EXHIBIT 3.1
Amended and Restated
Articles of Incorporation of
Nuance Communications
The undersigned, Ronald A. Croen, hereby certifies that:
One. He is the duly elected and acting President and Secretary of Nuance
Communications, a California corporation.
Two. The Articles of Incorporation shall be amended and restated to read in
full as follows:
I.
The name of the corporation is Nuance Communications (the "Corporation").
II.
The purpose of the 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.
1. Designation. This Corporation is authorized to issue two classes of
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shares designated respectively "Common Stock" and "Preferred Stock," and
referred to herein either as Common Stock or common shares and Preferred Stock
or preferred shares, respectively. The number of shares of Common Stock is
50,000,000 and the number of shares of Preferred Stock is 39,954,152. The
initial series of Preferred Stock shall comprise 3,150,000 shares and shall be
designated "Series A Preferred Stock." The second series of Preferred Stock
shall comprise 5,000,000 shares and shall be designated "Series B Preferred
Stock." The third series of Preferred Stock shall comprise 3,575,000 shares and
shall be designated "Series C Preferred Stock." The fourth series of Preferred
Stock shall comprise 3,752,076 shares and shall be designated "Series D
Preferred Stock." The fifth series of Preferred Stock shall comprise 4,500,000
shares and be designated "Series E Preferred Stock." The sixth series of
Preferred Stock shall comprise 3,150,000 shares and shall be designated "Series
A-1 Preferred Stock." The seventh series of Preferred Stock shall comprise
5,000,000 shares and shall be designated "Series B-1 Preferred Stock." The
eighth series of Preferred Stock shall comprise 3,575,000 shares and shall be
designated "Series C-1 Preferred Stock." The ninth series of Preferred Stock
shall comprise 3,752,076 shares and shall be designated "Series D-1 Preferred
Stock." The tenth series of Preferred Stock shall comprise 4,500,000 shares and
shall be designated "Series E-1 Preferred Stock." As used herein, the term
"Preferred Stock" without designation shall refer to shares of Series A
Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock, Series D-1 Preferred Stock, and Series E-1 Preferred Stock or to shares
of any such series. The balance of the shares of authorized Preferred Stock may
be issued in any number of series, as determined by the Board of Directors. The
Board, by resolution, may fix the designation and number of shares of any
series, and may determine, alter, or revoke the rights, preferences, privileges
or restrictions pertaining to any wholly unissued series. The Board may
thereafter, in the same manner, increase or decrease the number of shares of any
series, but not below the number of shares of that series then outstanding. The
rights, preferences, privileges and restrictions granted to or imposed upon the
Preferred Stock and Common Stock are as specified in this Section III.
2. Dividend Provisions. Subject to the rights of series of Preferred
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Stock which may from time to time come into existence, the holders of Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of any assets legally available therefor,
dividends at the rate of $0.03 per share with respect to the Series A Preferred
Stock, $0.09 per share with respect to the Series B Preferred Stock, $0.20 per
share with respect to the Series C Preferred Stock, $0.46 per share with respect
to the Series D Preferred Stock, $0.90 per share with respect to the Series E
Preferred Stock, $0.03 per share with respect to the Series A-1 Preferred Stock,
$0.09 per share with respect to the Series B-1 Preferred Stock, $0.20 per share
with respect to the Series C-1 Preferred Stock, $0.46 per share with respect to
the Series D-1 Preferred Stock, $0.90 per share with respect to the Series E-1
Preferred Stock, or, if greater, at least as large per share (based on the
number of shares of Common Stock into which such share of Preferred Stock is
convertible) as those declared or paid with respect to the Common Stock, and in
preference to any dividends declared or paid with respect to the Common Stock.
All such dividends shall be non-cumulative.
3. Liquidation Preferences.
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(a) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series A-1 Preferred Stock, the Series B-1 Preferred Stock,
the Series C-1 Preferred Stock, the Series D-1 Preferred Stock, and the Series
E-1 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 Common Stock by reason of their ownership of such stock, the sum
of $0.3175 per share with respect to the Series A Preferred Stock, $0.9598 per
share with respect to the Series B Preferred Stock, $2.00 per share with respect
to the Series C Preferred Stock, $4.69 per share with respect to the Series D
Preferred Stock, $9.00 per share with respect to the Series E Preferred Stock,
$0.3175 per share with respect to the Series A-1 Preferred Stock, $0.9598 per
share with respect to the Series B-1 Preferred Stock, $2.00 per share with
respect to the Series C-1 Preferred Stock, $4.69 per share with respect to the
Series D-1 Preferred Stock, and $9.00 per share with respect to the Series E-1
Preferred Stock, plus declared and unpaid dividends, if any, for each share of
Preferred Stock then held by them. If upon the occurrence of such event, the
assets and funds available for distribution among the holders of the
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Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution to the shareholders shall be
distributed among the holders of the Preferred Stock pro rata to the full
preferential amount each such holder is entitled to receive.
(b) After payment has been made to the holders of the Preferred Stock
of the full preferential amounts as to which they shall be entitled as
aforesaid, then the holders of Common Stock shall be entitled to share ratably
in the remaining assets and funds of the Corporation legally available for
distribution, pro rata to the number of shares of Common Stock held by each
holder.
(c) (i) For purposes of this Section 3, a liquidation, dissolution or
winding up of this Corporation shall be deemed to be occasioned by, or to
include, (A) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation (the events described in clauses (A) and (B) are referred to
collectively as an "Acquisition"); unless the Corporation's shareholders of
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record as constituted immediately prior to such Acquisition, immediately after
such Acquisition (by virtue of securities issued as consideration for the
Corporation's Acquisition or otherwise) hold at least 50% of the voting power of
the surviving or acquiring entity.
(ii) In any of such events, if the consideration received by the
Corporation is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through the
Nasdaq Stock Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) 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 at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions 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 above in (A)(1), (2) or (3) to reflect the approximate fair
market
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value thereof, as mutually determined by the Corporation and the holders of at
least a majority of the voting power of all then outstanding shares of Preferred
Stock.
(iii) In the event the requirements of this subsection 3(c) are
not complied with, this Corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 3 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of Preferred Stock shall revert to and
be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 3(c)(iv) hereof.
(iv) The Corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the shareholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 3, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Preferred
Stock that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of Preferred Stock.
4. Conversion. The holders of the Preferred Stock shall have conversion
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rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
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convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the per share price at which such
series was originally issued by the Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date that the certificate
is surrendered for conversion. The initial Conversion Price per share for
shares of Series A Preferred Stock and Series A-1 Preferred Stock shall be
$0.3175; provided, however, that the Conversion Price for the Series A Preferred
Stock and the Series A-1 Preferred Stock shall be subject to adjustment as set
forth in subsection 4(d). The initial conversion price per share for shares of
Series B Preferred Stock and Series B-1 Preferred Stock shall be $0.9598;
provided, however, that the Conversion Price for the Series B Preferred Stock
and Series B-1 Preferred Stock shall be subject to adjustment as set forth in
subsection 4(d). The initial Conversion Price per share for shares of Series C
Preferred Stock and Series C-1
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Preferred Stock shall be $2.00; provided, however, that the Conversion Price for
the Series C Preferred Stock and Series C-1 Preferred Stock shall be subject to
adjustment as set forth in subsection 4(d). The initial Conversion Price per
share for shares of Series D Preferred Stock and Series D-1 Preferred Stock
shall be $4.69; provided, however, that the Conversion Price for the Series D
Preferred Stock and Series D-1 Preferred Stock shall be subject to adjustment as
set forth in subsection 4(d). The initial Conversion Price per share for shares
of Series E Preferred Stock and Series E-1 Preferred Stock shall be $9.00;
provided, however, that the Conversion Price per share for shares of Series E
Preferred Stock and Series E-1 Preferred Stock shall be subject to adjustment as
set forth in subsection 4(d).
(b) Automatic Conversion. Each share of Preferred Stock shall
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automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such series of Preferred Stock immediately upon the
earlier of (i) except as provided in subsection 4(c), the Corporation's sale of
its Common Stock in a firm commitment underwritten public offering pursuant to a
registration statement on Form S-1 under the Securities Act of 1933, as amended,
the public offering price of which was not less than $10.00 per share (adjusted
to reflect subsequent stock dividends, stock splits or recapitalization) and
$20,000,000 in the aggregate or (ii) the date specified by written consent or
agreement of the holders of at least two-thirds of the then outstanding shares
of such series of Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Preferred Stock
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shall be entitled to convert the same into shares of Common Stock, the holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office for this Corporation or any transfer agent for the Preferred Stock, and
shall give written notice to this Corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder 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 such surrender of the shares of Preferred Stock to be
converted, 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 as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon such conversion of the Preferred Stock shall not be deemed to
have converted such Preferred Stock until immediately prior to the closing of
such sale of securities.
(d) Conversion Price Adjustments for Certain Dilutive Issuances,
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Splits and Combinations.
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(i) Special Definitions. For purposes of this Section 4(d),
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the following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to
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subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Original Issue Date" with respect to each series of
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Preferred Stock shall mean the date on which the first share of such series of
Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
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indebtedness, shares (other than the Common Stock) or other securities
convertible into or exchangeable for Common Stock.
(D) "Additional Stock" shall mean any shares of Common
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Stock issued (or deemed to have been issued pursuant to subsection 4(d)(vii)(E))
by this Corporation after the Original Issue Date other than:
(1) shares issuable or issued pursuant to transactions
described in subsections 4(e), 4(f) and 4(g) hereof;
(2) shares issuable or issued to employees,
consultants, directors or vendors (if in transactions with primarily non-
financing purposes) of this Corporation or of SRI International, Inc. directly
or pursuant to a stock option plan, restricted stock plan, arrangement or
agreement approved by the Board of Directors of this Corporation;
(3) shares issued or issuable upon conversion of the
Preferred Stock;
(4) shares issued pursuant to the acquisition of
another corporation or entity by this Corporation by merger, purchase of
substantially all of the assets, or other reorganization;
(5) shares issued to financial institutions in
connection with the extension of credit to the Corporation or in connection with
the lease of equipment and in both cases for other than equity financing
purposes; or
(6) shares issued in connection with any stock split,
stock dividend, or recapitalization by the Corporation.
(E) "Pro Rata Share" with respect to each holder of
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Preferred Stock shall mean that portion of the total dollar amount of the
Dilutive Issuance (as defined below) equal to (i) the amount of the Dilutive
Issuance actually offered to all holders of Preferred Stock by the Board of
Directors of the Corporation (ii) multiplied by a fraction, the numerator of
which is the
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number of shares of Preferred Stock then held by such holder, and the
denominator of which is the total number of shares of Preferred Stock then
outstanding.
(F) "Dilutive Issuance" with respect to each series of
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Preferred Stock shall mean an issuance of Additional Stock for a consideration
per share less than the Conversion Price of such series of Preferred Stock in
effect on the date of and immediately prior to such issuance.
(G) "Participating Investor" shall mean any holder of
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Preferred Stock that purchases at least its Pro Rata Share of a Dilutive
Issuance.
(H) "Nonparticipating Investor" shall mean any holder of
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Preferred Stock that is not a Participating Investor.
(ii) Series A-1 Shadow Preferred.
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(A) In the event the Corporation proposes to undertake a
Dilutive Issuance with respect to the Series A Preferred Stock, it shall give
each holder of Series A Preferred Stock a written notice (the "Series A Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least thirty (30) days prior to the date of such
Dilutive Issuance. Each holder of Series A Preferred Stock may, within twenty
(20) days from the date of the Series A Issuance Notice, provide written notice
to the Corporation that such holder agrees to become a Participating Investor
for the price and upon the terms specified in the Series A Issuance Notice. In
the event that such holder fails to give such notice within the twenty (20) day
period, or fails to actually purchase its Pro Rata Share of the Dilutive
Issuance (other than as a result of the Corporation refusing to allow such
holder to so purchase its Pro Rata Share), such holder shall be deemed to be a
Nonparticipating Investor.
(B) To the extent of the percentage of the Pro Rata Share
not purchased (the "Series A Refused Percentage") by each Nonparticipating
Investor, that number of outstanding shares of Series A Preferred Stock held by
such Nonparticipating Investor equal to the product of (x) the number of shares
of such series held by the Nonparticipating Investor, times (y) the Series A
Refused Percentage, shall be converted automatically on the date (the "Series A-
1 Closing Date") of the applicable Dilutive Issuance (provided that the
Corporation gave the Series A Issuance Notice to such holder of Series A
Preferred Stock) into an equal number of fully-paid and nonassessable shares of
Series A-1 Preferred Stock; provided, however, that prior to the Series A-1
Closing Date each Nonparticipating Investor shall have the right to convert such
shares of Series A Preferred Stock into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
(C) Upon the conversion of Series A Preferred Stock held by
a Nonparticipating Investor into Series A-1 Preferred Stock as set forth herein,
such shares of Series A Preferred Stock shall no longer be outstanding on the
books of the Corporation and may not be
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reissued, and the Nonparticipating Investor shall be treated for all purposes as
the record holder of such shares of Series A-1 Preferred Stock on the Series A-1
Closing Date. No shares of Series A-1 Preferred Stock shall be issued except as
set forth in this Section 4(d)(ii) upon conversion of shares of Series A
Preferred Stock.
(D) No adjustment in the Conversion Price of the Series A-1
Preferred Stock shall be made in respect of the issuance of Additional Stock,
regardless of the issuance price of such shares, except for the issuance of such
shares as a stock dividend, stock split, or in connection with such other
transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series A-1 Preferred
Stock are issued, concurrently with such issuance, the Corporation shall take
all such action as may be required, including amending the Articles of
Incorporation, (1) to cancel all authorized shares of Series A-1 Preferred Stock
that remain unissued after such issuance, (2) to create and reserve for issuance
upon any subsequent Dilutive Issuance a new series of Preferred Stock equal in
number to the number of shares of Series A-1 Preferred Stock so canceled and
designated Series A-2 Preferred Stock, with the designations, powers,
preferences and rights and the qualifications, limitations and restrictions
identical to those then applicable to the Series A Preferred Stock, except that
the Conversion Price for such shares of Series A-2 Preferred Stock once
initially issued shall be the Conversion Price in effect immediately prior to
such Dilutive Issuance and shall no longer be subject to adjustment in respect
of the issuance of Additional Stock, except for the issuance of such shares as a
stock dividend, stock split, or in connection with such other transaction as
provided in paragraph 4(e) hereof, and (3) to amend the provisions of this
Section 4 to provide that any subsequent conversion of Series A Preferred Stock
upon a Dilutive Issuance will be into shares of Series A-2 Preferred Stock
rather than Series A-1 Preferred Stock. The Corporation shall take the same
actions with respect to the Series A-2 Preferred Stock and each subsequently
authorized series of Preferred Stock upon initial issuance of shares of the last
such series to be authorized.
(iii) Series B-1 Shadow Preferred.
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(A) In the event the Corporation proposes to undertake a
Dilutive Issuance with respect to the Series B Preferred Stock, it shall give
each holder of Series B Preferred Stock a written notice (the "Series B Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least thirty (30) days prior to the date of such
Dilutive Issuance. Each holder of Series B Preferred Stock may, within twenty
(20) days from the date of the Series B Issuance Notice, provide written notice
to the Corporation that such holder agrees to become a Participating Investor
for the price and upon the terms specified in the Series B Issuance Notice. In
the event that such holder fails to give such notice within the twenty (20) day
period, or fails to actually purchase its Pro Rata Share of the Dilutive
Issuance (other than as a result of the Corporation refusing to allow such
holder to so purchase its Pro Rata Share), such holder shall be deemed to be a
Nonparticipating Investor.
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(B) To the extent of the percentage of the Pro Rata Share
not purchased (the "Series B Refused Percentage") by each Nonparticipating
Investor, that number of outstanding shares of Series B Preferred Stock held by
such Nonparticipating Investor equal to the product of (x) the number of shares
of such series held by the Nonparticipating Investor, times (y) the Series B
Refused Percentage, shall be converted automatically on the date (the "Series B-
1 Closing Date") of the applicable Dilutive Issuance (provided that the
Corporation gave the Series B Issuance Notice to such holder of Series B
Preferred Stock) into an equal number of fully-paid and nonassessable shares of
Series B-1 Preferred Stock; provided, however, that prior to the Series B-1
Closing Date each Nonparticipating Investor shall have the right to convert such
shares of Series B Preferred Stock into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
(C) Upon the conversion of Series B Preferred Stock held by
a Nonparticipating Investor into Series B-1 Preferred Stock as set forth herein,
such shares of Series B Preferred Stock shall no longer be outstanding on the
books of the Corporation and may not be reissued, and the Nonparticipating
Investor shall be treated for all purposes as the record holder of such shares
of Series B-1 Preferred Stock on the Series B-1 Closing Date. No shares of
Series B-1 Preferred Stock shall be issued except as set forth in this Section
4(d)(iii) upon conversion of shares of Series B Preferred Stock.
(D) No adjustment in the Conversion Price of the Series B-1
Preferred Stock shall be made in respect of the issuance of Additional Stock,
regardless of the issuance price of such shares, except for the issuance of such
shares as a stock dividend, stock split, or in connection with such other
transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series B-1 Preferred
Stock are issued, concurrently with such issuance, the Corporation shall take
all such action as may be required, including amending the Articles of
Incorporation, (1) to cancel all authorized shares of Series B-1 Preferred Stock
that remain unissued after such issuance, (2) to create and reserve for issuance
upon any subsequent Dilutive Issuance a new series of Preferred Stock equal in
number to the number of shares of Series B-1 Preferred Stock so canceled and
designated Series B-2 Preferred Stock, with the designations, powers,
preferences and rights and the qualifications, limitations and restrictions
identical to those then applicable to the Series B Preferred Stock, except that
the Conversion Price for such shares of Series B-2 Preferred Stock once
initially issued shall be the Conversion Price in effect immediately prior to
such Dilutive Issuance and shall no longer be subject to adjustment in respect
of the issuance of Additional Stock, except for the issuance of such shares as a
stock dividend, stock split, or in connection with such other transaction as
provided in paragraph 4(e) hereof, and (3) to amend the provisions of this
Section 4 to provide that any subsequent conversion of Series B Preferred Stock
upon a Dilutive Issuance will be into shares of Series B-2 Preferred Stock
rather than Series B-1 Preferred Stock. The Corporation shall take the same
actions with respect to the Series B-2 Preferred Stock and each subsequently
authorized series of Preferred Stock upon initial issuance of shares of the last
such series to be authorized.
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(iv) Series C-1 Shadow Preferred.
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(A) In the event the Corporation proposes to undertake a
Dilutive Issuance with respect to the Series C Preferred Stock, it shall give
each holder of Series C Preferred Stock a written notice (the "Series C Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least thirty (30) days prior to the date of such
Dilutive Issuance. Each holder of Series C Preferred Stock may, within twenty
(20) days from the date of the Series C Issuance Notice, provide written notice
to the Corporation that such holder agrees to become a Participating Investor
for the price and upon the terms specified in the Series C Issuance Notice. In
the event that such holder fails to give such notice within the twenty (20) day
period, or fails to actually purchase its Pro Rata Share of the Dilutive
Issuance (other than as a result of the Corporation refusing to allow such
holder to so purchase its Pro Rata Share), such holder shall be deemed to be a
Nonparticipating Investor.
(B) To the extent of the percentage of the Pro Rata Share
not purchased (the "Series C Refused Percentage") by each Nonparticipating
Investor, that number of outstanding shares of Series C Preferred Stock held by
such Nonparticipating Investor equal to the product of (x) the number of shares
of such series held by the Nonparticipating Investor, times (y) the Series C
Refused Percentage, shall be converted automatically on the date (the "Series C-
1 Closing Date") of the applicable Dilutive Issuance (provided that the
Corporation gave the Series C Issuance Notice to such holder of Series C
Preferred Stock) into an equal number of fully-paid and nonassessable shares of
Series C-1 Preferred Stock; provided, however, that prior to the Series C-1
Closing Date each Nonparticipating Investor shall have the right to convert such
shares of Series C Preferred Stock into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
(C) Upon the conversion of Series C Preferred Stock held by
a Nonparticipating Investor into Series C-1 Preferred Stock as set forth herein,
such shares of Series C Preferred Stock shall no longer be outstanding on the
books of the Corporation and may not be reissued, and the Nonparticipating
Investor shall be treated for all purposes as the record holder of such shares
of Series C-1 Preferred Stock on the Series C-1 Closing Date. No shares of
Series C-1 Preferred Stock shall be issued except as set forth in this Section
4(d)(iv) upon conversion of shares of Series C Preferred Stock.
(D) No adjustment in the Conversion Price of the Series C-1
Preferred Stock shall be made in respect of the issuance of Additional Stock,
regardless of the issuance price of such shares, except for the issuance of such
shares as a stock dividend, stock split, or in connection with such other
transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series C-1 Preferred
Stock are issued, concurrently with such issuance, the Corporation shall take
all such action as may be required, including amending the Articles of
Incorporation, (1) to cancel all authorized shares of
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Series C-1 Preferred Stock that remain unissued after such issuance, (2) to
create and reserve for issuance upon any subsequent Dilutive Issuance a new
series of Preferred Stock equal in number to the number of shares of Series C-1
Preferred Stock so canceled and designated Series C-2 Preferred Stock, with the
designations, powers, preferences and rights and the qualifications, limitations
and restrictions identical to those then applicable to the Series C Preferred
Stock except that the Conversion Price for such shares of Series C-2 Preferred
Stock once initially issued shall be the Conversion Price in effect immediately
prior to such Dilutive Issuance and shall no longer be subject to adjustment in
respect of the issuance of Additional Stock, except for the issuance of such
shares as a stock dividend, stock split, or in connection with such other
transaction as provided in paragraph 4(e) hereof, and (3) to amend the
provisions of this Section 4 to provide that any subsequent conversion of Series
C Preferred Stock upon a Dilutive Issuance will be into shares of Series C-2
Preferred Stock rather than Series C-1 Preferred Stock. The Corporation shall
take the same actions with respect to the Series C-2 Preferred Stock and each
subsequently authorized series of Preferred Stock upon initial issuance of
shares of the last such series to be authorized.
(v) Series D-1 Shadow Preferred.
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(A) In the event the Corporation proposes to undertake a
Dilutive Issuance with respect to the Series D Preferred Stock, it shall give
each holder of Series D Preferred Stock a written notice (the "Series D Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least thirty (30) days prior to the date of such
Dilutive Issuance. Each holder of Series D Preferred Stock may, within twenty
(20) days from the date of the Series D Issuance Notice, provide written notice
to the Corporation that such holder agrees to become a Participating Investor
for the price and upon the terms specified in the Series D Issuance Notice. In
the event that such holder fails to give such notice within the twenty (20) day
period, or fails to actually purchase its Pro Rata Share of the Dilutive
Issuance (other than as a result of the Corporation refusing to allow such
holder to so purchase its Pro Rata Share), such holder shall be deemed to be a
Nonparticipating Investor.
(B) To the extent of the percentage of the Pro Rata Share
not purchased (the "Series D Refused Percentage") by each Nonparticipating
Investor, that number of outstanding shares of Series D Preferred Stock held by
such Nonparticipating Investor equal to the product of (x) the number of shares
of such series held by the Nonparticipating Investor, times (y) the Series D
Refused Percentage, shall be converted automatically on the date (the "Series D-
1 Closing Date") of the applicable Dilutive Issuance (provided that the
Corporation gave the Series D Issuance Notice to such holder of Series D
Preferred Stock ) into an equal number of fully-paid and nonassessable shares of
Series D-1 Preferred Stock; provided, however, that prior to the Series D-1
Closing Date each Nonparticipating Investor shall have the right to convert such
shares of Series D Preferred Stock into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
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(C) Upon the conversion of Series D Preferred Stock held by
a Nonparticipating Investor into Series D-1 Preferred Stock as set forth herein,
such shares of Series D Preferred Stock shall no longer be outstanding on the
books of the Corporation and may not be reissued, and the Nonparticipating
Investor shall be treated for all purposes as the record holder of such shares
of Series D-1 Preferred Stock on the Series D-1 Closing Date. No shares of
Series D-1 Preferred Stock shall be issued except as set forth in this Section
4(d)(v) upon conversion of shares of Series D Preferred Stock.
(D) No adjustment in the Conversion Price of the Series D-1
Preferred Stock shall be made in respect of the issuance of Additional Stock,
regardless of the issuance price of such shares, except for the issuance of such
shares as a stock dividend, stock split, or in connection with such other
transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series D-1 Preferred
Stock are issued, concurrently with such issuance, the Corporation shall take
all such action as may be required, including amending the Articles of
Incorporation, (1) to cancel all authorized shares of Series D-1 Preferred Stock
that remain unissued after such issuance, (2) to create and reserve for issuance
upon any subsequent Dilutive Issuance a new series of Preferred Stock equal in
number to the number of shares of Series D-1 Preferred Stock so canceled and
designated Series D-2 Preferred Stock, with the designations, powers,
preferences and rights and the qualifications, limitations and restrictions
identical to those then applicable to the Series D Preferred Stock, except that
the Conversion Price for such shares of Series D-2 Preferred Stock once
initially issued shall be the Conversion Price in effect immediately prior to
such Dilutive Issuance and shall no longer be subject to adjustment in respect
of the issuance of Additional Stock, except for the issuance of such shares as a
stock dividend, stock split, or in connection with such other transaction as
provided in paragraph 4(e) hereof, and (3) to amend the provisions of this
Section 4 to provide that any subsequent conversion of Series D Preferred Stock
upon a Dilutive Issuance will be into shares of Series D-2 Preferred Stock
rather than Series D-1 Preferred Stock. The Corporation shall take the same
actions with respect to the Series D-2 Preferred Stock and each subsequently
authorized series of Preferred Stock upon initial issuance of shares of the last
such series to be authorized.
(vi) Series E-1 Shadow Preferred.
---------------------------
(A) In the event the Corporation proposes to undertake a
Dilutive Issuance with respect to the Series E Preferred Stock, it shall give
each holder of Series E Preferred Stock a written notice (the "Series E Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least thirty (30) days prior to the date of such
Dilutive Issuance. Each holder of Series E Preferred Stock may, within twenty
(20) days from the date of the Series E Issuance Notice, provide written notice
to the Corporation that such holder agrees to become a Participating Investor
for the price and upon the terms specified in the Series E Issuance Notice. In
the event that such holder fails to give such notice within the twenty (20) day
period, or fails to actually purchase its Pro Rata Share of the Dilutive
Issuance (other than as a result of the
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Corporation refusing to allow such holder to so purchase its Pro Rata Share),
such holder shall be deemed to be a Nonparticipating Investor.
(B) To the extent of the percentage of the Pro Rata Share not
purchased (the "Series E Refused Percentage") by each Nonparticipating Investor,
that number of outstanding shares of Series E Preferred Stock held by such
Nonparticipating Investor equal to the product of (x) the number of shares of
such series held by the Nonparticipating Investor, times (y) the Series E
Refused Percentage, shall be converted automatically on the date (the "Series E-
1 Closing Date") of the applicable Dilutive Issuance (provided that the
Corporation gave the Series E Issuance Notice to such holder of Series E
Preferred Stock) into an equal number of fully-paid and nonassessable shares of
Series E-1 Preferred Stock; provided, however, that prior to the Series E-1
Closing Date each Nonparticipating Investor shall have the right to convert such
shares of Series E Preferred Stock into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
(C) Upon the conversion of Series E Preferred Stock held by a
Nonparticipating Investor into Series E-1 Preferred Stock as set forth herein,
such shares of Series E Preferred Stock shall no longer be outstanding on the
books of the Corporation and may not be reissued, and the Nonparticipating
Investor shall be treated for all purposes as the record holder of such shares
of Series E-1 Preferred Stock on the Series E-1 Closing Date. No shares of
Series E-1 Preferred Stock shall be issued except as set forth in this Section
4(d)(vi) upon conversion of shares of Series E Preferred Stock.
(D) No adjustment in the Conversion Price of the Series E-1 Preferred
Stock shall be made in respect of the issuance of Additional Stock, regardless
of the issuance price of such shares, except for the issuance of such shares as
a stock dividend, stock split, or in connection with such other transaction as
provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series E-1 Preferred Stock are
issued, concurrently with such issuance, the Corporation shall take all such
action as may be required, including amending the Articles of Incorporation, (1)
to cancel all authorized shares of Series E-1 Preferred Stock that remain
unissued after such issuance, (2) to create and reserve for issuance upon any
subsequent Dilutive Issuance a new series of Preferred Stock equal in number to
the number of shares of Series E-1 Preferred Stock so canceled and designated
Series E-2 Preferred Stock, with the designations, powers, preferences and
rights and the qualifications, limitations and restrictions identical to those
then applicable to the Series E Preferred Stock, except that the Conversion
Price for such shares of Series E-2 Preferred Stock once initially issued shall
be the Conversion Price in effect immediately prior to such Dilutive Issuance
and shall no longer be subject to adjustment in respect of the issuance of
Additional Stock, except for the issuance of such shares as a stock dividend,
stock split, or in connection with such other transaction as provided in
paragraph 4(e) hereof, and (3) to amend the provisions of this Section 4 to
provide that any subsequent conversion of Series E Preferred Stock upon a
Dilutive Issuance will be into shares of Series E-2 Preferred Stock rather than
Series E-1 Preferred Stock. The Corporation shall take the
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same actions with respect to the Series E-2 Preferred Stock and each
subsequently authorized series of Preferred Stock upon initial issuance of
shares of the last such series to be authorized.
(vii) Adjustments for Dilutive Issuance. The Conversion Price of
---------------------------------
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, and Series E Preferred Stock shall be subject
to adjustment from time to time as follows:
(A) If the Corporation shall issue, after the Original Issue
Date of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, or Series E Preferred Stock (the
"Purchase Date"), any Additional Stock without consideration or for a
consideration per share less than the Conversion Price for such series in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such series in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this subsection 4(d)(vii)) be
adjusted to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock that the aggregate consideration received by the Corporation for
such issuance would purchase at the Conversion Price in effect prior to the
issuance of Additional Stock; and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of such Additional Stock. As provided in subsection
4(d)(vii)(E) below, Common Stock for purposes of this subsection 4(d)(vii) and
subsection 4(d)(i)(D) shall include all Common Stock issuable upon exercise of
outstanding options to purchase or rights to subscribe for Common Stock and all
Common Stock issuable upon conversion of all outstanding convertible or
exchangeable securities, including the Preferred Stock.
(B) No adjustment of the Conversion Price for the Preferred
Stock shall be made in an amount less than one cent ($0.01) per share, provided
that any adjustments which are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into account in any
subsequent adjustment made prior to three (3) years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 4(d)(vii) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
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(E) In the case of the issuance (whether before, on or after the
Purchase Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 4(d)(vii)(E):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(vii)(C) and 4(d)(vii)(D)), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in subsections 4(d)(vii)(C)
and 4(d)(vii)(D)).
(3) In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to this Corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price of the
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such change, but
no further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of the Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities or options
-15-
or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
4(d)(vii)(E)(1) or (2) shall be appropriately adjusted to reflect any change in
termination of expiration of the type described in like subsection
4(d)(vii)(E)(3) or (4).
(e) Adjustment of Conversion Price. The Conversion Price of each
------------------------------
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) In the event the Corporation should at any time or from time
to time after the Original Issue Date fix a record date for the effectuation of
a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Preferred Stock shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be increased in proportion to such increase of the aggregate of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents, with the number of shares issuable with respect to Common Stock
Equivalents determined from time to time in the manner provided for deemed
issuances in subsection 4(d)(vii)(E).
(ii) If the number of shares of Common Stock outstanding at any
time after the Original Issue Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(f) Other Distributions. In the event this Corporation shall declare
-------------------
a distribution payable in securities of other persons, evidences of indebtedness
issued by this Corporation or other persons, assets (including cash dividends)
or options or rights not referred to in subsection 4(d)(i)(D), then, in each
such case for the purpose of this subsection 4(f), the holders of the Preferred
Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of
-16-
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(g) Recapitalization. If at any time or from time to time there shall
----------------
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in Section 3 or
this Section 4) provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of the Preferred
Stock the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price 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.
(h) No Impairment. This Corporation will not, by amendment of its
-------------
Amended and Restated Articles of Incorporation or 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 this 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 the Preferred Stock against impairment.
(i) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of any
share or shares of the Preferred Stock, and the number of shares of Common Stock
to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of a series of Preferred Stock the holder is
at the time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Preferred Stock pursuant to this Section 4, this
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. This Corporation shall, upon the 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 (A) such adjustment and readjustment,
(B) the Conversion Price for such series of Preferred Stock at the time in
effect, and
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(C) 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 a share of
Preferred Stock.
(j) Notices of Record Date. In the event of any taking by this
----------------------
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, this
Corporation shall mail to each holder of 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 dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(k) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
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 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,
this 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 purposes,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to these Amended and Restated
Articles of Incorporation.
(l) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of 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 this
Corporation.
5. Voting Rights.
-------------
(a) General. Except as otherwise required by law and except as
-------
required in Sections 5(b) and 6 hereof, the holders of Common Stock and
Preferred Stock shall vote together as a single class. Each holder of shares of
Common Stock shall be entitled to one vote for each share of Common Stock held
by such holder. Each holder of Preferred Stock shall be entitled to such number
of votes for the Preferred Stock held by it on the record date fixed for such
meeting, or on the effective date of such written consent, as shall be equal to
the whole number of shares of the Corporation's Common stock into which its
shares of Preferred Stock are convertible, in accordance with the terms of the
Corporation's Amended and Restated Articles of Incorporation, immediately after
the close of business on the record date fixed for such meeting or the effective
date of such written consent.
(b) Board Seats. The holders of the Common Stock, voting as a
-----------
separate class, shall be entitled to elect one (1) director of the Corporation.
The holders of the Series A Preferred
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Stock, voting as a separate class, shall be entitled to elect two (2) directors
of the Corporation. The holders of the Series B Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) directors of the Corporation.
The holders of the Series C Preferred Stock, voting as a separate class, shall
be entitled to elect one (1) director of the Corporation. The holders of
Preferred Stock and Common Stock, voting together as a single class and not as a
separate series, shall be entitled to elect any remaining directors of the
Corporation.
(c) Vacancies. In the case of any vacancy in the office of a
---------
director occurring among the directors elected by the holders of the Common
Stock, Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred
Stock pursuant to Section 5(b), the holders of a majority of shares in such
class or the remaining director so elected by such class may by affirmative vote
of a majority thereof (or the remaining director so elected), elect a successor
or successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of the Common Stock, the holders of the Series A Preferred Stock,
the holders of the Series B Preferred Stock, or the holders of the Series C
Preferred Stock or by any director so elected as provided in the next preceding
sentence hereof may be removed during the aforesaid term of office, either with
or without cause, by, and only by, the affirmative vote of the holders of a
majority of the shares of such class of stock who elected such director or
directors, given either at a special meeting of such shareholders duly called
for that purpose or pursuant to a written consent of shareholders, and any
vacancy thereby created may be filled by the holders of that class of stock
represented at such meeting or pursuant to such written consent.
6. Protective Provisions.
---------------------
(a) Except as otherwise required by law and subject to the rights
of series of Preferred Stock which may from time to time come into existence, so
long as shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock, Series
D-1 Preferred Stock, or Series E-1 Preferred Stock, are outstanding, this
Corporation shall not amend or repeal any provision of the Corporation's Amended
and Restated Articles of Incorporation if such action would materially and
adversely affect the rights, preferences, or privileges of any series of
Preferred Stock, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the total
number of shares of such series of Preferred Stock materially and adversely
affected by such action.
(b) Except as otherwise required by law and subject to the rights
of series of Preferred Stock which may from time to time come into existence, so
long as shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock, Series
D-1 Preferred Stock, or Series E-1 Preferred Stock, are outstanding, this
Corporation shall not increase or decrease (other than by redemption or
conversion) the total number of authorized shares of any series of Preferred
Stock without first obtaining the approval (by vote or
-19-
written consent, as provided by law) of the holders of at least a majority of
the total number of shares of the series of Preferred Stock sought to be
increased or decreased.
(c) Except as otherwise required by law and subject to the
rights of series of Preferred Stock which may from time to time come into
existence, so long as shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1
Preferred Stock, Series D-1 Preferred Stock, or Series E-1 Preferred Stock are
outstanding, this Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the total number of shares of Preferred Stock outstanding, undertake
any of the following actions:
(i) authorize or issue shares of any class of stock
having any preference or priority as to dividends or assets superior to, or on a
parity with, any series of Preferred Stock;
(ii) pay or declare any dividend on any securities junior
to the Preferred Stock with respect to dividends or assets;
(iii) sell, convey, liquidate, or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Corporation is
disposed of; or.
(iv) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of any series of Preferred
Stock.
7. Status of Converted Stock. In the event any shares of Preferred Stock
-------------------------
shall be converted pursuant to Section 4 hereof, the shares so converted or
redeemed shall be canceled and shall not be issuable by the Corporation. The
Amended and Restated Articles of Incorporation of this Corporation shall be
appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
8. Repurchase of Shares. In connection with repurchases by this
--------------------
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
IV.
1. The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
-20-
2. The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or disinterested
directors, or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the limits set
forth in Section 204 of the California Corporations Code with respect to actions
for breach of duty to the Corporation or its shareholders. The Corporation is
further authorized to provide insurance for agents as set forth in Section 317
of the California Corporations Code, provided that, in cases where the
Corporation owns all or a portion of the shares of the company issuing the
insurance policy, the company and/or the policy must meet one of the two sets of
conditions set forth in Section 317, as amended.
3. Any repeal or modification of the foregoing provisions of this Section
IV by the shareholders of this Corporation shall not adversely affect any right
or protection of an agent of this Corporation existing at the time of such
repeal or modification.
Three. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
Four. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of the shareholders in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of Common Stock of the Corporation is
3,017,448. The total number of outstanding shares of Preferred Stock of the
Corporation previously designated as Series A Preferred Stock is 3,150,000, the
total number of outstanding shares of Preferred Stock of the Corporation
previously designated as Series B Preferred Stock is 4,948,946, the total number
of outstanding shares of Preferred Stock of the Corporation previously
designated as Series C Preferred Stock is 3,575,000 and the total number of
outstanding shares of Preferred Stock of the Corporation previously designated
as Series D Preferred Stock is 3,552,076. There were no shares of Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock, or
Series D-1 Preferred Stock outstanding. The number of shares voting in favor of
the amendment equaled or exceeded the vote required, such required vote being a
majority
-21-
of the outstanding shares of Common Stock and a majority of the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, and Series D Preferred Stock voting together as a single class.
[Remainder of Page Intentionally Left Blank]
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I DECLARE under penalty of perjury under the laws of the State of California
that the matters set forth in this certificate are true and correct of my own
knowledge.
Executed at Menlo Park, California, this 24th day of September, 1999.
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/s/ Ronald A. Croen
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Ronald A. Croen, President and Secretary