Certificate of Incorporation
Of
Allaire Corporation
FIRST: The name of the corporation is Allaire Corporation (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New
Castle, and the name of its registered agent at such address is Corporation
Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
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.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue shall be 15,000,000, consisting of
(i) 10,000,000 shares of common stock, par value $.01 per share ("Common
Stock"), and (ii) 5,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation:
A. COMMON STOCK.
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1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of Common Stock will be entitled to one vote per
share on all matters to be voted on by the stockholders of the Corporation.
There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential liquidation rights of any then
outstanding Preferred Stock.
B. PREFERRED STOCK.
----------------
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. No share of
Preferred Stock that is redeemed, purchased or acquired by the Corporation may
be reissued except as otherwise provided herein
or by law. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided herein, in any such resolution or resolutions, or by
law.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided by law or by this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of the
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors.
(b) Elections of directors need not be by written ballot unless, and
only to the extent, otherwise provided in the By-Laws.
(c) The Board of Directors shall have concurrent power with the
stockholders to adopt, alter, amend or repeal the By-Laws of the Corporation.
(d) Subject to any applicable requirements of law, the books of the
Corporation may be kept outside the State of Delaware at such locations as may
be designated by the Board of Directors or in the By-Laws of the Corporation.
(e) The Board of Directors may from time to time determine whether,
to what extent, at what times and places and under what conditions and
regulations the accounts, books and records of the Corporation, or any of them,
shall be open to the inspection of the stockholders, and no stockholder shall
have any right to inspect any account, book or document of the Corporation
except as and to the extent expressly provided by law or expressly authorized by
resolution of the Board of Directors.
(f) Except as provided to the contrary in the provisions
establishing a class of stock, the number of authorized shares of such class may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the stock of the
Corporation entitled to vote, voting as a single class.
(g) In addition to the powers and authority herein or by law
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be
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exercised or done by the Corporation, subject, nevertheless, to the provisions
of the laws of the State of Delaware, this Certificate of Incorporation and any
By-Laws adopted by the stockholders; provided, however, that no By-Laws
hereafter adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been adopted.
SIXTH: The Corporation shall indemnify each person who at any time is, or
shall have been, a director or officer of the Corporation and was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred in connection with any such action, suit or proceeding, to the maximum
extent permitted by the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. The foregoing right of indemnification
shall in no way be exclusive of any other rights of indemnification to which any
such director or officer may be entitled, under any by-law, agreement, vote of
directors or stockholders or otherwise. No amendment to or repeal of the
provisions of this Article SIXTH shall deprive a director or officer of the
benefit hereof with respect to any act or failure to act occurring prior to such
amendment or repeal.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by the director as a director; provided, however, that this Article EIGHTH
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (a) for any breach of the duty of loyalty of the director to
the Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) for
any unlawful action under Section 174 of the General Corporation Law of the
State of Delaware, or (d) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this ARTICLE EIGHTH
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of the
director occurring prior to such amendment or repeal. If the laws of the State
of Delaware are hereafter changed to permit further elimination or limitation of
the liability of directors, then the liability of each director of the
Corporation shall thereupon be eliminated or limited to the fullest extent then
permitted by law.
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NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute and this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
TENTH: The name and the mailing address of the sole incorporator of the
Corporation is:
NAME MAILING ADDRESS
Robert L. Birnbaum Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of April,
1997.
/s/ Robert L. Birnbaum
---------------------------
Robert L. Birnbaum,
Sole Incorporator
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CERTIFICATE OF MERGER
OF
ALLAIRE CORP., A MINNESOTA CORPORATION,
WITH AND INTO
ALLAIRE CORPORATION, A DELAWARE CORPORATION
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name State of Incorporation
---- ----------------------
Allaire Corporation Delaware
Allaire Corp. Minnesota
SECOND: An agreement and plan of merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the requirements of Section 252 of the General Corporation Law
of the State of Delaware.
THIRD: The name of the surviving corporation is "Allaire Corporation."
FOURTH: The certificate of incorporation of Allaire Corporation as in
effect immediately prior to the merger, shall be the certificate of
incorporation of the surviving corporation.
FIFTH: An executed agreement and plan of merger is on file at the principal
place of business of the surviving corporation, which is located at One Alewife
Center, 3rd Floor, Cambridge, Massachusetts 02140.
SIXTH: A copy of the agreement and plan of merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of either
constituent corporation.
SEVENTH: The authorized capital stock of Allaire Corp. consists of
5,000,000 shares of Common Stock, $.01 par value, 200,000 shares of Series A
Convertible Preferred Stock, $.01 par value, 508,949 shares of Series B
Convertible Preferred Stock, $.01 par value, and 84,600 shares of Series C
Convertible Preferred Stock, $.01 par value.
Dated: April 25, 1997
ALLAIRE CORPORATION
By: /s/ David J. Orfao
--------------------
President
David J. Orfao
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
ALLAIRE CORPORATION
ALLAIRE CORPORATION, a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
creates, from the 5,000,000 shares of Preferred Stock, par value $.01 per share,
of the Corporation authorized to be issued pursuant to Article FOURTH of the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation", which term includes this Certificate of Designations,
Preferences and Rights) a series of Preferred Stock and hereby fixes the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, of the
shares of such series as follows:
(A) Designation of Series of Preferred Stock
----------------------------------------
Of the 5,000,000 shares of Preferred Stock which the Corporation is
authorized to issue under its Certificate of Incorporation, 200,000 of such
shares shall be designated as shares of Series A Convertible Preferred Stock of
the Corporation (the "Series A Preferred Stock"), par value $.01 per share. Such
shares of Series A Preferred Stock, together with the 10,000,000 shares of
authorized Common Stock of the Corporation (the "Common Stock"), the balance of
the undesignated shares of Preferred Stock of the Corporation and any other
common stock or Preferred Stock that may be authorized in or from time to time
pursuant to the Certificate of Incorporation of the Corporation, are sometimes
hereinafter collectively referred to as the "capital stock."
(B) Voting Privileges.
------------------
Each holder of Series A Preferred Stock shall have that number of votes on
all matters submitted to the stockholders that is equal to the number of shares
of Common Stock into which such holder's shares of Series A Preferred Stock are
then convertible, as hereinafter provided. Except as otherwise required by
agreement or law, the shares of capital stock of the Corporation shall vote as a
single class on all matters submitted to the stockholders.
(C) Dividends.
---------
In the event any dividend or distribution is declared or made with respect
to outstanding shares of Common Stock, a comparable dividend or distribution
must be simultaneously declared or made with respect to the outstanding shares
of Series A Preferred Stock. In the event any dividend or distribution is
declared or made with respect to the Common Stock, each holder of shares of
Series A Preferred Stock shall be paid such comparable dividend or receive such
comparable distribution on the basis of the number of shares of Common Stock
into which such holder's shares of Series A Preferred Stock are then
convertible, as hereinafter provided.
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(D) Liquidation Preference.
-----------------------
In the event of an involuntary or voluntary liquidation or dissolution of
the Corporation at any time, the holders of shares of Series A Preferred Stock
shall be entitled to receive out of the assets of the Corporation an amount per
share equal to the Conversion Price (as hereinafter defined), plus dividends
unpaid and accumulated or accrued thereon, if any. In the event of either an
involuntary or a voluntary liquidation or dissolution of the Corporation payment
shall be made to the holders of shares of Series A Preferred Stock in the
amounts herein fixed before any payment shall be made or any assets distributed
to the holders of the Common Stock or any other class of shares of the
Corporation ranking junior to the Series A Preferred Stock with respect to
payment upon dissolution or liquidation of the Corporation. If upon any
liquidation or dissolution of the Corporation the assets available for
distribution shall be insufficient to pay the holders of all outstanding shares
of Series A Preferred Stock the full amounts to which they respectively shall be
entitled, the holders of such shares shall share pro rata in any such
distribution.
(E) Conversion Right.
-----------------
At the option of the holders thereof, each share of Series A Preferred
Stock shall be convertible, at the office of the Corporation (or at such other
office or offices, if any, as the Board of Directors may designate), into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock, at a price equal to the Conversion Price
(as defined below) applicable to such share (i.e., with respect to each share at
an initial conversion rate of one share of Common Stock for each share of Series
A Preferred Stock). The initial conversion price shall be subject to adjustment
from time to time in the instances provided below. The following provisions
shall govern the right of conversion:
(1) In order to convert shares of Series A Preferred Stock into shares of
Common Stock of the Corporation, the holder thereof shall surrender
at any office hereinabove mentioned the certificate or certificates
therefor, duly endorsed to the Corporation or in blank, and give
written notice to the Corporation at such office that such holder
elects to convert such shares. Shares of Series A Preferred Stock
shall be deemed to have been converted immediately prior to the close
of business on the day of the surrender of such shares for conversion
as herein provided, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock at such
time. As promptly as practicable on or after the conversion date, the
Corporation shall issue and deliver or cause to be issued and
delivered at such office a certificate or certificates for the number
of shares of Common Stock issuable upon such conversion.
(2) The conversion price shall be subject to adjustment from time to time
as hereinafter provided. Upon each adjustment of the conversion price
each holder of shares of Series A Preferred Stock shall thereafter be
entitled to receive the number of shares of Common Stock obtained by
multiplying the conversion price in effect immediately prior to such
adjustment by the number of shares issuable pursuant to conversion
immediately prior to such adjustment and dividing the product thereof
by the conversion price resulting from such adjustment.
(3) In case the Corporation shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to
effect a subdivision of the outstanding shares of Common Stock, as
described in subparagraph (4) below) or any obligations or any shares
of stock of the Corporation which are convertible into, or
exchangeable for, Common
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Stock (any of such obligations or shares of stock being hereinafter
called "Convertible Securities"), or in any rights or options to
purchase Common Stock or Convertible Securities, or (ii) declare any
other dividend or make any other distribution upon the Common Stock
payable otherwise than out of earnings or earned surplus, then
thereafter each holder of shares of Series A Preferred Stock upon the
conversion thereof will be entitled to receive the number of shares
of Common Stock into which such shares of Series A Preferred Stock
have been converted, and, in addition and without payment therefor,
each dividend described in clause (i) above and each dividend or
distribution described in clause (ii) above which such holder would
have received by way of dividends or distributions if continuously
since such holder became the record holder of such shares of Series A
Preferred Stock such holder (i) had been the record holder of the
number of shares of Common Stock then received, and (ii) had retained
all dividends or distributions in stock or securities (including
Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in
respect of such Common Stock or in respect of any stock or securities
paid as dividends or distributions and originating directly or
indirectly from such Common Stock. For the purposes of the foregoing
a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that
such earnings or earned surplus are charged an amount equal to the
fair value of such dividend or distribution as determined by the
Board of Directors of the Corporation.
(4) In case the Corporation shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the
conversion price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller
number of shares, the conversion price in effect immediately prior to
such combination shall be proportionately increased.
(5) If any capital reorganization or reclassification of the capital
stock of the corporation, or consolidation or merger of the
corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provision shall be made whereby the holders of Series A Preferred
Stock shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein and in lieu of the
shares of the Common Stock of the corporation immediately theretofore
receivable upon the conversion of Series A Preferred Stock, such
shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock
immediately theretofore receivable upon the conversion of Series A
Preferred Stock had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends
unpaid and accumulated or accrued thereon to the date of such
reorganization, reclassification, consolidation, merger or sale, and
in any such case appropriate provision shall be made with respect to
the rights and interests of the holders of Series A Preferred Stock
to the end that the provisions hereof (including without limitation
provisions for adjustments of the conversion price and of the number
of shares receivable upon the conversion of Series A Preferred Stock)
shall thereafter be applicable, as nearly as may be in relation to
any shares of stock, securities or assets thereafter receivable upon
the conversion of Series A Preferred Stock. The corporation shall not
effect any such consolidation, merger or sale, unless prior to the
consummation thereof
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the successor corporation (if other than the corporation) resulting
from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to the
registered holders of Series A Preferred Stock, at the last addresses
of such holders appearing on the books of the corporation, the
obligation to deliver to such holders such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
such holders may be entitled to receive.
(6) Upon any adjustment of the conversion price, then and in each case
the Corporation shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the registered holders of Series
A Preferred Stock, at the addresses of such holders as shown on the
books of the Corporation, which notice shall state the conversion
price resulting from such adjustment and the increase or decrease, if
any, in the number of shares receivable at such price upon the
conversion of Series A Preferred Stock, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
(7) If any event occurs as to which in the opinion of the Board of
Directors of the Corporation the other provisions of this paragraph
(E) are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of Series A Preferred Stock
in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in
the application of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid.
(8) As used in this paragraph (E) the term "Common Stock" shall mean and
include the Corporation's presently authorized Common Stock and shall
also include any capital stock of any class of the Corporation
hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; provided that the shares receivable pursuant to
conversion of shares of Series A Preferred Stock shall include shares
designated as Common Stock as of the date of issuance of such shares
of Series A Preferred Stock, or, in case of any reclassification of
the outstanding shares thereof, the stock, securities or assets
provided for in subparagraph (5) above.
(9) No fractional shares of Common Stock shall be issued upon conversion,
but, instead of any fraction of a share which would otherwise be
issuable, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the market
price per share of Common Stock as of the close of business on the
day of conversion. "Market price" shall mean if the Common Stock is
traded on a securities exchange or on the Nasdaq National Market, the
closing price of the Common Stock on such exchange or the Nasdaq
National Market, or, if the Common Stock is otherwise traded in the
over-the-counter market, the closing bid price, in each case averaged
over a period of 20 consecutive business days prior to the date as of
which "market price" is being determined. If at any time the Common
Stock is not traded on an exchange or the Nasdaq National Market, or
otherwise traded in the over-the-counter market, the "market price"
shall be deemed to be the fair value thereof determined in good faith
by the Board of Directors of the Corporation as of a date which is
within 15 days of the date as of which the determination is to be
made.
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(F) Mandatory Conversion.
---------------------
The Series A Preferred Stock shall automatically be converted into shares
of Common Stock, without any act by the Corporation or the holders of the Series
A Preferred Stock, concurrently with the closing of the Initial Public Offering
of the Corporation (as hereinafter defined). As used herein, the term "closing"
shall mean the delivery by the Corporation to the underwriters of certificates
representing the shares of Common Stock offered to the public against delivery
to the Corporation by such underwriters of payment therefor. Each holder of a
share of Series A Preferred Stock so converted shall be entitled to receive the
full number of shares of Common Stock into which such share of Series A
Preferred Stock held by such holder could be converted if such holder had
exercised its conversion right at the time of closing of such public offering.
Upon such conversion, each holder of a share of Series A Preferred Stock shall
immediately surrender such share in exchange for appropriate stock certificates
representing a share or shares of Common Stock. As used herein, "Initial Public
Offering" shall mean the first public offering by the Corporation of shares of
Common Stock registered under the Securities Act of 1933, as amended, in which
(1) the aggregate public offering price of the securities sold for cash by the
Corporation in the offering is at least $2,000,000 and (2) the offering is
underwritten on a firm commitment basis by an underwriter or a group of
underwriters. The term "firm commitment basis" with respect to the underwriting
of such public offering shall mean a commitment pursuant to a written
underwriting agreement under which the nature of the underwriters' commitment is
such that all securities will be purchased by such underwriters if any
securities are purchased by such underwriters.
(G) Conversion Price.
-----------------
As used herein, the "Conversion Price" shall mean (1) $4.07 per share for
each share of Series A Preferred Stock issued upon conversion of those certain
10% Convertible Subordinated Notes due December 31, 2001, or (2) for each other
share of Series A Preferred Stock issued, that price per share equal to the cash
price paid or the value (as determined by the Board) of other assets transferred
in consideration for each share of Series A Preferred Stock issued.
IN WITNESS WHEREOF, Allaire Corporation has caused this Certificate of
Designation, Preferences and Rights of Series A Convertible Preferred Stock to
be executed on its behalf by David J. Orfao, its President, this 25th day of
April, 1997.
ALLAIRE CORPORATION
By: /s/ David J. Orfao
----------------------
President
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CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
AND
SERIES C CONVERTIBLE PREFERRED STOCK
OF
ALLAIRE CORPORATION
ALLAIRE CORPORATION, a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
creates, from the 5,000,000 shares of Preferred Stock, par value $.01 per share,
of the Corporation authorized to be issued pursuant to Article FOURTH of the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation", which term includes this Certificate of Designations,
Preferences and Rights) a series of Preferred Stock and hereby fixes the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, of the
shares of such series as follows:
1. Designations of Series of Preferred Stock. Of the 5,000,000 shares of
Preferred Stock which the Corporation is authorized to issue under its
Certificate of Incorporation, 514,306 of such shares shall be designated as
shares of Series B Convertible Preferred Stock of the Corporation (the "Series B
Preferred Stock"), par value $.01 per share, and 169,200 of such shares shall be
designated as shares of Series C Convertible Preferred Stock of the Corporation
(the "Series C Preferred Stock" and, together with the Series B Preferred Stock,
the "Preferred Stock"), par value $.01 per share. Such shares of Preferred
Stock, together with the 10,000,000 shares of authorized Common Stock of the
Corporation ("Common Stock"), par value $.01 per share, the 200,000 shares of
authorized Series A Convertible Preferred Stock of the Corporation ("Series A
Preferred Stock"), par value $.01 per share, and the balance of the undesignated
shares of Preferred Stock of the Corporation and any other common stock or
preferred stock that may hereafter be authorized in or pursuant to the
Certificate of Incorporation of the Corporation, are sometimes hereinafter
collectively referred to as the "capital stock."
2. Voting.
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2A. General. Except as may be otherwise provided in these terms of the
Preferred Stock or by law, the Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the shareholders of the Corporation, including, but not
limited to actions amending the Certificate of Incorporation of the Corporation
to increase or decrease (but not below the number of outstanding shares) the
number of authorized shares of Common Stock. Each share of Preferred Stock shall
entitle the holder thereof to such number of votes per share on each such action
as shall equal the number of shares of Common Stock (including fractions of a
share) into which such share of Preferred Stock is then convertible.
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2B. Board Size. The Corporation shall not, without the written consent
or affirmative vote of the holders of at least fifty-one percent (51%) of the
then outstanding shares of Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class,
increase the maximum number of directors constituting the Board of Directors to
a number in excess of five.
2C. Election of Directors. So long as any shares of Preferred Stock are
outstanding, (i) the holders of the Preferred Stock, exclusively and voting as a
single class, shall be entitled, by a vote of a majority of voting power of such
shares which are present and entitled to vote on such item of business, to elect
one of the directors of the Corporation and to exercise any right of removal or
replacement of such director, (ii) the holders of the Common Stock, the Series A
Preferred Stock and the Preferred Stock, exclusively and voting together as a
single class, shall be entitled, by a vote of a majority of the voting power of
such shares which are present and entitled to vote on such item of business, to
elect two of the directors of the Corporation and to exercise any right of
removal or replacement of such directors, and (iii) the remaining two directors
of the Corporation, if any, shall be elected by, and shall be removed or
replaced only by, a vote of both (A) a majority of the voting power of the
shares of the Common Stock and the Series A Preferred Stock, voting together as
a single class, which are present and entitled to vote on such item of business,
and (B) a majority of the voting power of the shares of the Preferred Stock,
voting together as a single class, which are present and entitled to vote on
such item of business.
3. Dividends. The holders of the Preferred Stock shall be entitled to
receive, out of funds legally available therefor, dividends at the same rate and
at the same time as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each share of
Preferred Stock as being equal to the number of shares of Common Stock
(including fractions of a share) into which each share of Preferred Stock is
then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Preferred Stock
shall be entitled, before any distribution or payment is made upon any stock
ranking on liquidation junior to the Preferred Stock, to be paid with respect to
each such share an amount equal to the greater of (i) the Original Purchase
Price (as defined below) (appropriately adjusted to reflect stock splits, stock
dividends, reorganizations, consolidations and similar changes hereafter
effected) of such share plus, in the case of each share, an amount equal to all
dividends declared but unpaid thereon, computed to the date payment thereof is
made available, or (ii) such amount as would have been payable had such share
been converted to Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of Preferred Stock shall
not be entitled to any further payment, such amount payable with respect to one
share of Preferred Stock being sometimes referred to as the "Liquidation
Preference Payment" and with respect to all shares of Preferred Stock being
sometimes referred to as the "Liquidation Preference Payments". The Original
Purchase Price per share shall be $4.52 in the case of the Series B Preferred
Stock and $5.91 in the case of the Series C Preferred Stock. If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Preferred Stock
shall be insufficient to permit payment to the holders of Preferred Stock of the
amount distributable as aforesaid, then the entire assets of the Corporation to
be so distributed shall be distributed pro rata among the holders of Preferred
Stock in accordance with the respective amounts which would have been
distributed to such holders if such assets had been sufficient to make the
Liquidation Preference Payments in full. Upon any such liquidation, dissolution
or winding up of the Corporation, after the holders of Preferred Stock shall
have been paid in full the amounts to which they shall be entitled, the
remaining net assets of the Corporation may be distributed to the holders of
stock ranking on liquidation junior to the Preferred Stock. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the amount
of the Liquidation Preference Payments and the place where said Liquidation
Preference Payments
-2-
shall be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex, not
less than 20 days prior to the payment date stated therein, to the holders of
record of Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation. The consolidation or
merger of the Corporation into or with any other entity or entities as a result
of which shareholders of the Corporation immediately before the transaction own
less than a majority of the successor or surviving corporation immediately
thereafter, or the sale, lease, abandonment, transfer or other disposition by
the Corporation of all or substantially all its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 4. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Preferred Stock and the Series A Preferred
Stock shall rank on a parity with the Preferred Stock.
5. Restrictions. At any time when at least 25% of the shares of Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock,
given in writing or by vote at a meeting, consenting or voting (as the case may
be) separately as a class, (such that the Series B and the Series C Preferred
Stock vote together as a single class) the Corporation will not:
5A. Create or authorize the creation of any additional class or series
of shares of stock ranking senior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation (such
senior stock referred to herein as "Senior Stock"), or increase the authorized
amount of any existing class or series of shares of Senior Stock, or create or
authorize any obligation or security convertible into shares of Senior Stock or
into shares of any other class or series of Senior Stock, or change the terms of
any existing class or series of shares of Senior Stock unless, following such
change, such series or class shall no longer be Senior Stock, whether any such
creation, authorization, increase or change shall be by means of amendment to
the Certificate of Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities
(except any consolidation or merger in which the shareholders of the Corporation
immediately prior to such consolidation or merger continue to own a majority of
the outstanding capital stock of the surviving corporation immediately after
such consolidation or merger) or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all or any substantial portion of its assets;
5C. Amend, alter or repeal its Certificate of Incorporation to effect
amendments or alterations whose effect would be (i) to change in any manner the
rights, preferences or privileges of any series of Preferred Stock; (ii)
detrimental or adverse in any manner with respect to the rights of holders of
any series of Preferred Stock, or (iii) to amend this paragraph 5;
5D. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any equity securities of the Corporation
other than the Preferred Stock, except for dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee or pursuant to any rights of first refusal upon transfers of any
capital stock;
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5E. Redeem or otherwise acquire any shares of Preferred Stock except as
expressly authorized in paragraph 7 hereof or pursuant to a purchase offer made
pro rata to all holders of the shares of Preferred Stock on the basis of the
aggregate Original Purchase Price of the Preferred Stock then held by each such
holder.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
paragraph 6, any holder of shares of Preferred Stock shall have the right, at
its option at any time, to convert each such share of Preferred Stock (except
that upon any liquidation of the Corporation the right of conversion shall
terminate at the close of business on the business day fixed for payment of the
amount distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by dividing the Original
Purchase Price of such share by the conversion price of such share (which shall
initially be the Original Purchase Price of such share) or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Preferred Stock are surrendered for conversion
(such price, or such price as last adjusted, being referred to as the
"Conversion Price"). Such rights of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a stated
number of shares of Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the
Preferred Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement or the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6B. Issuance of Certificates: Time Conversion Effected. Promptly after
the receipt of the written notice referred to in subparagraph 6A and surrender
of the certificate or certificates for the share or shares of Preferred Stock to
be converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Preferred Stock.
To the extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close of
business on the date on which such written notice shall have been received by
the Corporation and the certificate or certificates for such share or shares
shall have been surrendered as aforesaid, and at such time the rights of the
holder of such share or shares of Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Preferred Stock into Common Stock and
no payment or adjustment shall be made upon any conversion on account of any
cash dividends on the Common Stock issued upon such conversion. At the time of
each conversion, and to the extent the Corporation has funds legally available
therefor, the Corporation shall pay in cash an amount equal to all dividends
accrued and unpaid on the shares of Preferred Stock surrendered for conversion
to the date upon which such conversion is deemed to take place as provided in
subparagraph 6B. In case the number of shares of Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Preferred Stock
represented by the certificate or certificates surrendered which are
-4-
not to be converted. If any fractional share of Common Stock would, except for
the provisions of the first sentence of this subparagraph 6C, be delivered upon
such conversion, the Corporation, in lieu of delivering such fractional share,
shall pay to the holder surrendering the Preferred Stock for conversion an
amount in cash equal to the current market price of such fractional share as
determined in good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if an whenever the Corporation shall issue or sell,
or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price in effect immediately prior to the time of such issue
or sale, then, forthwith upon such issue or sale, the Conversion Price shall be
reduced concurrently with such issue to the price (calculated to the nearest
cent) determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
(which shall be deemed to include all shares of Common Stock issuable upon the
conversion of all outstanding convertible securities of the Corporation,
including the Series A Preferred Stock and the Preferred Stock) multiplied by
the then existing Conversion Price and (b) the consideration, if any, received
by the Corporation upon such issue or sale, by (ii) the total number of shares
of Common Stock (which shall be deemed to include all shares of Common Stock
issuable upon the conversion of all outstanding convertible securities of the
Corporation, including the Series A Preferred Stock and the Preferred Stock)
outstanding immediately after such issue or sale.
Notwithstanding anything contained herein to the contrary, the holder of
any shares of Preferred Stock shall not be entitled to the benefits of this
subparagraph 6D if such holder has failed to participate in any particular
offering by the Corporation of shares of any class or series of its capital
stock, however designated (or other securities, whether debt or equity,
convertible into or exchangeable for any class or series of capital stock, or
any warrants, options, subscriptions or other purchase rights with options,
subscriptions or other purchase rights with respect thereto), which would
otherwise result in an adjustment to the Conversion Price pursuant to this
subparagraph 6D (a "Dilutive Offering"), by acquiring in such Dilutive Offering
at least such number of shares actually offered in the Dilutive Offering to all
holders of Preferred Stock, as determined by the Board of Directors of the
Corporation, multiplied by a fraction: (a) the numerator of which is the number
of shares of Preferred Stock held by such holder at the time of such Dilutive
Offering, and (b) the denominator of which is the total number of shares of
Preferred Stock then outstanding (the "Pro Rata Share"). If any holder of
Preferred Stock shall fail to purchase its Pro Rata Share of any Dilutive
Offering, then the Conversion Price of the Preferred Stock held by such holder
will not be reduced in accordance with the foregoing provision of this Section,
and instead the shares of Preferred Stock held by such holder will be converted
automatically and without further action on the part of such holder into Common
Stock at the Conversion Price in effect immediately prior to the issuance of
shares in the Dilutive Offering. The provisions of this second paragraph of
subparagraph 6D may be waived in any instance (without the necessity of
convening any meeting of shareholders of the Corporation) upon the written
consent of the holders of a majority of the outstanding shares of Preferred
Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible
-5-
Securities") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any, received
or receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in
the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Conversion Price in effect immediately
prior to the time of the granting of such Options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided
in subparagraph 6D(3), no adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued for
such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible Securities
is made upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been or are
to be made pursuant to other provisions of this subparagraph 6D, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any Option referred to in subparagraph 6D(1), the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraph 6D(1) or 6D(2), or the rate at which
Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in effect at
the time of such event
-6-
shall forthwith be readjusted to the Conversion Price which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced; and on the
termination of any such Option or any such right to convert or exchange
such Convertible Securities, the Conversion Price then in effect hereunder
shall forthwith be increased to the Conversion Price which would have been
in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
(other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
by the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any Options shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purpose of
this subparagraph 6D.
6E. Certain Issues of Capital Stock Excepted. Anything herein to the
contrary notwithstanding the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance, from and after
the date of filing of these terms of the Preferred Stock, of (i) shares of
capital stock issued upon conversion of convertible notes of the Corporation
issued and outstanding on the date of filing of these terms, (ii) shares of
capital stock issued upon the conversion of any shares of Series A Preferred
Stock
-7-
or Preferred Stock issued and outstanding on the date of filing of these terms,
(iii) shares of capital stock issued upon exercise of options and warrants
issued and outstanding on the date of filing of these terms, plus such number of
shares of capital stock as are subject to such options and warrants that expire
or terminate without exercise, or (iv) up to an aggregate of 2,300,000 shares
(appropriately adjusted to reflect the occurrence of any event described in
subparagraph 6F) of Common Stock, and rights to purchase such stock, to
directors, officers, employees or consultants of the Corporation in connection
with their service as directors of the Corporation, their employment by the
Corporation or their retention as consultants by the Corporation, plus such
number of shares of Common Stock which are repurchased by the Corporation from
any such persons after December 31, 1996 pursuant to contractual rights held by
the Corporation and at repurchase prices not exceeding the respective original
purchase prices paid by such persons to the Corporation therefor, plus such
number of shares of Common Stock as are subject to such purchase rights that
expire or terminate without exercise.
6F. Subdivision of Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionally increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interest of such holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation, which
notice shall state the Conversion Price resulting from such adjustment, setting
forth in reasonable detail the method upon which such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
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(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all its
assets; or
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the Conversation Price in
effect at the time. The Corporation will take all such action as may be
necessary to assure that all shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirement of any
national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. No Reissuance of Preferred Stock. Shares of Preferred Stock which
are converted into shares of Common Stock as provided herein shall not be
reissued.
6L. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Preferred Stock which is being converted.
-9-
6M. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.01 per share, as constituted on the date of filing of these term of
the Preferred Stock, and shall also include any capital stock of any class of
the Corporation thereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the Corporation shall
effect a firm commitment underwritten public offering of shares of Common Stock
in which (A) the aggregate price paid for such shares by the public shall be at
least $15,000,000 and (B) the price per share paid by the public for such shares
shall be at least five times the Original Purchase Price of the Series B
Preferred Stock (appropriately adjusted to reflect the occurrence of any event
described in subparagraph 6F) or (ii) the holders of two-thirds of the shares of
Preferred Stock issued pursuant to that certain Convertible Stock Purchase
Agreement dated as of June 18, 1996 have elected to convert such shares into
Common Stock pursuant to paragraph 6A, then effective upon the closing of the
sale of such shares by the Corporation pursuant to such public offering or such
conversion, as the case may be, all outstanding shares of such Preferred Stock
shall automatically convert to shares of Common Stock on the basis set forth in
this paragraph 6. Holders of shares of Preferred Stock so converted may deliver
to the Corporation at its principal office (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to such
holders) during its usual business hours, the certificate or certificates for
the shares so converted. As promptly as practicable thereafter, the Corporation
shall issue and deliver to such holder a certificate or certificates for the
number of whole shares of Common Stock to which such holder is entitled,
together with any cash dividends and payment in lieu of fractional shares to
which such holder may be entitled pursuant to subparagraph 6C. Until such time
as a holder of shares of Preferred Stock shall surrender his or its certificates
therefor as provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the surrender
thereof.
7. Redemption. The shares of Preferred Stock shall be redeemed as follows:
7A. Redemption at the Request of Holders. The Corporation shall not
have the right to call or redeem at any time all or any shares of Preferred
Stock. With the approval of the holders of a majority of the then outstanding
shares of Preferred Stock, one or more holders of shares of Preferred Stock may,
by giving notice (the "Notice") to the Corporation at any time after June 30,
2001 require the Corporation to redeem all of the outstanding Preferred Stock in
three equal installments, with one-third of the shares of outstanding Series B
Preferred Stock and Series C Preferred Stock redeemed on the First Redemption
Date (as defined below), one-half of the remaining shares of Series B Preferred
Stock and Series C Preferred Stock redeemed on the first anniversary of the
First Redemption Date (the "Second Redemption Date") and the remainder of shares
of Series B Preferred Stock and Series C Preferred Stock redeemed on the third
anniversary of the First Redemption Date (the "Third Redemption Date"). Upon
receipt of the Notice, the Corporation will
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so notify all other persons holding Preferred Stock. After receipt of the
Notice, the Corporation shall fix the first date for redemption (the "First
Redemption Date"), provided that such First Redemption Date shall occur within
sixty (60) after receipt of the Notice. All holders of Preferred Stock shall
deliver to the Corporation, or to such other place as may be designated by the
Corporation, during regular business hours the certificate or certificates for
the Preferred Stock on or before the First Redemption Date. The First Redemption
Date, the Second Redemption Date and the Third Redemption Date are collectively
referred to as the "Redemption Dates".
7B. Redemption Price and Payment. The shares of Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to the Original Purchase Price per share plus, in the case
of each share, an amount equal to all dividends declared but unpaid thereon,
computed to such Redemption Date, such amount being referred to as the
"Redemption Price". Such payment shall be made in full on the applicable
Redemption Date to the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30 days prior
to each Redemption Date, written notice (the "Redemption Notice") shall be given
by the Corporation by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, to each holder of record (at the close
of business on the business day next preceding the day on which the Redemption
Notice is given) of shares of Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date, and the
place where said Redemption Price shall be payable. The Redemption Notice shall
be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Preferred Stock being redeemed (except the right
to receive the Redemption Price) shall cease with respect to the shares to be
redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Preferred Stock to be redeemed on such
Redemption Date, the holders of such shares shall share ratably in any funds
legally available for redemption of such shares according to the respective
amounts which would be payable to them if the full number of shares to be
redeemed on such Redemption Date were actually redeemed. The shares of Preferred
Stock to be redeemed but not so redeemed shall remain outstanding and entitled
to all rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
such shares of Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired by
the Corporation in any manner whatsoever shall be canceled and shall not under
any circumstances be reissued; and the Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of the applicable series of Preferred Stock.
7E. Failure to Redeem. If the Corporation shall fail to redeem any
shares of Preferred Stock in the manner set forth in this paragraph 7 within six
months of a Redemption Date then upon the written request (the "Request") of
holders of a majority of the outstanding shares of Preferred Stock (the
"Majority"), the Corporation shall, within thirty (30) days of receipt of the
Request, at the Corporation's expense, engage a third-party investment banking
firm or other agent (the "Agent") acceptable to the Majority for the purpose of
assisting the Corporation in taking such steps as are necessary for the
Corporation to meet its obligations
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under this paragraph 7 (a "Liquidity Event"). The Liquidity Event may be a
merger, sale of assets or other reorganization event or any other type of
transaction which would make available sufficient cash for the Corporation to
effect the requested redemption. If the Corporation shall fail to engage such
Agent within the required thirty (30) day period, the Majority may, at their
election and at the Corporation's expense, engage such Agent. If a Liquidity
Event has not occurred within six months of the date of the Request, the
Majority may, at its election, compel a Liquidity Event by a judgment for
specific performance or other remedies, at law or in equity, by a court of
competent jurisdiction.
8. Amendments. These terms of the Preferred Stock may be amended, modified
or waived only with the written consent or affirmative vote of the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock.
IN WITNESS WHEREOF, Allaire Corporation has caused this Certificate of
Designation, Preferences and Rights of Series A Convertible Preferred Stock to
be executed on its behalf by David J. Orfao, its President, this 25th day of
April, 1997.
ALLAIRE CORPORATION
By: /s/ David J. Orfao
------------------------
President
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CERTIFICATE OF AMENDMENT
OF
ALLAIRE CORPORATION
PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Whereas, ALLAIRE CORPORATION, a corporation organized and existing by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), filed its Certificate of Incorporation on April 4, 1997, filed a
Certificate of Merger on April 25, 1997, filed a Certificate of Designations of
Series A Convertible Preferred Stock on April 25, 1997 and filed a Certificate
of Designations of Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock on April 25, 1997 (the "Series B and C Designation"); and
Whereas, the Corporation desires to amend its Certificate of Incorporation
to amend the Series B and C Designation and designate a new series of Preferred
Stock;
Now therefore, the Corporation does hereby certify as follows:
The Board of Directors of the Corporation, acting by unanimous written
consent in accordance with Section 141 of the General Corporation Law of the
State of Delaware, adopted a resolution, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, setting forth an amendment to the
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment by written consent in accordance with Sections 228 and 242 of the
General Corporation Law of the State of Delaware. The resolution setting forth
the amendment (hereinafter referred to as the "New Designation") is as follows:
Resolved: That the New Designation, be, and it hereby is approved, and the
officers of the Corporation, and each of them, are hereby authorized, for and on
behalf of the Company, to make, execute and file with the Delaware Secretary of
State in the manner required by law, the New Designation, and to execute and
deliver such other instruments and to take such other action as they, or any of
them, may deem necessary or advisable to carry out the purposes of this
resolution.
Now therefore, Part B of Article FOURTH of the Corporation's Certificate of
Incorporation be amended by amending the Series B and C Designation and creating
a new series of Preferred Stock as follows:
1. Designations of Series of Preferred Stock. Of the 5,000,000 shares of
Preferred Stock which the Corporation is authorized to issue under its
Certificate of Incorporation, 514,306 of such shares shall be designated as
shares of Series B Convertible Preferred Stock of the Corporation, par value
$.01 per share (the "Series B Preferred Stock"), 169,200 of such shares shall be
designated as shares of Series C Convertible Preferred Stock of the Corporation,
par value $.01 per share (the "Series C Preferred Stock"), and 2,500,000 of such
shares shall be designated as shares of Series D Convertible Preferred Stock of
the Corporation, par value $.01 per share (the "Series D Preferred Stock" and,
together with the Series B Preferred Stock and the Series C Preferred Stock, the
"Preferred Stock"). Such shares of Preferred Stock, together with the 10,000,000
shares of authorized Common Stock of the Corporation ("Common Stock"), par value
$.01 per share, the 200,000 shares of authorized Series A Convertible Preferred
Stock of the Corporation ("Series A Preferred Stock"), par value $.01 per share,
and the balance of the undesignated shares of Preferred Stock of the Corporation
and any other common stock or preferred stock that may hereafter be authorized
in or pursuant
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to the Certificate of Incorporation of the Corporation, are sometimes
hereinafter collectively referred to as the "capital stock."
2. Voting.
-------
2A. General. Except as may be otherwise provided in these terms of the
Preferred Stock or by law, the Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the shareholders of the Corporation, including, but not
limited to actions amending the Certificate of Incorporation of the Corporation
to increase or decrease (but not below the number of outstanding shares) the
number of authorized shares of Common Stock. Each share of Preferred Stock shall
entitle the holder thereof to such number of votes per share on each such action
as shall equal the number of shares of Common Stock (including fractions of a
share) into which such share of Preferred Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written consent
or affirmative vote of the holders of at least fifty-one percent (51%) of the
then outstanding shares of Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class,
increase the maximum number of directors constituting the Board of Directors to
a number in excess of seven.
2C. Election of Directors. So long as any shares of Preferred Stock
are outstanding, (i) the holders of the Preferred Stock, exclusively and voting
as a single class, shall be entitled, by a vote of a majority of voting power of
such shares which are present and entitled to vote on such item of business, to
elect two of the directors of the Corporation and to exercise any right of
removal or replacement of such directors, (ii) the holders of the Common Stock
and the Series A Preferred Stock, exclusively and voting together as a single
class, shall be entitled, by a vote of a majority of the voting power of such
shares which are present and entitled to vote on such item of business, to elect
two of the directors of the Corporation and to exercise any right of removal or
replacement of such directors, and (iii) the remaining three directors of the
Corporation, if any, shall be elected by, and shall be removed or replaced only
by, a vote of both (A) a majority of the voting power of the shares of the
Common Stock and the Series A Preferred Stock, voting together as a single
class, which are present and entitled to vote on such item of business, and (B)
a majority of the voting power of the shares of the Preferred Stock, voting
together as a single class, which are present and entitled to vote on such item
of business.
3. Dividends. The holders of the Preferred Stock shall be entitled to
receive, out of funds legally available therefor, dividends at the same rate and
at the same time as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each share of
Preferred Stock as being equal to the number of shares of Common Stock
(including fractions of a share) into which each share of Preferred Stock is
then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Preferred Stock
shall be entitled, before any distribution or payment is made upon any stock
ranking on liquidation junior to the Preferred Stock, to be paid with respect to
each such share an amount equal to the greater of (i) the Original Purchase
Price (as defined below) (appropriately adjusted to reflect stock splits, stock
dividends, reorganizations, consolidations and similar changes hereafter
effected) of such share plus, in the case of each share, an amount equal to all
dividends declared but unpaid thereon, computed to the date payment thereof is
made available, or (ii) such amount as would have been payable had such share
been converted to Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of Preferred Stock shall
not be entitled to any further
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payment, such amount payable with respect to one share of Preferred Stock being
sometimes referred to as the Liquidation Preference Payment and with respect to
all shares of Preferred Stock being sometimes referred to as the Liquidation
Preference Payments. The Original Purchase Price per share shall be $4.52 in
the case of the Series B Preferred Stock, $5.91 in the case of the Series C
Preferred Stock and $4.00 in the case of the Series D Preferred Stock. If upon
such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Preferred Stock shall be insufficient to permit payment to the holders of
Preferred Stock of the amount distributable as aforesaid, then the entire assets
of the Corporation to be so distributed shall be distributed pro rata among the
holders of Preferred Stock in accordance with the respective amounts which would
have been distributed to such holders if such assets had been sufficient to make
the Liquidation Preference Payments in full. Upon any such liquidation,
dissolution or winding up of the Corporation, after the holders of Preferred
Stock shall have been paid in full the amounts to which they shall be entitled,
the remaining net assets of the Corporation may be distributed to the holders of
stock ranking on liquidation junior to the Preferred Stock. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the amount
of the Liquidation Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, not less than 20 days prior to the payment date stated therein, to the
holders of record of Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other entity or
entities as a result of which shareholders of the Corporation immediately before
the transaction own less than a majority of the successor or surviving
corporation immediately thereafter, or the sale, lease, abandonment, transfer or
other disposition by the Corporation of all or substantially all its assets,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of the provisions of this paragraph 4. For
purposes hereof, the Common Stock shall rank on liquidation junior to the
Preferred Stock and the Series A Preferred Stock shall rank on a parity with the
Preferred Stock.
5. Restrictions. At any time when at least 25% of the shares of Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock,
given in writing or by vote at a meeting, consenting or voting (as the case may
be) separately as a class (such that the Series B, Series C and the Series D
Preferred Stock vote together as a single class), the Corporation will not:
5A. Create or authorize the creation of any additional class or series
of shares of stock ranking senior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation (such
senior stock referred to herein as Senior Stock ), or increase the authorized
amount of any existing class or series of shares of Senior Stock, or create or
authorize any obligation or security convertible into shares of Senior Stock or
into shares of any other class or series of Senior Stock, or change the terms of
any existing class or series of shares of Senior Stock unless, following such
change, such series or class shall no longer be Senior Stock, whether any such
creation, authorization, increase or change shall be by means of amendment to
the Certificate of Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities
(except any consolidation or merger in which the shareholders of the Corporation
immediately prior to such consolidation or merger continue to own a majority of
the outstanding capital stock of the surviving corporation immediately after
such consolidation or merger) or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all or any substantial portion of its assets;
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5C. Amend, alter or repeal its Certificate of Incorporation to effect
amendments or alterations whose effect would be (i) to change in any manner the
rights, preferences or privileges of any series of Preferred Stock; (ii)
detrimental or adverse in any manner with respect to the rights of holders of
any series of Preferred Stock, or (iii) to amend this paragraph 5;
5D. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any equity securities of the Corporation
other than the Preferred Stock, except for dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee or pursuant to any rights of first refusal upon transfers of any
capital stock;
5E. Redeem or otherwise acquire any shares of Preferred Stock except
as expressly authorized in paragraph 7 hereof or pursuant to a purchase offer
made pro rata to all holders of the shares of Preferred Stock on the basis of
the aggregate Original Purchase Price of the Preferred Stock then held by each
such holder.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
paragraph 6, any holder of shares of Preferred Stock shall have the right, at
its option at any time, to convert each such share of Preferred Stock (except
that upon any liquidation of the Corporation the right of conversion shall
terminate at the close of business on the business day fixed for payment of the
amount distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by dividing the Original
Purchase Price of such share by the conversion price of such share (which
conversion price in the case of each share of the Series B Preferred Stock and
Series C Preferred Stock initially shall be one-half of the Original Purchase
Price of such share, and in the case of the Series D Preferred Stock initially
shall be the Original Purchase Price of such share) or, in case an adjustment of
such price has taken place pursuant to the further provisions of this paragraph
6, then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (in each case
such price, or such price as last adjusted, being referred to as the Conversion
Price ). Such rights of conversion shall be exercised by the holder thereof by
giving written notice that the holder elects to convert a stated number of
shares of Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock) at any time during its usual business hours on the date set forth in such
notice, together with a statement or the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates: Time Conversion Effected. Promptly after
the receipt of the written notice referred to in subparagraph 6A and surrender
of the certificate or certificates for the share or shares of Preferred Stock to
be converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Preferred Stock.
To the extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close of
business on the date on which such written notice
-4-
shall have been received by the Corporation and the certificate or certificates
for such share or shares shall have been surrendered as aforesaid, and at such
time the rights of the holder of such share or shares of Preferred Stock shall
cease, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Preferred Stock into Common Stock and
no payment or adjustment shall be made upon any conversion on account of any
cash dividends on the Common Stock issued upon such conversion. At the time of
each conversion, and to the extent the Corporation has funds legally available
therefor, the Corporation shall pay in cash an amount equal to all dividends
accrued and unpaid on the shares of Preferred Stock surrendered for conversion
to the date upon which such conversion is deemed to take place as provided in
subparagraph 6B. In case the number of shares of Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Preferred Stock
represented by the certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, the Conversion Price
shall be reduced concurrently with such issue to the price (calculated to the
nearest cent) determined by dividing (i) an amount equal to the sum of (a) the
number of shares of Common Stock outstanding immediately prior to such issue or
sale (which shall be deemed to include all shares of Common Stock issuable upon
the conversion of all outstanding convertible securities of the Corporation,
including the Series A Preferred Stock and the Preferred Stock) multiplied by
the then existing Conversion Price and (b) the consideration, if any, received
by the Corporation upon such issue or sale, by (ii) the total number of shares
of Common Stock (which shall be deemed to include all shares of Common Stock
issuable upon the conversion of all outstanding convertible securities of the
Corporation, including the Series A Preferred Stock and the Preferred Stock)
outstanding immediately after such issue or sale.
Notwithstanding anything contained herein to the contrary, the holder of
any shares of Preferred Stock shall not be entitled to the benefits of this
subparagraph 6D if such holder has failed to participate in any particular
offering by the Corporation of shares of any class or series of its capital
stock, however designated (or other securities, whether debt or equity,
convertible into or exchangeable for any class or series of capital stock, or
any warrants, options, subscriptions or other purchase rights with options,
subscriptions or other purchase rights with respect thereto), the issuance of
shares pursuant to which would result in an adjustment to the Conversion Price
pursuant to this subparagraph 6D (a Dilutive Offering ), by acquiring in such
Dilutive Offering at least such number of shares actually offered in the
Dilutive Offering to all holders of Preferred Stock, as determined by the Board
of Directors of the Corporation, multiplied by a fraction: (a) the numerator of
which is the number of shares of Preferred Stock held by such holder at the time
of such Dilutive Offering, and (b) the denominator of which is the
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total number of shares of Preferred Stock then outstanding (the Pro Rata Share).
If any holder of Preferred Stock shall fail to purchase its Pro Rata Share of
any Dilutive Offering, then the Conversion Price of the Preferred Stock held by
such holder will not be reduced in accordance with the foregoing provision of
this Section, and instead the shares of Preferred Stock held by such holder will
be converted automatically and without further action on the part of such holder
into Common Stock at the Conversion Price in effect immediately prior to the
issuance of shares in the Dilutive Offering. The provisions of this second
paragraph of subparagraph 6D may be waived in any instance (without the
necessity of convening any meeting of shareholders of the Corporation) upon the
written consent of the holders of a majority of the outstanding shares of
Preferred Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called Options and such convertible or exchangeable
stock or securities being called Convertible Securities ) whether or not
such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be
less than the Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion
or exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be
deemed to be outstanding. Except as otherwise provided in subparagraph
6D(3), no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise
of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion
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or exchange of all such Convertible Securities) shall be less than the
Conversion Price in effect immediately prior to the time of such issue or
sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed
to have been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed to be
outstanding, provided that (a) except as otherwise provided in subparagraph
6D(3), no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible Securities
is made upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been or are
to be made pursuant to other provisions of this subparagraph 6D, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any Option referred to in subparagraph 6D(1), the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraph 6D(1) or 6D(2), or the rate at which
Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in effect at
the time of such event shall forthwith be readjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
reduced; and on the termination of any such Option or any such right to
convert or exchange such Convertible Securities, the Conversion Price then
in effect hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
(other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
by the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any Options shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
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6D(6) Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purpose of
this subparagraph 6D.
6E. Certain Issues of Capital Stock Excepted. Anything herein to the
contrary notwithstanding the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance, from and after
the date of filing of these terms of the Preferred Stock, of (i) shares of
capital stock issued upon conversion of convertible notes of the Corporation
issued and outstanding on the date of filing of these terms, (ii) shares of
capital stock issued upon the conversion of any shares of Series A Preferred
Stock or Preferred Stock issued and outstanding on the date of filing of these
terms or issuable upon exercise of warrants issued and outstanding on the date
of filing of these terms, (iii) shares of capital stock issued upon exercise of
rights, options and warrants issued and outstanding or otherwise in existence on
the date of filing of these terms, (iv) shares of Common Stock, and options or
other rights to purchase such stock, to directors, officers, employees or
consultants of the Corporation in connection with their service as directors of
the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation, provided that such Common Stock, options and
other rights are granted with the approval of the Compensation Committee of the
Company's Board of Directors or, if there is no Compensation Committee, by the
Company's Board of Directors, or (v) such number of shares of Common Stock which
are repurchased by the Corporation from any employees pursuant to contractual
rights held by the Corporation and at repurchase prices not exceeding the
respective original purchase prices paid by such persons to the Corporation
therefor.
6F. Subdivision of Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionally increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate
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provisions shall be made with respect to the rights and interest of such holder
to the end that the provisions hereof (including without limitation provisions
for adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation, which
notice shall state the Conversion Price resulting from such adjustment, setting
forth in reasonable detail the method upon which such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all its
assets; or
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and without limiting the generality of the
foregoing, the
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Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversation Price in effect at the time.
The Corporation will take all such action as may be necessary to assure that all
shares of Common Stock may be so issued without violation of any applicable law
or regulation, or of any requirement of any national securities exchange upon
which the Common Stock may be listed. The Corporation will not take any action
which results in any adjustment of the Conversion Price if the total number of
shares of Common Stock issued and issuable after such action upon conversion of
the Preferred Stock would exceed the total number of shares of Common Stock then
authorized by the Certificate of Incorporation.
6K. No Reissuance of Preferred Stock. Shares of Preferred Stock which
are converted into shares of Common Stock as provided herein shall not be
reissued.
6L. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the term
Common Stock shall mean and include the Corporation's authorized Common Stock,
par value $.01 per share, as constituted on the date of filing of these term of
the Preferred Stock, and shall also include any capital stock of any class of
the Corporation thereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the Corporation shall
effect a firm commitment underwritten public offering of shares of Common Stock
in which (A) the aggregate price paid for such shares by the public shall be at
least $15,000,000 and (B) the price per share paid by the public for such shares
shall be at least two and one-half times the Original Purchase Price of the
Series B Preferred Stock (appropriately adjusted to reflect the occurrence of
any event described in subparagraph 6F) or (ii) the holders of two-thirds of the
shares of Preferred Stock have elected to convert such shares into Common Stock
pursuant to paragraph 6A, then effective upon the closing of the sale of such
shares by the Corporation pursuant to such public offering or such conversion,
as the case may be, all outstanding shares of such Preferred Stock shall
automatically convert to shares of Common Stock on the basis set forth in this
paragraph 6. Holders of shares of Preferred Stock so converted may deliver to
the Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to such
holders) during its usual business hours, the certificate or certificates for
the shares so converted. As promptly as practicable thereafter, the Corporation
shall issue and deliver to such holder a certificate or certificates for the
number of whole shares of Common Stock to which such holder is entitled,
together with any cash dividends and payment
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in lieu of fractional shares to which such holder may be entitled pursuant to
subparagraph 6C. Until such time as a holder of shares of Preferred Stock shall
surrender his or its certificates therefor as provided above, such certificates
shall be deemed to represent the shares of Common Stock to which such holder
shall be entitled upon the surrender thereof.
7. Redemption. The shares of Preferred Stock shall be redeemed as
follows:
7A. Redemption at the Request of Holders. The Corporation shall not
have the right to call or redeem at any time all or any shares of Preferred
Stock. With the approval of the holders of a majority of the then outstanding
shares of Preferred Stock, one or more holders of shares of Preferred Stock may,
by giving notice (the Notice ) to the Corporation at any time after June 1, 2002
require the Corporation to redeem all of the outstanding Preferred Stock in
three equal installments, with one-third of the shares of outstanding Preferred
Stock redeemed on the First Redemption Date (as defined below), one-half of the
remaining shares of Preferred Stock redeemed on the first anniversary of the
First Redemption Date (as to such redemption, the Second Redemption Date ) and
the remainder of shares of Preferred Stock redeemed on the third anniversary of
the First Redemption Date (as to such redemption, the Third Redemption Date ).
Upon receipt of any Notice, the Corporation will so notify all other persons
holding Preferred Stock. After receipt of any Notice, the Corporation shall fix
the first date for redemption to which the Notice relates (the First Redemption
Date ), provided that such First Redemption Date shall occur within sixty (60)
days after receipt of such Notice. All holders of Preferred Stock shall deliver
to the Corporation, or to such other place as may be designated by the
Corporation, during regular business hours the certificate or certificates for
the Preferred Stock on or before the First Redemption Date. The First Redemption
Date, Second Redemption Date and Third Redemption Date are collectively referred
to as the Redemption Dates.
7B. Redemption Price and Payment. The shares of Preferred Stock to
be redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to the Original Purchase Price per share plus, in the case
of each share, an amount equal to all dividends declared but unpaid thereon,
computed to such Redemption Date, such amount being referred to as the
Redemption Price. Such payment shall be made in full on the applicable
Redemption Date to the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30 days
prior to each Redemption Date, written notice (the Redemption Notice ) shall be
given by the Corporation by delivery in person, certified or registered mail,
return receipt requested, telecopier or telex, to each holder of record (at the
close of business on the business day next preceding the day on which the
Redemption Notice is given) of shares of Preferred Stock notifying such holder
of the redemption and specifying the Redemption Price, such Redemption Date, and
the place where said Redemption Price shall be payable. The Redemption Notice
shall be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Preferred Stock being redeemed (except the right
to receive the Redemption Price) shall cease with respect to the shares to be
redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Preferred Stock to be redeemed on any Redemption Date
are insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such Redemption Date, the holders of such shares shall share ratably
in any funds legally available for redemption of such shares according to the
respective amounts which would be payable to them if the full number of shares
to be redeemed on such Redemption Date were actually redeemed. The shares of
Preferred Stock to be redeemed but not so redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are
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legally available for the redemption of such shares of Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
of Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired
by the Corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and the Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce accordingly
the number of authorized shares of the applicable series of Preferred Stock.
7E. Failure to Redeem. If the Corporation shall fail to redeem any
shares of Preferred Stock in the manner set forth in this paragraph 7 within six
months of a Redemption Date upon which such shares were to be redeemed then upon
the written request (the Request ) of holders of a majority of the outstanding
shares of Preferred Stock (the Majority ), the Corporation shall, within thirty
(30) days of receipt of the Request, at the Corporation's expense, engage a
third-party investment banking firm or other agent (the Agent ) acceptable to
the Majority for the purpose of assisting the Corporation in taking such steps
as are necessary for the Corporation to meet its obligations under this
paragraph 7 (a Liquidity Event ). The Liquidity Event may be a merger, sale of
assets or other reorganization event or any other type of transaction which
would make available sufficient cash for the Corporation to effect the requested
redemption. If the Corporation shall fail to engage such Agent within the
required thirty (30) day period, the Majority may, at their election and at the
Corporation's expense, engage such Agent. If a Liquidity Event has not occurred
within six months of the date of the Request, the Majority may, at its election,
compel a Liquidity Event by a judgment for specific performance or other
remedies, at law or in equity, by a court of competent jurisdiction.
8. Amendments. These terms of the Preferred Stock may be amended, modified
or waived only with the written consent or affirmative vote of the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock.
IN WITNESS WHEREOF, Allaire Corporation has caused this Certificate of
Amendment to the Certificate of Incorporation which amends Article Fourth, Part
B pertaining to the Preferences and Rights of Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock and adds Certificate of
Designations, Preferences and Rights of Series D Convertible Preferred Stock, to
be executed on its behalf by David J. Orfao, its President, this 14th day of
May, 1997.
ALLAIRE CORPORATION
By: /s/ David J. Orfao
------------------------
President