices shall be
made upon the subsequent issue of Conversion Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to Corporation or decrease in the number of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the respective 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 affective, 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 (provided, however,
that no such adjustment of the respective Conversion Prices shall affect
Conversion Stock previously issued upon conversion of the Series A Preferred
Stock);
(iii) upon the expiration of any such Options or any rights of conversion
or exchange under such Convertible Securities which shall not have been
exercised, the respective 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, the
only 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 therefore
was the consideration actually received by
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Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by consideration actually received by
Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by 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
Corporation for the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by Corporation for the issued of
all such Options, whether or not exercised, plus the consideration deemed to
have been received by Corporation (determined pursuant to subsection 4(d)5,
hereof) upon the issue of the Convertible Securities with respect to which such
Options were actually exercised;
(iv) no readjustment pursuant to clauses (1) or (2) above shall have the
affect of increasing the respective Conversion Prices to an amount which exceeds
the lower of (1) such Conversion Prices to an amount which exceeds the lower of
(1) such Conversion Price on the original adjustment date, or (2) such
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date;
(v) in the case of any Options which expire by their terms not more than
thirty (30) days after the date of issue thereof, no adjustment of the
respective Conversion Prices shall be made (except as to shares of Series A
Preferred Stock converted in such period) until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same manner
provided in clause (iii) above; and
(vi) if any such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed thereof, the adjustment
previously made in the respective Conversion Prices which became effective on
such record date shall be canceled as of the close of business on such record
date, and shall instead be made on the actual date of issuance, if any.
4. Adjustment of Conversion Price Upon Issuance of Additional Shares of
Common Stock. In the event Corporation shall issue Additional Shares of Common
Stock (including Additional Share of Common Stock deemed to be issued pursuant
to subsection 4(d)3. hereof) without consideration or for a consideration per
share less than the Series A Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A
Conversion Price shall be reduced concurrently with such issue, to a price
(calculated to the nearest cent) determined by the following formula:
CP(1) = CP x O + C
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O + AS
where:
CP = the Conversion Price prior to adjustment
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CP(1) = the Conversion Price as so adjusted
O= the number of shares of Common Stock outstanding immediately prior
to such issue (determined on a fully-diluted basis)
C= the number of shares of Common Stock which could be purchased at
the Conversion Price prior to adjustment with the aggregate of the
consideration received or deemed to be received by Corporation for
the total number of Additional Shares of Common Stock so issued or
deemed to be issued, and
AS= the number of Additional Shares of Common Stock so issued or
deemed to be issued.
5. Determination of Consideration. For purposes of this subsection 4(d),
the consideration received by Corporation for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(1) insofar as it consists of cash, be computed at the
aggregate amount of cash received by Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(2) 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
(3) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (1) and (2) above, as determined in
good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to subsection 4(d)3, relating to Options and Convertible
Securities shall be determined by dividing:
(1) the total amount, if any, received or receivable by
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 number) payable to
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(2) 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.
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6. Adjustment for Combinations or Subdivisions of Common Stock. In the
event that Corporation at any time or from time to time after the Original Issue
Date shall declare or pay any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock, or shall effect a subdivision of
the outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or 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,
then the respective Conversion Prices in effect immediately prior to such event
shall, concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate.
(e) Other Distributions. In the event Corporation shall at any time or
from time to time make or issue or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of Corporation or any of its subsidiaries, other than
Additional Shares of Common Stock, then in each such event provision shall be
made so that the holders of Series A Preferred Stock shall receive, upon the
conversion thereof, the securities of Corporation which they would have received
had their stock been converted into Common Stock on the date of such event.
(f) No Impairment. Corporation shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Corporation, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of Series A Preferred Stock against
impairment.
(g) Certificates as to Adjustments. Upon the occurrence of such adjustment
or readjustment of a Conversion Price pursuant to this Section 4, Corporation at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and cause independent public accountants selected by
Corporation to verify such computation and prepare and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. Corporation shall, upon the written request at any time
of any holder of Series A Preferred Stock, furnish or cause to be furnished to
such holder a certificate of its chief financial officer setting forth (i) such
adjustments and readjustments, (ii) the applicable Conversion Price at the time
in effect, and (iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Series A Preferred Stock.
(h) Notices of Record Date. In the event of any taking by 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 payable out of retained earnings) or other distribution, any security
or right convertible into or entitling the holder thereof to receive Additional
Shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or and other securities or property, or
to receive any other right, Corporation shall mail to each holder of Series A
Preferred Stock, at least twenty (20) days prior to the date specified therein,
a notice specifying the date on which any such record is to be taken for the
purpose of such
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dividend, distribution, security or right, and the amount and character of such
dividend, distribution, security or right.
(i) Issue Taxes. Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Voting
Common Stock on conversion of shares of Series A Preferred Stock pursuant
hereto; provided, however, that Corporation shall not be obligated to pay any
transfer taxes resulting form any transfer requested by any holder in connection
with any such conversion.
(j) Reservation of Stock Issuable Upon Conversion. Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Voting Common Stock, solely for the purpose of effecting the conversion of
the shares of Series A Preferred Stock, such number of its shares of Voting
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Voting Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred Stock, Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Voting Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to this
Certificate of Incorporation.
(k) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Voting Common Stock (including fractions thereof) issuable upon conversion of
more than one share of series A Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Voting
Common Stock, Corporation shall, in lieu of issuing any fractional share, pay
the holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
(l) Adjustments. In case of any reorganization or any reclassification of
the capital stock of Corporation, any consolidation or merger of Corporation
with or into another corporation or corporations or the conveyance of all or
substantially all of the assets of Corporation to another corporation, each
share of Series A Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property (including cash) to
which a holder of the number of shares of Voting Common Stock deliverable upon
conversion of such share of Series A Preferred Stock would have been entitled
upon the record date of (or date of, if no record date is fixed) such
reorganization, reclassification, consolidation, merger or conveyance; and, in
any case, appropriate adjustment (as determined by the Board of Directors) shall
be made in the application of the provisions herein set forth with respect to
the rights and interests thereafter of the holders of such Series A Preferred
Stock, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any shares
of stock or the securities or property (including cash) thereafter deliverable
upon the conversion of the shares of Series A Preferred Stock.
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(m) Satisfaction of Accrued But Unpaid Dividends. Prior to converting any
shares of Series A Preferred Stock into Voting Common Stock as provided herein,
the holder thereof shall be entitled to receive payment in satisfaction of all
accrued but unpaid dividends thereon as provided in Section 1(a).
(a) Notices. Any notice required by the provisions of this Section 4 to be
given to the holders of shares of Series A Preferred Stock shall be deemed given
upon confirmed transmission by facsimile or telecopy or upon deposit in the
United States mail, first class postage prepaid, and addressed to each holder of
record at its address appearing on the books of Corporation. Notwithstanding the
foregoing, if a stockholder to whom notice is to be given has an address of
record which is outside of the United States, then any notice to such
stockholder under this subsection 4(n) shall be deemed given upon confirmed
transmission by facsimile or telecopy or ten days after deposit in the United
States mail, first class postage prepaid, and addressed to such holder at its
address appearing on the books of Corporation.
5. Right of First Participation.
(a) Pro Rata Right. Corporation hereby grants to each holder of
Series A Preferred Stock (hereinafter referred to in this Section 5 as
"Holder"), the right of participation to purchase up to its pro rata share of
all New Securities (as defined in Section 5(b) hereof) which Corporation may,
from time to time, propose to sell and issue. A Holder's pro rata share, for
purposes of this right of participation, is the ratio (A) the numerator of which
is the number of shares of Voting Common Stock held by such Holder or issuable
to such Holder upon the conversion of Series A Preferred Stock as of the date of
Corporation's written notice pursuant to Section 5(c) hereof, and (B) the
denominator of which is the number of shares of Voting Common Stock outstanding
on a fully diluted basis. Each Holder shall have a right of over-allotment such
that if any Holder fails to exercise its right hereunder to purchase its pro
rata share of New Securities, the other Holders may purchase the non-purchasing
Holder's portion on a pro rata basis within five (5) days from the date such
non-purchasing Holder fails to exercise its right. This right of participation
shall be subject to the following provisions of this Section 5.
(b) New Securities. "New Securities" shall mean any capital stock of
Corporation, whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided that the term "New Securities"
does not include (i) the sale by Corporation of up to thirteen million six
hundred ninety-eight thousand eight hundred seventy-five (13,698,875) shares of
Series A Preferred stock for a purchase price of One Dollar ($1.00) per share,
payable in cash or property, as determined by the Board of Directors of
Corporation; (ii) securities issuable upon conversion of or with respect to
Series A Preferred Stock or any other series of Preferred Stock; (iii)
securities issued pursuant to the acquisition of another corporation by
Corporation by merger, purchase of substantially all the assets or other
reorganization whereby Corporation owns more than fifty percent (50%) of the
voting power of such corporation; (iv) up to two million one hundred forty-one
thousand three hundred seventy-five (2,141,375) shares appropriately adjusted
for any stock split, stock dividend or other recapitalization issued pursuant to
the Management Option Pool (as defined in subsection 4(d)1.(iv)(2) hereof); (v)
securities issued pursuant to any stock dividend,
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stock split, combination or other reclassification by Corporation of any of its
capital stock; or (vi) securities issued upon exercise of the MCNC Warrant.
(c) Required Notices. In the event Corporation proposes to undertake
an issuance of New Securities, it shall give each Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which Corporation proposes to issue the same. Each such Holder shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase the Holder's pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to
Corporation and stating therein the quantity of New Securities to be purchased.
(d) Corporation's Right to Sell. In the event the Holders fail to
exercise the right of participation as to all New Securities offered within said
twenty (20)-day period and after expiration of the five (5)-day period for
exercise of the over-allotment provisions of this Section 5, Corporation shall
have one hundred eighty (180) days thereafter to sell all such New Securities
respecting which such Holder's right of participation hereunder was not
exercised, at a price and upon general terms no more favorable in any material
respect to the purchasers thereof than specified in Corporation's notice. In the
event Corporation has not sold all such New Securities within said one hundred
eighty (180)-day period, Corporation shall not thereafter issue or sell any New
Securities, without first offering such securities to the Holders in the manner
provided herein.
(e) Expiration of Right. The right of participation granted under
this Section 5 shall not apply to, and shall expire upon, the closing of a
Qualified Public Offering.
(f) Assignment. The right of participation set forth in this Section
5 is nonassignable, except that (a) such right is assignable by each Holder to
any wholly-owned subsidiary or parent of, or to any corporation, entity or other
person which is, within the meaning of the 1933 Act, controlling, controlled by
or under common control with, such Holder, (b) such right is assignable between
and among any of such Holders, and (c) such right is assignable in any Permitted
Transfer (as hereinafter defined) by a Holder. A "Permitted Transfer" shall
mean: (i) a transaction not involving a change in beneficial ownership; (ii)
transactions involving distribution without consideration by a partnership to
any of its partners, retired partners, or to the estate of any of its partners,
or by a limited liability company to any of its members, retired members or to
the estate of any of its members; (iii) transfers by an individual to a trust
for the benefit of such individual or his family; (iv) transfers by gift, will
or intestate succession to the spouse, lineal dependants or ancestors of any
Holder or spouse of a Holder; (v) transfers to any one transferee of at least
three hundred sixty-two thousand five hundred (362,500) shares of Registrable
Securities provided that the Corporation is given prior written notice of such
transfer; or (vi) transfers pursuant to Section 2.d. of the Shareholders
Agreement to be entered into between the Corporation and all of its
shareholders, dated on or before May 31, 1998, as amended from time-to-time (the
"Shareholders Agreement").
6. Board Members' Restrictions and Limitations Set Forth In Investor
Rights Agreement.
Until the closing of a Qualified Public Offering, for as long as at least
three million six hundred twenty-five thousand (3,625,000) shares of Series A
Preferred Stock remain outstanding (as
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adjusted for any combination, consolidation, stock distribution or stock
dividend with respect to such shares):
(a) Board Membership. The authorized number of members of the Board of
Directors of Corporation shall be five (5), to be nominated and elected as
provided in the Investor Rights Agreement to be entered into between Corporation
and all of its shareholders, dated on or before May 31, 1998, as amended from
time-to-time (the "Investor Rights Agreement").
(b) Restrictions on Sale of Assets, Merger, Dissolution, Etc. Corporation
shall be subject to the restrictions on sale of assets, mergers, dissolution,
reorganization, issuance of additional shares of stock, indebtedness,
investments and other restrictions set forth in Section 3.3 of the Investor
Rights Agreement, such restrictions being incorporated herein by this reference.
7. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued as shares of
Preferred Stock. All such shares shall be canceled and shall not be held as
treasury shares."
(3) At the effective time of the filing of these Articles, each
outstanding share of the existing Common stock of Corporation shall be
automatically exchanged for a share of the Voting Common Stock of Corporation,
without the necessity of further action or the issuance of a new stock
certificate therefor. Except for the foregoing, the amendments do not provide
for the exchange, reclassification, or cancellation of issued shares.
(4) Shareholder approval of the amendments was obtained as required by
Chapter 55 of the General Statutes of North Carolina.
(5) The date of adoption of each amendment was the ___ day of
____________, 1998.
(6) These Articles will be effective upon filing.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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This 16th day of April, 1998.
UNITIVE ELECTRONICS, INC.
By: /s/ Wayne Machon
--------------------------
Wayne Machon, President
[Signature Page to Articles of Amendment]