EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
R2 TECHNOLOGY, INC.
a Delaware corporation
R2 TECHNOLOGY, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The name of this corporation is R2 Technology, Inc. The original
Certificate of Incorporation was filed with the Secretary of the State of
Delaware on August 19, 1996.
SECOND: This Amended and Restated Certificate of Incorporation of R2
Technology, Inc., has been duly adopted in accordance with the provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware by the directors and stockholders of the Corporation, and prompt
written notice was duly given pursuant to Section 228 of the General Corporation
Law of the State of Delaware to those stockholders who did not approve the
Restated Certificate of Incorporation, as so amended, by written consent.
THIRD: The Amended and Restated Certificate of Incorporation as heretofore
amended or supplemented and so adopted is hereby amended and restated now to
read in full as follows:
ARTICLE I.
The name of this corporation (hereinafter called the or this "Corporation")
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is R2 Technology, Inc.
ARTICLE II.
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, and the name of
the registered agent of this Corporation in the State of Delaware at such
address is The Corporation Trust Company.
ARTICLE III.
The purpose of this Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, Common Stock ("Common Stock") and Preferred Stock
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("Preferred Stock"). The total number of shares which this Corporation shall
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have authority to issue is one hundred forty-five million five hundred
seventy-five thousand (145,575,000) shares. Eighty million twenty-five thousand
(80,025,000) shares shall be Common Stock with a par value of $0.001 per share
and sixty-five million five hundred fifty thousand (65,550,000) shares shall be
Preferred Stock with a par value of $0.001 per share.
B. The Preferred Stock may be issued from time to time in one or more
series. The series of Preferred Stock shall be designated as and comprise the
following:
(1) 4,000,000 shares of Series A-1 Preferred Stock (the "Series A-1
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Preferred");
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(2) 4,000,000 shares of Series A-2 Preferred Stock (the "Series A-2
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Preferred");
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(3) 4,850,000 shares of Series B-1 Preferred Stock (the "Series B-1
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Preferred");
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(4) 4,850,000 shares of Series B-2 Preferred Stock (the "Series B-2
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Preferred");
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(5) 7,500,000 shares of Series C-1 Preferred Stock (the "Series C-1
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Preferred");
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(6) 7,500,000 shares of Series C-2 Preferred Stock (the "Series C-2
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Preferred");
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(7) 4,400,000 shares of Series D-1 Preferred Stock (the "Series D-1
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Preferred");
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(8) 4,400,000 shares of Series D-2 Preferred Stock (the "Series D-2
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Preferred");
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(9) 1,800,000 shares of Series E-1 Preferred Stock (the "Series E-1
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Preferred");
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(10) 1,800,000 shares of Series E-2 Preferred Stock (the "Series E-2
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Preferred");
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(11) 4,500,000 shares of Series F-1 Preferred Stock (the "Series F-1
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Preferred"); and
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(12) 4,500,000 shares of Series F-2 Preferred Stock (the "Series F-2
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Preferred").
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(13) 5,725,000 shares of Series G-1 Preferred Stock (the "Series G-1
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Preferred"); and
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(14) 5,725,000 shares of Series G-2 Preferred Stock (the "Series G-2
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Preferred").
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The remaining shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of this Corporation (the "Board of
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Directors") is expressly authorized to provide for the issuance of all or any of
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the remaining shares of the Preferred Stock in one or
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more series, and to fix the number of shares and to determine or alter for each
such series, such voting powers, full or limited, or no voting powers, and such
designations, preferences, and relative, participating, optional, or other
rights and such qualifications, limitations, or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such shares (a "Preferred Stock
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Designation") and as may be permitted by the General Corporation Law of the
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State of Delaware.
The Series A-1 Preferred, the Series A-2 Preferred and any additional
series that the Board of Directors may so designate pursuant to Section 3(e)(ii)
of Article V are hereinafter collectively referred to as the Series A Preferred
Stock ("Series A Preferred Stock"). The Series B-1 Preferred, the Series B-2
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Preferred and any additional series that the Board of Directors may so designate
pursuant to Section 3(e)(ii) of Article V are hereinafter collectively referred
to as the Series B Preferred Stock ("Series B Preferred Stock"). The Series C-1
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Preferred, the Series C-2 Preferred and any additional series that the Board of
Directors may so designate pursuant to Section 3(e)(ii) of Article V are
hereinafter collectively referred to as the Series C Preferred Stock ("Series C
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Preferred Stock"). The Series D-1 Preferred, the Series D-2 Preferred and any
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additional series that the Board of Directors may so designate pursuant to
Section 3(e)(ii) of Article V are hereinafter collectively referred to as the
Series D Preferred Stock ("Series D Preferred Stock"). The Series E-1 Preferred,
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the Series E-2 Preferred and any additional series that the Board of Directors
may so designate pursuant to Section 3(e)(ii) of Article V are hereinafter
collectively referred to as the Series E Preferred Stock ("Series E Preferred
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Stock"). The Series F-1 Preferred, the Series F-2 Preferred and any additional
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series that the Board of Directors may so designate pursuant to Section 3(e)(ii)
of Article V are hereinafter collectively referred to as the Series F Preferred
Stock ("Series F Preferred Stock"). The Series G-1 Preferred, the Series G-2
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Preferred and any additional series that the Board of Directors may so designate
pursuant to Section 3(e)(ii) of Article V are hereinafter collectively referred
to as the Series G Preferred Stock ("Series G Preferred Stock").
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The Board of Directors is also expressly authorized to increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any series other than the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock
subsequent to the issuance of shares of that series. In case the number of
shares of any such series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V.
The powers, rights, preferences, privileges and restrictions relating to
the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred Stock,
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Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock
shall be entitled to receive dividends, out of any assets legally available
therefor, prior and in preference to any declaration or payment of any dividend
on the Common Stock of this Corporation, at the rate of $0.08, $0.16, $0.16,
$0.20,
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$0.26, $0.30 and $0.32 per share per annum, respectively (as adjusted for any
stock dividends, combinations or splits), or, if greater (as determined on a per
annum. basis and on an as converted basis for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock,
respectively), an amount equal to that paid on any other outstanding shares of
this Corporation. Such dividends shall be payable when, as and if declared by
the Board of Directors, and shall not be cumulative, and no right shall accrue
to holders of Common Stock or Preferred Stock by reason of the fact that
dividends on said shares are not declared in any preceding period.
2. Liquidation Preference.
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(a) Preferred Preference. In the event of any liquidation, dissolution
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or winding up of this Corporation, either voluntary or involuntary, the holders
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series G Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets of this Corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal to
(i) one dollar ($1.00), (ii) two dollars ($2.00), (iii) two dollars ($2.00),
(iv) two dollars and fifty cents ($2.50), (v) three dollars and twenty-five
cents ($3.25), (vi) three dollars and seventy five cents ($3.75) and (vii) four
dollars ($4.00) respectively, (as adjusted for any stock dividends, combinations
or splits), for each outstanding share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, plus an
amount equal to any declared but unpaid dividends on such share up to the date
fixed for distribution. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire assets and funds of this Corporation
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the full preferential amount
each such holder is otherwise entitled to receive.
(b) Distribution of Remaining Assets.
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(i) If the total assets available for distribution to stockholders
are determined, prior to the distributions under Section 2(a) hereof, to be less
than the product obtained by multiplying the Series G Preferred Stock preference
amount of $4.00 (as adjusted for any stock dividends, combination or splits) by
the number of shares of Common Stock outstanding (including all outstanding
shares of Preferred Stock on an as-if-converted basis), then after the
distributions under Section 2(a) hereof have been made to the holders of shares
of Preferred Stock which have not been previously converted pursuant to Section
3(a) or 3(b), the remaining assets of the Corporation available for distribution
to stockholders shall be distributed pro rata among the holders of Common Stock
and Preferred Stock (on an as-if-converted basis).
(ii) If the total assets available for distribution to stockholders
are determined, prior to the distributions under Section 2(a) hereof, to be
equal to or greater than the
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product obtained by multiplying the Series G Preferred Stock preference amount
of $4.00 (as adjusted for any stock dividends, combination or splits) by the
number of shares of Common Stock outstanding (including all outstanding shares
of Preferred Stock on an as-if-converted basis), then after the distributions
under Section 2(a) hereof have been made to the holders of shares of Preferred
Stock which have not previously been converted pursuant to Section 3(a) or 3(b),
the remaining assets of the Corporation available for distribution to
stockholders shall be distributed pro rata among the holders of Common Stock
only.
(c) Mergers. A merger, reorganization, or sale of all or
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substantially all of the assets of this Corporation in which the stockholders of
this Corporation immediately prior to the transaction do not possess greater
than 50% of the voting power of the surviving (or acquiring) entity (or its
parent) immediately after the transaction shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2; provided that
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the holders of Preferred Stock and Common Stock shall be paid in cash or in
securities received or in a combination thereof (which combination shall be in
the same proportions as the consideration received in the transaction). Any
securities to be delivered to the holders of the Preferred Stock and Common
Stock upon a merger, reorganization or sale of all or substantially all the
assets of the Corporation shall be valued as follows:
(i) if traded on a securities exchange, the value shall be deemed
to be the average of the closing prices of the securities on such exchange over
the thirty (30) day period ending three (3) business days prior to the closing;
(ii) if actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid prices over the thirty (30) day period
ending three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be the
fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of Preferred
Stock, provided that if the Corporation and the holders of a majority of the
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outstanding shares of Preferred Stock are unable to reach agreement, then the
value shall be as determined in an independent appraisal by an investment banker
hired and paid by the Corporation, which banker is acceptable to the holders of
a majority of the outstanding shares of Preferred Stock.
Nothing in this Section 2 shall limit the right of any holder of Preferred
Stock to elect to convert any of such shares into Common Stock as set forth in
Section 3 prior to any merger, reorganization or sale of assets.
3. Conversion. The holders of Preferred Stock shall have conversion rights
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as follows (the "Conversion Rights"):
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(a) Right to Convert. Each share of Preferred Stock shall be
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convertible into share(s) of Common Stock without the payment of any additional
consideration by the holder thereof and, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Preferred Stock. Each share of each
series of Preferred Stock shall be convertible into the number of fully paid and
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nonassessable shares of Common Stock which results from dividing the Conversion
Price (as hereinafter defined) per share in effect for such series of Preferred
Stock at the time of conversion into the per share Conversion Value (as
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hereinafter defined) of such series of Preferred Stock. The number of share(s)
of Common Stock into which a share of a series of Preferred Stock is convertible
is hereinafter referred to as the "Conversion Rate" of such series.
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(i) The initial Conversion Price per share of the Series A-1
Preferred shall be $0.90, and the Conversion Value per share of the Series A-1
Preferred shall be $1.00; the initial Conversion Price per share of the Series
A-2 Preferred shall be $0.90, and the Conversion Value per share of the Series
A-2 Preferred shall be $1.00;
(ii) the initial Conversion Price per share of the Series B-1
Preferred shall be $1.65, and the Conversion Value per share of the Series B-1
Preferred shall be $2.00; the initial Conversion Price per share of the Series
B-2 Preferred shall be $1.65, and the Conversion Value per share of the Series
B-2 Preferred shall be $2.00;
(iii) the initial Conversion Price per share of the Series C-1
Preferred shall be $2.00, and the Conversion Value per share of the Series C-1
Preferred shall be $2.00; the initial Conversion Price per share of the Series
C-2 Preferred shall be $2.00, and the Conversion Value per share of the Series
C-2 Preferred shall be $2.00;
(iv) the initial Conversion Price per share of the Series D-1
Preferred shall be $2.50, and the Conversion Value per share of the Series D-1
Preferred shall be $2.50; the initial Conversion Price per share of the Series
D-2 Preferred shall be $2.50, and the Conversion Value per share of the Series
D-2 Preferred shall be $2.50;
(v) the initial Conversion Price per share of the Series E-1
Preferred shall be $3.25, and the Conversion Value per share of the Series E-1
Preferred shall be $3.25; the initial Conversion Price per share of the Series
E-2 Preferred shall be $3.25, and the Conversion Value per share of the Series
E-2 Preferred shall be $3.25;
(vi) the initial Conversion Price per share of the Series F-1
Preferred shall be $3.75, and the Conversion Value per share of the Series F-1
Preferred shall be $3.75; the initial Conversion Price per share of the Series
F-2 Preferred shall be $3.75, and the Conversion Value per share of the Series
F-2 Preferred shall be $3.75; and
(vii) the initial Conversion Price per share of the Series G-1
Preferred shall be $4.00, and the Conversion Value per share of the Series G-1
Preferred shall be $4.00; the initial Conversion Price per share of the Series
G-2 Preferred shall be $4.00, and the Conversion Value per share of the Series
G-2 Preferred shall be $4.00.
The Conversion Price of the Series A-1 Preferred, the Series A-2 Preferred, the
Series B-1 Preferred, the Series B-2 Preferred, the Series C-1 Preferred, the
Series C-2 Preferred, the Series D-1 Preferred, the Series D-2 Preferred, the
Series E- 1 Preferred, the Series E-2 Preferred, the Series F- 1 Preferred, the
Series F-2 Preferred, the Series G-1 Preferred and the Series G-2 Preferred
shall be subject to adjustment from time to time as provided below. Upon
conversion, all declared and unpaid dividends on the Preferred Stock shall be
paid.
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(b) Automatic Conversion. Each share of Preferred Stock shall
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automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (A) the public offering price equals or exceeds $4.50 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (B) the aggregate proceeds raised equals or exceeds
$20,000,000 or (ii) at any time, upon the affirmative election of the holders of
at least a majority of the outstanding shares of the Preferred Stock, voting
together as a single class.
(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, he, she or it
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he or she
elects to convert the same (except that no such written notice of election to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 3(b) hereof). The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled 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 (except that in the case of an
automatic conversion pursuant to Section 3(b)(i) hereof such conversion shall be
deemed to have been made immediately prior to the closing of the offering
referred to in Section 3(b)(i)) 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.
(d) Fractional Shares. In lieu of any fractional shares to which the
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holder of Preferred Stock would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the fair market value of one share of
such series of Preferred Stock as determined by the Board of Directors. Whether
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock of each holder to be
converted at such time into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price.
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(i) Special Definitions. For purposes of this paragraph 3(e), the
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following definitions shall apply:
(1) The term "Excluded Stock" shall mean:
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(A) all shares of Common Stock issued and outstanding as of
November 29, 2001, and all shares of Common Stock issued or issuable upon
conversion of Preferred Stock;
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(B) up to 10,000,000 shares in the aggregate of Common
Stock, warrants or options to purchase Common Stock or other securities issued
or issuable to officers, directors, consultants or employees of the Corporation
pursuant to any plan or other arrangement approved by the Board of Directors;
(C) all shares of Series A-2 Preferred, Series B-2
Preferred, Series C-2 Preferred, Series D-2 Preferred, Series E-2 Preferred,
Series F-2 Preferred and Series G-2 Preferred issued or issuable upon conversion
respectively of Series A-1 Preferred, Series B-1 Preferred, Series C-1
Preferred, Series D-1 Preferred, Series E-1 Preferred, Series F-1 Preferred and
Series G-1 Preferred;
(D) a warrant to purchase 250,000 shares of Common Stock
issued or issuable to Arch Development Corporation;
(E) a warrant to purchase up to 127,192 shares of Common
Stock issued to the firm of Heidrick and Struggles;
(F) warrants to purchase 67,000 shares of Series F-1
Preferred Stock and the Common Stock issuable upon the exercise or conversion
thereof; and
(G) warrants to purchase up to an aggregate of 1,350,000
shares of Series G-1 Preferred Stock and the Common Stock issuable upon the
exercise or conversion thereof.
(2) The term "Financing" shall mean any issuance of Common Stock
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(including all securities ultimately exercisable for, or convertible into,
Common Stock), other than Excluded Stock, in a transaction in which holders of
Series A-1 Preferred, Series B-1 Preferred, Series C-1 Preferred, Series D-1
Preferred, Series E-1 Preferred, Series F-1 Preferred and Series G-1 Preferred
are offered an opportunity to purchase his, her or its respective Preferred
Stock Pro Rata Share (as defined hereinafter) of such issuance.
(3) The term "Common Stock Equivalents" shall mean the number of
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ultimately underlying shares of Common Stock (whether originally in the form of
Common Stock or securities ultimately exercisable for, or convertible into,
Common Stock) available for issuance as part of any Financing.
(4) The term "Preferred Stock Pro Rata Share" shall mean the
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amount of securities determined by multiplying the total number of shares of
Common Stock Equivalents offered for sale by the Corporation in a Financing to
the holders of Series A-1 Preferred, Series B-1 Preferred, Series C-1 Preferred,
Series D-1 Preferred, Series E-1 Preferred, Series F-1 Preferred and Series G-1
Preferred by a fraction, (x) the numerator of which is the total number of
shares of Series A-1 Preferred, Series B-1 Preferred, Series C-1 Preferred,
Series D-1 Preferred, Series E-1 Preferred, Series F-1 Preferred and Series G-1
Preferred (all on an as-if-converted basis) held by such holder and (y) the
denominator of which is the total number of shares of Common Stock then
outstanding (including securities ultimately convertible into, or exercisable
for, Common Stock).
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(5) The term "Series A Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series A-1 Preferred in effect on the date of and immediately prior
to such issuance.
(6) The term "Series B Dilutive Issuance shall mean an issuance
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of Common Stock Equivalents in a Financing for a minimum consideration per share
of the ultimately underlying Common Stock less than the Conversion Price of the
Series B-1 Preferred in effect on the date of and immediately prior to such
issuance.
(7) The term "Series C Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series C-1 Preferred in effect on the date of and immediately prior
to such issuance.
(8) The term "Series D Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series D-1 Preferred in effect on the date of and immediately prior
to such issuance.
(9) The term "Series E Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series E-1 Preferred in effect on the date of and immediately prior
to such issuance.
(10) The term "Series F Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series F-1 Preferred in effect on the date of and immediately prior
to such issuance.
(11) The term "Series G Dilutive Issuance" shall mean an
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issuance of Common Stock Equivalents in a Financing for a minimum consideration
per share of the ultimately underlying Common Stock less than the Conversion
Price of the Series G-1 Preferred in effect on the date of and immediately prior
to such issuance.
(12) The term "Participating Holder" shall mean any holder of
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Series A-1 Preferred which purchases at least its Preferred Stock Pro Rata Share
of a Series A Dilutive Issuance, any holder of Series B-1 Preferred which
purchases at least its Preferred Stock Pro Rata Share of a Series B Dilutive
Issuance, any holder of Series C-1 Preferred which purchases at least its
Preferred Stock Pro Rata share of a Series C Dilutive Issuance, any holder of
Series D-1 Preferred which purchases at least its Preferred Stock Pro Rata share
of a Series D Dilutive Issuance, any holder of Series E-1 Preferred which
purchases at least its Preferred Stock Pro Rata share of a Series E Dilutive
Issuance, any holder of Series F-1 Preferred which purchases at least its
Preferred Stock Pro Rata share of a Series F Dilutive Issuance and any holder of
Series G-1 Preferred which purchases at least its Preferred Stock Pro Rata share
of a Series G Dilutive Issuance.
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(13) The term "Non-Participating Holder" shall mean any holder
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of Series A-1 Preferred, Series B-1 Preferred, Series C-1 Preferred, Series D-1
Preferred, Series E-1 Preferred, Series F-1 Preferred and Series G-1 Preferred
which is not a Participating Holder.
(ii) Shadow Preferred.
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(1) In the event the Corporation shall issue Common Stock
(including securities ultimately convertible to, or exercisable for, Common
Stock) for a minimum consideration per share of the ultimately underlying Common
Stock less than the Conversion Price of the Series A-1 Preferred Stock, Series
B-1 Preferred, Series C-1 Preferred, Series D-1 Preferred, Series E-1 Preferred,
Series F-1 Preferred, or Series G-1 Preferred, on the date of and immediately
prior to such issuance, the Corporation shall deliver to each holder of at least
250,000 shares of Preferred Stock (a "Major Investor") a written notice of its
intention to issue such securities at least twenty (20) business days prior to
the anticipated on which such securities are first issued (the "Financing
Closing Date"). Such notice shall describe the type and price of the securities
to be issued, the general terms upon which the Corporation proposes to issue
such securities, and whether such issuance is a Series A Dilutive Issuance,
Series B Dilutive Issuance, Series C Dilutive Issuance, Series D Dilutive
Issuance, Series E Dilutive Issuance, Series F Dilutive Issuance or a Series G
Dilutive Issuance. Each Major Investor may secure its right to purchase its
Preferred Stock Pro Rata Share of such securities by delivering a written notice
to the Corporation of its election to so purchase such securities within 20
(twenty) business of its receipt of such notice.
(2) In the event the Corporation issues Common Stock
Equivalents in a Series A Dilutive Issuance, each share of Series A-1 Preferred
held by each and every Non-Participating Holder shall, immediately prior to the
closing of the applicable Series A Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series A-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series A-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(3) In the event the Corporation issues Common Stock
Equivalents in a Series B Dilutive Issuance, each share of Series B-1 Preferred
held by each and every Non-Participating Holder shall, immediately prior to the
closing of the applicable Series B Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series B-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series B-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(4) In the event the Corporation issues Common Stock
Equivalents in a Series C Dilutive Issuance, each share of Series C-1 Preferred
held by each and every Non-Participating Holder shall, immediately prior to the
closing of the applicable Series C Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series C-2 Preferred or (b) any
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subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series C-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(5) In the event the Corporation issues Common Stock
Equivalents in a Series D Dilutive Issuance, each share of Series D-1 Preferred
held by each and every Non-Participating Holder shall, immediately prior to the
closing of the applicable Series D Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series D-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series D-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(6) In the event the Corporation issues Common Stock
Equivalents in a Series E Dilutive Issuance, each share of Series E-1 Preferred
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series E Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series E-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series E-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(7) In the event the Corporation issues Common Stock
Equivalents in a Series F Dilutive Issuance, each share of Series F-1 Preferred
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series F Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series F-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series F-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(8) In the event the Corporation issues Common Stock
Equivalents in a Series G Dilutive Issuance, each share of Series G-1 Preferred
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series G Dilutive Issuance, be automatically converted
into (a) the first time shares are converted pursuant to this clause 3(e)(ii),
one fully paid and nonassessable share of Series G-2 Preferred or (b) any
subsequent time shares are converted pursuant to this clause 3(e)(ii), one share
of Preferred Stock designated Series G-(X) Preferred Stock where X is the next
integer following the last series so issued hereunder.
(9) Upon the conversion of Series A-1 Preferred, Series B-1
Preferred, Series C-1 Preferred, Series D-1 Preferred, Series E-1 Preferred,
Series F-1 Preferred and Series G-1 Preferred held by a Non-Participating Holder
as set forth herein, such shares of Series A-1 Preferred, Series B-1 Preferred,
Series C-1 Preferred, Series D-1 Preferred, Series E-1 Preferred, Series F-1
Preferred and Series G-1 Preferred shall no longer be outstanding on the books
of the Corporation and the Non-Participating Holder shall be treated for all
purposes as the record holder of such shares of Series A-2 Preferred, Series B-2
Preferred, Series C-2 Preferred,
11
Series D-2 Preferred, Series E-2 Preferred, Series F-2 Preferred and Series G-2
Preferred on the date of the closing of the applicable Series A Dilutive
Issuance, Series B Dilutive Issuance, Series C Dilutive Issuance, Series D
Dilutive Issuance, Series E Dilutive Issuance, Series F-1 Dilutive Issuance or
Series G Dilutive Issuance, as the case may be. The Corporation shall, as soon
as practicable following the return to the Corporation of certificates
representing such converted shares of Series A-1 Preferred, Series B-1
Preferred, Series C-1 Preferred, Series D-1 Preferred, Series E-1 Preferred,
Series F-1 Preferred and Series G-1 Preferred issue and deliver to such holder
of such converted shares of Preferred Stock a certificate or certificates for
the number of shares of Series A-2 Preferred, Series B-2 Preferred, Series C-2
Preferred, Series D-2 Preferred, Series E-2 Preferred, Series F-2 Preferred and
Series G-2 Preferred to which such holder shall be entitled as aforesaid.
(iii) Adjustment of Conversion Price for Issuance of Common Stock.
-----------------------------------------------------------
Except in the event of stock dividends, subdivisions, split-ups, combinations or
recapitalizations which are covered by Sections 3(e)(iv), (v), (vi) and (vii),
no adjustment in the Conversion Price of Series A-2 Preferred, Series B-2
Preferred, Series C-2 Preferred, Series D-2 Preferred, Series E-2, Series F-2
Preferred or Series G-2 Preferred shall be made in connection with a Financing.
The respective Conversion Price(s) of Series A-1 Preferred, Series B-1
Preferred, Series C-1 Preferred, Series D-1 Preferred, Series E-1 Preferred,
Series F-1 Preferred and Series G-1 Preferred shall be subject to adjustment
from time to time as follows:
If the Corporation shall issue, or is deemed to issue, additional shares of
Common Stock Equivalents, for a consideration per share less than the Conversion
Price for a series of Preferred Stock in effect immediately prior to such
issuance (excluding stock dividends, subdivisions, split-ups, combinations,
dividends or recapitalizations which are covered by Sections 3(e)(iv), (v), (vi)
and (vii)), the Conversion Price in effect immediately after each such issuance
shall forthwith (except as otherwise provided in this Section 3(e)) be adjusted
to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
------ ---
(x) the total number of shares of Common Stock
outstanding (including the number of shares of Common Stock issuable in
connection with outstanding securities ultimately convertible into, or
exercisable for, Common Stock) immediately prior to such issuance multiplied by
----------
the Conversion Price in effect immediately prior to such issuance, plus
----
(y) the aggregate consideration received by the
Corporation upon such issuance, by
--
(B) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock issuable in connection with
outstanding securities ultimately convertible into, or exercisable for, Common
Stock) immediately prior to such issuance plus the additional shares of Common
----
Stock Equivalents issued, or deemed to be issued, as part of the Financing (but
not including any additional shares of Common Stock deemed to be issued as a
result of any adjustment in the Conversion Price resulting from such issuance).
12
For the purposes of this clause 3(e)(iii), the following provisions shall
be applicable:
(1) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor after
deducting any discounts or commissions paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(2) 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 market value thereof as determined by the
Board of Directors, in accordance with generally accepted accounting treatment;
provided, however, that if, at the time of such determination, the Common Stock
- --------
is traded in the over-the-counter market or on a national or regional securities
exchange, such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as defined hereinbelow) of the
shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase
or rights to subscribe for Common Stock (other than Excluded Stock), (ii)
securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities (other than Excluded Stock):
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise 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 subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
----
minimum purchase price provided in such options or rights for the underlying
Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange 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 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
subdivisions (1) and (2) above);
(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or conversion of
or exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price shall forthwith
13
be readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change or (y) the options or rights related to such securities
not converted or exchanged prior to such change, as the case may be, been made
upon the basis of such change; and
(D) on 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 shall forthwith be readjusted to such Conversion Price as
would have obtained had the adjustment made upon the issuance of such options,
rights, convertible or exchangeable securities or options or rights related to
such convertible or exchangeable securities, as the case may be, been made upon
the basis of the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such convertible or exchangeable securities or upon the exercise of
the options or rights related to such convertible or exchangeable securities, as
the case may be.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Conversion Price
of each series of Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of any shares of such
series of Preferred Stock shall be increased in proportion to such increase of
outstanding shares.
(v) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of each series of Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
any shares of such series of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(vi) In case the Corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of this capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of each series of Preferred Stock shall, concurrent with the distribution
to holders of Common Stock, receive a like distribution based upon the number of
shares of Common Stock into which such series of Preferred Stock is convertible.
(vii) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into another
person (other than a consolidation or merger in which the
14
Corporation is the continuing entity and which does not result in any change in
the Common Stock), or of the sale or other disposition of all or substantially
all the properties and assets of the Corporation, the shares of a series of
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the Corporation
or otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of such series of Preferred Stock into
Common Stock. The provisions of this clause 3(e)(vii) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(viii) All calculations under this Section 3 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the case may
be.
(ix) For the purpose of any computation pursuant to this Section
3(e), the term "Current Market Price" at any date of one share of Common Stock,
--------------------
shall be deemed to be the average of the highest reported bid and the lowest
reported offer prices on the preceding business day as furnished by the National
Quotation Bureau, Incorporated (or equivalent recognized source of quotations);
provided, however, that if the Common Stock is not traded in such manner that
- --------
the quotations referred to in this clause (ix) are available for the period
required hereunder, Current Market Price shall be determined in good faith by
the Board of Directors, but if challenged by the holders of greater than fifty
percent (50%) of the outstanding Preferred Stock, then as determined by an
independent appraiser selected by the Board of Directors, the cost of such
appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need be
-------------------
made if such adjustment would result in a change in the Conversion Price of less
than $0.01. Any adjustment of less than $0.01 which is not made shall be carried
forward and shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or
more in the Conversion Price.
(g) No Impairment. Without the consent of the majority of the
-------------
outstanding shares of Preferred Stock, the Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 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 Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of any Conversion Rate pursuant to this Section 3,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is; based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments
15
and readjustments, (ii) the Conversion Rate of such series 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 conversions of such
holder's shares of Preferred Stock.
(i) Notices of Record Date. Upon (i) any taking by the Corporation of
----------------------
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any merger, reorganization, or sale of all or
substantially all of the assets of the Corporation in which the stockholders of
the Corporation immediately prior to the transaction possess less than fifty
percent (50%) of the voting power of the surviving entity (or its parent)
immediately after the transaction, any reclassification or recapitalization of
the capital stock of the Corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least ten (10) days prior to the
record date specified therein a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
In the event of any transaction which would constitute a liquidation giving
rise to the liquidation rights set forth in Section 2 hereof, the Corporation's
notice of such transaction required by this Section 3(i) above shall include a
calculation of the amount that would be distributed to the holders of each share
of Preferred Stock through application of the provisions of Section 2 hereof, as
well as a calculation of the amount that would be distributed to the holders of
each share of Preferred Stock if all outstanding shares of Preferred Stock were
converted to Common Stock prior to the transaction pursuant to the conversion
rights set forth in Section 3 hereof. The purpose of the foregoing calculation
shall be to enable the holders of Preferred Stock to determine the amount
receivable by the holders of each respective series in the event of such a
transaction, and to determine the advisability of exercising the optional
conversion rights set forth in Section 3.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of 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 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 Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this Section 3
-------
to be given to a holder of shares of Preferred Stock shall be deemed given three
business days after
16
deposit in the United States mail, postage prepaid, and addressed to each holder
of record at his address appearing on the books of the Corporation.
(l) Reissuance of Converted Shares. No shares of Preferred Stock which
------------------------------
have been converted into Common Stock or into another series of Preferred Stock
pursuant to Section 3(e)(ii) above following the original issuance thereof,
shall ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of Preferred Stock of the
Corporation.
4. Redemption Rights.
-----------------
(a) Redemption at the Holders' Option. In the event that the holders
---------------------------------
of a majority of the outstanding shares of each of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock,
with each series voting separately, give written notice to the Corporation of a
demand for redemption of the Preferred Stock, the Corporation will in accordance
with this Section 4, repurchase such shares of Preferred Stock. However, should
the holders of a majority of any series of Preferred Stock not vote in favor of
the redemption of the Preferred Stock, then no shares of Preferred Stock shall
be redeemed. Any demand for redemption may be exercised at any time after
February 15, 2003 and by giving at least 120 days' notice prior to the date of
commencement of the redemption (the "Redemption Date") by certified or
---------------
registered mail, postage prepaid, to the Corporation at its principal office.
After receipt of such notice of a redemption pursuant to this Section 4(a), the
Corporation shall, to the extent it may lawfully do so, redeem all of the
outstanding shares of Preferred Stock to be redeemed in twelve equal
installments on the last day of each calendar quarter (commencing with the first
calendar quarter ending after the 120 day notice period). The Redemption Price
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock and Series G Preferred Stock shall be $1.00, $2.00, $2.00, $2.50, $3.25,
$3.75 and $4.00 per share, respectively (as adjusted for any stock dividends,
combinations or splits) plus all declared and unpaid dividends thereon to and
including the applicable Redemption Date. Any redemption of only a part of the
outstanding Preferred Stock by the Corporation pursuant to this Section 4 shall
be pro rata as among each series of Preferred Stock (based on the total number
of shares of Common Stock issuable upon conversion of such series of Preferred
Stock) and within each series as among the holders of such series of Preferred
Stock (based on the number of shares of such series owned by such holders).
(b) Notice Regarding Redemption. At least thirty (30) but no greater
---------------------------
than sixty (60) days prior to any Redemption Date, written notice shall be
mailed, postage prepaid, to each holder of record (determined at the close of
business on the business day next preceding the day on which notice is given) of
Preferred Stock to be redeemed, at such holder's post office address last shown
on the records of the Corporation, notifying such holder of the redemption of
such shares, specifying the Redemption Date, the Redemption Price and the date
on which such holder's Conversion Rights (as hereinafter defined) as to such
shares terminate (such Conversion Rights to expire on the day prior to the
Redemption Date) and calling upon such holder to surrender to the Corporation,
in the manner and at the place designated in the continental United States, such
holder's certificate or certificates representing the shares to be redeemed
(such notice is hereinafter referred to as the "Redemption Notice"). Unless such
-----------------
holder elects to
17
convert such shares in accordance with Section 3 prior to the Redemption Date,
on or after the Redemption Date, each holder of Preferred Stock to be redeemed
shall surrender such holder's certificate or certificates representing such
shares to the Corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on or prior to the Redemption Date, the funds necessary
for such redemption shall have been set aside by the Corporation and deposited
with a bank or trust company, for the benefit of the holders of Preferred Stock
whose shares are being redeemed, then from and after the close of business on
the Redemption Date, all rights of the holders of such shares as holders of
Preferred Stock of the Corporation (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(c) Trust Fund. On or prior to the Redemption Date, the Corporation
----------
may deposit the Redemption Price of all shares of Preferred Stock designated for
redemption in the Redemption Notice and not yet redeemed or converted with a
bank or trust company as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed or converted. Any
monies so deposited by the Corporation pursuant to this Section 4(c) for the
redemption of shares thereafter converted into shares of Common Stock pursuant
to Section 3 hereof no later than the close of business on the Redemption Date
shall be returned to the Corporation forthwith upon such conversion. The balance
of any monies deposited by the Corporation pursuant to this Section 4(c)
remaining unclaimed at the expiration of one (1) year following the Redemption
Date shall thereafter be returned to the Corporation upon its request expressed
in a resolution of the Board of Directors, provided that the stockholder to whom
--------
such monies would be payable hereunder shall be entitled, upon surrender of his
certificates representing such shares of Preferred Stock to the Corporation, to
receive such monies but without interest from the Redemption Date.
(d) Insufficient Funds. If the funds of the Corporation legally
------------------
available for redemption of Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the shares of Preferred Stock ratably among the holders in accordance
with the last sentence of Section 4(a) hereof. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
Preferred Stock, such funds will be immediately used to redeem the balance of
the shares of Preferred Stock which the Corporation became obligated to redeem
on such Redemption Date but which it has not yet redeemed.
5. Voting Rights.
-------------
(a) Generally. Except as otherwise required by law and provided in
---------
Section 5(b), the holder of each share of Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
each share of Preferred Stock could be converted on the record date for the vote
or consent of stockholders and shall have voting
18
rights and powers equal to the voting rights and powers of the Common Stock. The
holder of each share of Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation and upon
any other matter submitted to a vote of stockholders, except those matters
provided herein or required by law to be submitted to a class vote. Fractional
votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares of Common Stock
into which shares of Preferred Stock held by each holder could be converted)
shall be rounded to the nearest whole number (with one-half rounded upward to
one).
(b) Election of Directors. The authorized number of directors for the
---------------------
Board of Directors is set at nine (9). As long as an aggregate of two million
(2,000,000) shares of Series A Preferred Stock are outstanding, at each election
of directors, the holders of the then outstanding shares of Series A Preferred
Stock, voting as a separate class, shall be entitled to elect two members of the
Board of Directors. As long as an aggregate of two million (2,000,000) shares of
Series B Preferred Stock are outstanding, at each election of directors, the
holders of the then outstanding shares of Series B Preferred Stock, voting as a
separate class, shall be entitled to elect one member of the Board of Directors.
As long as an aggregate of two million (2,000,000) shares of Series C Preferred
Stock are outstanding, at each election of directors, the holders of the then
outstanding shares of Series C Preferred Stock, voting as a separate class,
shall be entitled to elect one member of the Board of Directors. As long as an
aggregate of two million (2,000,000) shares of Series D Preferred Stock are
outstanding, at each election of directors, the holders of the then outstanding
shares of Series D Preferred Stock, voting as a separate class, shall be
entitled to elect one member of the Board of Directors. The holders of the then
outstanding Common Stock shall be entitled to elect the remaining members of the
Corporation's Board of Directors. As long as an aggregate of two million
(2,000,000) shares of Series G Preferred Stock is outstanding, the holders of
outstanding Series G Preferred Stock, voting as a separate class, shall be
entitled to elect one member of the Corporation's Board of Directors. Subject to
Section 144 of the General Corporation Law of the State of Delaware, any
director who shall have been elected by a specified group of stockholders may be
removed during the aforesaid term of office, either for or without cause, by,
and only by, the affirmative vote of the holders of a majority of the shares of
such specified group, given at a special meeting of such stockholders duly
called or by an action by written consent for that purpose. Any vacancy in the
Board of Directors caused by the removal, resignation or death of any such
director who shall have been elected by a specified group of stockholders or the
declaration by the Board of Directors that the office of such director is vacant
because such director has been declared of unsound mind by a court or convicted
of a felon, may be filled by, and only by, the vote of the holders of a majority
of the shares of such specified group given at a special meeting of such
stockholders or by an action by written consent.
6. Protective Provisions.
---------------------
(a) In addition to any other class vote that may be required by law,
so long as any shares of 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 then outstanding
shares of Preferred Stock (voting as a single class):
19
(i) authorize or issue, or obligate itself to issue, any other
equity security senior to or on a parity with the Preferred Stock as to dividend
or redemption rights, liquidation preferences, conversion rights, voting rights
or otherwise, or create any obligation or security convertible into or
exchangeable for, or having any option right to purchase, any such equity
security which is senior to or on a parity with the Preferred Stock;
(ii) amend or repeal any provision of, or add any provision to,
the Corporation's Amended and Restated Certificate of Incorporation or its
Bylaws, or increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Preferred Stock of the Corporation or the
total number of shares of Preferred Stock designated Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock or Series G Preferred Stock;
(iii) effect any sale or other conveyance of all or
substantially all of the assets of the Corporation or any of its subsidiaries,
or any consolidation or merger involving the Corporation or any of its
subsidiaries;
(iv) effect any liquidation, dissolution, reclassification,
recapitalization or reorganization with respect to the Corporation or any of its
outstanding equity securities;
(v) pay or declare any dividend or distribution on any shares
of Common Stock;
(vi) apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, of any shares of any Preferred
Stock (other than pursuant to Section 4) or any class or series of Common Stock,
except at cost from employees, advisors, officers, directors and consultants of,
and persons performing services for, this Corporation or its subsidiaries on
terms approved by the Board of Directors upon termination of employment or
association;
(vii) increase or decrease the authorized number of directors
for the Board of Directors, which is currently set at nine (9);
(viii) amend or modify any stock option or purchase plan to
increase the authorized number of shares subject thereto or implement any new
stock option or purchase plan; or
(ix) transfer or grant any rights with respect to the
Corporation's technology other than license agreements entered into in
connection with the sale of the Corporation's products in the ordinary course of
business.
(b) In addition to any other rights provided by law, so long as any
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock or Series G Preferred Stock shall be outstanding, this Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of not less than a majority of the then outstanding shares of the series
of Preferred Stock so affected:
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(i) alter or change the rights, preferences, privileges or
restrictions of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock or Series G Preferred Stock, as the case may be, in a manner
which would affect such series adversely;
(ii) create any equity security which has rights, preferences or
privileges senior to or on a parity with the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock or Series G Preferred Stock, as the
case may be; or
(iii) issue or obligate itself to issue any shares of Series A-2
Preferred Stock, Series B-2 Preferred Stock, Series C-2 Preferred Stock, Series
D-2 Preferred Stock, Series E-2 Preferred Stock, Series F-2 Preferred Stock or
Series G-2 Preferred Stock, except in accordance with Section 3(e)(ii).
ARTICLE VI.
The Corporation reserves the right to amend, alter, change, or repeal any
provisions contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon the stockholders herein are granted subject to this right.
ARTICLE VII.
The Corporation is to have perpetual existence.
ARTICLE VIII.
1. Limitation of Liability. To the fullest extent permitted by the General
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Corporation Law of the State of Delaware as the same exists or as may hereafter
be amended, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
2. Indemnification. The Corporation may indemnify to the fullest extent
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permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.
3. Amendments. Neither any amendment nor repeal of this Article VIII, nor
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the adoption of any provision of the Corporation's Amended and Restated
Certificate of Incorporation inconsistent with this Article VIII, shall
eliminate or reduce the effect of this Article VIII, in respect of any matter
occurring, or any action or proceeding accruing or arising or that, but for this
Article VIII, would accrue or arise, prior to such amendment, repeal, or
adoption of an inconsistent provision.
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ARTICLE IX.
In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the Corporation.
ARTICLE X.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
FOURTH: The foregoing Amendment and Restatement of the Certificate of
Incorporation has been duly approved by the Board of Directors.
FIFTH: The stockholders of the Corporation have approved this Amendment and
Restatement of the Certificate of Incorporation in accordance with Sections 242
and 245 of the General Corporation Law of the State of Delaware. The number of
shares voting in favor of the foregoing amendment equaled or exceeded the vote
required.
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We declare under penalty of perjury under the laws of the State of Delaware
that the matters set forth in this Amended and Restated Certificate of
Incorporation of R2 Technology, Inc., are true and correct of our own knowledge.
Executed at Menlo Park, California, on this 30th day of November 2001.
/s/ Michael Klein
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Michael S. Klein, President
/s/ Alan Mendelson
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Alan C. Mendelson, Secretary