EXHIBIT 3.1
SECOND RESTATED CERTIFICATE OF INCORPORATION OF
CTI INDUSTRIES CORPORATION
CTI Industries Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is CTI Industries Corporation. The date
of the filing of its original Certificate of Incorporation of the Corporation
with the Secretary of State, under the name Container Merger Company, Inc., was
October 14, 1983.
2. This Restated Certificate of Incorporation restates, integrates and
further amends the Certificate of Incorporation of the Corporation, as amended,
in its entirety and has been adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware, as
amended, to read as herein set forth in full:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is:
CTI INDUSTRIES CORPORATION
SECOND: The address, including the street, number, city and county of
the registered office of the corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle, and the name of the registered
agent of the corporation in the State of Delaware at such address is The
Corporation Trust Company.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the corporation shall be 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:
A. This Corporation is authorized to issue three classes of capital
stock to be designated respectively Common Stock ("Common Stock"), Class B
Common Stock ("Class B Common Stock") and Preferred Stock. The total number of
shares of capital stock that the Corporation is authorized to issue is Fourteen
Million One Hundred Thousand (14,100,000). The total number of shares of Common
Stock this Corporation shall have authority to issue is Eleven Million
(11,000,000). The total number of shares of Class B Common Stock this
Corporation shall have authority to issue is One Million One Hundred Thousand
(1,100,000). The total number of shares of Preferred Stock the Company shall
have the authority to issue is Two Million (2,000,000). The Common Stock shall
have a par value of $.065 per share, the Class B Common Stock shall have a par
value of $.91 per share and the Preferred Stock shall have a par value of $.91
per share. Upon the conversion of the Preferred Stock to shares of Class B
Common Stock as provided in Section 6.02 of Paragraph D of this Article Fourth,
any additional shares of Preferred Stock may be issued from time to time with
such designations, preferences, conversion rights, cumulative, relative,
participating, option or other rights, qualifications, limitations or
restrictions thereof as shall be stated and expressed in the resolution or
resolutions providing for the issuance of such Preferred Stock adopted by the
Boardof Directors pursuant to the authority in this paragraph given.
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B. Upon the effective date of this Second Restated Certificate of
Incorporation (i) a reverse stock split of the Company's Preferred Stock shall
automatically take place whereby current holders of Preferred Stock will receive
1 share of Preferred Stock for every 2.6 shares of Preferred Stock then held and
(ii) a reverse stock split of the Company's Common Stock shall automatically
take place whereby current holders of Common Stock will receive 1 share of
Common Stock for every 2.6 shares of Common Stock then held. The reverse stock
splits provided for above will take effect automatically and immediately without
the need for replacement certificates to be issued by the Company. The Company
shall, however, issue replacement certificates as soon as practicable.
C. The powers, preferences, rights, restrictions, and other matters
relating to the Common Stock and Class B Common Stock are as follows:
1. Dividends. The holders of the Common Stock and Class B
Common Stock shall participate equally and pro rata in dividends, if any,
declared by the Company on a per share basis.
2. Liquidation. In the event of any voluntary or involuntary
liquidation (whether complete or partial), dissolution or winding up of the
Corporation, the holders of Common Stock and Class B Common Stock shall
participate equally, on a per share basis, in the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings.
3. Voting Rights.
3.01 General Voting Rights. Except in circumstances in which
the holders of Common Stock and Class B Common Stock, respectively,
shall be required to vote separately as a class, with respect to all
matters upon which the Corporation's stockholders shall vote or be
entitled to vote, the holders of all Common Stock and Class B Common
Stock shall vote together as a single class with each holder being
entitled to one vote per share on all such matters.
3.02 Election of Directors. For so long as there shall be
issued and outstanding more than 500,000 shares of Class B Common
Stock.
(a) By-Laws; Number of Directors. Notwithstanding the
provisions of Article Seventh hereof, the by-laws of the Corporation
shall provide for the election of seven directors and such provision
may not be amended, modified, altered or repealed except by the
approval of the holders of two-thirds of the outstanding shares of
Class B Common Stock voting separately as a class, provided, however,
that the number of directors shall in no event be reduced below seven
without the additional approval of the holders of two-thirds of the
outstanding shares of Common Stock voting separately as a class.
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(b) Election of Directors.
(i) Four of the seven directors of the
Corporation shall be elected by the
holders of a majority of the
outstanding shares of Class B Common
Stock voting separately as a class;
(ii) The remaining three directors shall
be elected by the holders of a
majority of the outstanding shares
of Common Stock and Class B Common
Stock voting together as a single
class.
3.03 Amendments to Class B Common Stock. After the initial
issuance of Class B Common Stock upon the conversion of the Preferred
Stock, the Corporation shall not (i) issue additional shares of Class B
Common Stock (except for additional issuances upon stock dividends,
stock splits, or recapitalizations with respect to outstanding shares
of Class B Common Stock) or (ii) amend the terms of the Class B Common
Stock in any manner that would adversely affect the rights of the
holders of Common Stock except with the approval of the holders of
two-thirds of the outstanding shares of Common Stock.
3.04 Quorum. At any meeting of the stockholders of the
Corporation, the presence in person or by proxy of a majority in number
of the issued and outstanding shares of Common Stock and Class B Common
Stock, as a single class, shall be sufficient to constitute a quorum.
3.05 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the stockholders of the Corporation, may
be taken without a meeting, if prior to such action a written consent
thereto is signed by the holders of shares of Common Stock and/or Class
B Common Stock necessary to approve such action if such action was
taken at a meeting of stockholders.
4. Transfer.
4.01 No person holding shares of Class B Common Stock of
record (hereinafter called "Class B Holder") may transfer, and the
Corporation shall not register the transfer of, such shares of Class B
Common Stock, whether by sale, assignment, gift, bequest, appointment,
operation of law or otherwise, except to a Permitted Transferee. A
Permitted Transferee shall mean:
(a) Stephen M. Merrick, John H. Schwan, Howard W.
Schwan, Frances Ann Rohlen, and Philip W. Colburn, their respective
spouses, issue, and the spouses of such issue (collectively referred to
as "Family Members");
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(b) The trustee or trustees of a trust or trusts
(including a voting trust) for the primary benefit of any one or more
Family Members (collectively referred to as "Family Trusts");
(c) A corporation or partnership controlled (as
defined below) by one or more Family Members or Family Trusts
(collectively referred to as "Family Entities"); and
(d) The estate of such Class B Holder.
4.02 Notwithstanding anything to the contrary set forth
herein, any Class B Holder may pledge such Holder's shares of Class B Common
Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares shall
not be transferred to or registered in the name of the pledgee and shall remain
subject to the provisions of this Section 4. In the event of foreclosure or
other similar action by the pledgee, such pledged shares of Class B Common Stock
may only be transferred to a Permitted Transferee of the pledgor or converted
into shares of Common Stock as the pledgee may elect.
4.03 The following events shall result in the conversion of
the applicable shares of Class B Common Stock into shares of Common Stock:
(a) a Class B Holder shall transfer or attempt to
transfer Class B Common Stock to a person or entity not a Permitted
Transferee;
(b) a Class B Holder shall transfer or attempt to
transfer to any person or entity not a Permitted Transferee, including,
without limitation, a pledgee, the right to vote any Class B Common
Stock, whether by agreement, voting trust or otherwise;
(c) a Family Trust holding Class B Common Stock shall
cease to be a trust for the primary benefit of any one or more Family
Members;
(d) a Family Entity holding Class B Common Stock
shall cease to be controlled by one or more Family Members or Family
Trusts. For purposes of this Section 4, "controlled" means: (i) in the
case of a corporation, the ownership, beneficially and of record, of
shares of capital stock representing a majority of the equity ownership
of, and economic interest in, such corporation, as well as a majority
of all votes entitled to vote for the election of directors; and (ii)
in the case of a partnership, the ownership, beneficially and of
record, of partnership interests representing a majority of the equity
as a majority of the partnership interests entitled to participate in
the management of the partnership.
If any of the foregoing events shall occur, all shares of
Class B Common Stock subject to such transfer or attempted transfer or then held
by such Family Trust or Family Entity, whichever applicable, shall, without
further act on anyone's part, be converted into shares of
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Common Stock effective upon the date of such event occurs, and stock
certificates formerly representing such shares of Class B Common Stock shall
thereupon and thereafter be deemed to represent the like number of shares of
Common Stock. The Corporation may, in connection with preparing a list of
shareholders entitled to vote at any meeting of shareholders, or as a condition
to the transfer or the resignation of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits, documents or
other proof as it deems necessary to establish that any person is a Permitted
Transferee or to ascertain that none of the events described in this
subparagraph 4.03 occurred.
4.04 Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or "nominee" name.
For this purposes, a "beneficial owner" of any shares of Class B Common Stock
shall mean a person who, or any entity which, possesses the power, either singly
or jointly, to direct the voting or disposition of such shares. The Corporation
shall note on the certificates for shares of Class B Common Stock the existence
of the restrictions on transfer imposed by this Section 4.
5. Conversion.
5.01 Conversion Rights and Procedure.
(a) Right of Conversion. Each holder of shares of
Class B Common Stock shall be entitled to exercise all or a portion of
the conversion rights provided herein at any time or from time to time.
(b) Rate of Conversion. Upon exercise of the right of
conversion hereunder with respect to shares of Class B Common Stock,
the holder thereof shall be entitled to receive that number of shares
of Common Stock ("Conversion Shares") equal to the number of shares of
Class B Common Stock tendered subject to adjustment as provided in
Section 4.02.
(c) Method of Conversion. A holder of shares of Class
B Common Stock shall exercise such holder's conversion rights hereunder
by (i) delivering or mailing to the Corporation, by certified or
registered mail, return receipt requested, a written notice stating
such holder's intention to exercise such rights and specifying the
number of shares of Class B Common Stock as to which the conversion
right is exercised and (ii) accompanying such notice with a certificate
or certificates representing such shares duly endorsed in blank or
accompanied with a stock power duly endorsed in blank. The right of
exercise shall be deemed to have been exercised on the date that such
notice shall be delivered to the Corporation or mailed in accordance
with this section ("Exercise Time"). Each share of Class B Common Stock
shall be canceled after it has been converted as provided herein.
(d) Delivery of Certificates. Certificates for
Conversion Shares shall be delivered to the holder named therein within
15 days after the Exercise Time. Unless all of the Class B Common Stock
evidenced by the certificate delivered to the Corporation shall
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have been converted, the Corporation shall within such 15 day period
prepare a new certificate, substantially identical to that surrendered,
representing the balance of the shares of Class B Common Stock formerly
represented by the certificate which shall not have been converted and
shall within the said 15 day period deliver such certificate to the
person designated as the holder thereof.
(e) The Corporation covenants and agrees that:
(i) At all times during which any shares
of Class B Common Stock are issued
and outstanding, the Corporation
shall reserve and maintain a
sufficient number of authorized and
unissued shares of Common Stock
sufficient to issue shares of Common
Stock upon conversion of all of the
then issued and outstanding Class B
Common Stock, including additional
shares which may become issuable by
reason of an adjustment pursuant to
Section 5.02 hereof. The Corporation
shall not issue any shares of Common
Stock if, after the issuance
thereof, the number of authorized
and unissued shares of Common Stock
would then be insufficient to issue
shares of Common Stock to holders of
the then issued and outstanding
Class B Common Stock if all of such
holders were to exercise their
rights of conversion hereunder;
(ii) The Conversion Shares issuable upon
any conversion of any shares of
Class B Common Stock shall be deemed
to have been issued to the person
exercising such conversion privilege
at the Exercise Time, and the person
exercising such conversion privilege
shall be deemed for all purposes to
have become the record holder of
such Common Stock shares at the
Exercise Time.
(iii) All Conversion Shares which may be
issued upon any conversion of any
shares of Class B Common Stock will,
upon issuance, be fully paid and
non-assessable and free from all
taxes, liens and charges with
respect to the issue thereof.
(f) Notwithstanding the above, the shares of Class B
Common Stock then outstanding shall be automatically converted into
shares of Common Stock upon the conversion terms then in effect on July
23, 2002.
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5.02 Adjustment Provisions.
(a) Subdivision or Combination of Stock. In case at
any time the Company shall in any manner subdivide its outstanding
shares of Common Stock into a greater number of shares or combine such
shares of Common Stock into a smaller number of shares, then the number
of shares of Common Stock into which a share of Class B Common Stock
may be converted shall be adjusted to reflect such subdivision or
combination of shares of Common Stock.
(b) Reorganization, Reclassification, Consolidation,
Merger or Sale. If any reorganization or reclassification of the
capital stock of the Company, or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially
all of the Company's 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 provisions shall be
made whereby the holders of Class B Common Stock shall thereafter have
the right to purchase and receive such shares of stock, securities, or
assets as may be issued or payable with respect to or exchange for a
number of outstanding shares of such Common Stock equal to the number
of shares of such stock immediately theretofore purchasable and
receivable upon the conversion of Class B Common Stock had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of the Class B
Common Stock to the end that the provisions hereof 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 the
rights represented hereby.
In the event of a merger or consolidation of the Company with or into
another corporation as a result of which a number of shares of common
stock of the surviving corporation greater or lesser than the number of
shares of Common Stock of the Company outstanding immediately prior to
such merger or consolidation are issuable to holders of Common Stock of
the Company, then the number of shares of Common Stock subject to
issuance upon conversion of a share of Class B Common Stock shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Company.
The Company shall not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger of
the corporation into or for the securities of which the previously
outstanding stock of the Company shall be exchanged in connection with
such consolidation or merger, or the corporation purchasing such
assets, as the case may be, shall assume, by written instrument
executed and mailed or delivered to the holder hereof at the last
address of such holder appearing on the books of the company, the
obligation to deliver to such holder such shares of stock, securities,
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. The provisions of this Section 5.02(b)
governing the substitution of another corporation for the Company shall
similarly apply to successive instances in which
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the corporation then deemed to be the Company hereunder shall either
sell all or substantially all of its properties and assets to any other
corporation, shall consolidate with or merge into any other
corporation, or shall be the surviving corporation of the merger into
it of any other corporation as a result of which the holders of any of
its stock or other securities shall be deemed to have become the
holders of, or shall become entitled to, the stock or other securities
of any corporation other than the corporation at the time deemed to be
the Company hereunder.
(c) Notice of Adjustment. The Company shall give to
the holder of the Class B Common Stock prompt written notice of every
adjustment of the Conversion terms by first class mail, postage
prepaid, addressed to the address of such holder as shown on the books
of the Company, which notice shall state the adjustment, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation was based.
D. The powers, preferences, rights, restrictions, and other matters
relating to the Preferred Stock are as follows:
1. Dividends
1.01 Preferred Stock Dividends. The holders of shares of
Preferred Stock shall be entitled to receive dividends at the rate of 13% per
annum of the par value, payable out of funds legally available therefore. Such
dividends shall be payable only when, as, and if declared by the Board of
Directors. Such dividends shall accrue from day to day whether or not earned or
declared. If declared, all dividends which shall have accrued shall be payable
on the first day of March, June, September and December for so long as any
shares of the Preferred Stock shall remain outstanding. If at any time the
Corporation shall pay less than the total amount of dividends due on outstanding
Preferred Stock at the time of the payment, such payment shall be distributed
among the holders of the Preferred Stock so that an equal amount shall be paid
with respect to each outstanding share of Preferred Stock.
1.02 Dividends Cumulative. Dividends on each share of the
Preferred Stock shall be cumulative from the date of issuance of such share,
whether or not at the time such dividend shall accrue or become due or at any
other time there shall be profits, surplus or other funds of the Corporation
legally available for the payment of dividends. Dividends shall accrue on each
share of Preferred Stock from and including the date of issuance of such share
to and including the date upon which the holder of such share shall have
converted such share to Common stock in accordance with Section 4 hereof or such
share shall have been purchased and redeemed by the Corporation.
1.03 Restriction on Common Stock Dividends. So long as any
shares of Preferred Stock are outstanding, no dividends whatsoever shall be
declared or paid upon, nor shall any distribution be made upon or with respect
to, any shares of Common Stock.
2. Liquidation.
2.01 Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation (whether complete or partial), dissolution or winding up
of the Corporation, the holders of Preferred Stock shall be entitled to be paid
out of the assets of the Corporation
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available for distribution to its stockholders, whether from capital, surplus or
earnings, an amount in cash per share equal to the Liquidating Value. No
distribution shall be made on any Common Stock of the Corporation by reason of
any voluntary or involuntary liquidation (whether complete or partial),
dissolution or winding up of the Corporation unless each holder shall have
received the full amount of the Liquidating Value with respect to all shares of
Preferred Stock held by such holder. The consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof, and the sale or transfer 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
Section 2.01.
2.02 Liquidating Value. The Liquidating Value with respect to
each share of Preferred Stock outstanding shall be the sum of (i) the par value
and (ii) all unpaid dividends accrued thereon to the date of final distribution.
2.03 Allocation of Liquidation Payments. If upon any
dissolution, liquidation (whether complete or partial), or winding up of the
Corporation, the assets of the Corporation available for distribution to the
stockholders shall be insufficient to pay to the holders of outstanding
Preferred Stock the full amount to which they shall be entitled pursuant to
Section 2.01 hereof, each holder of Preferred Stock shall be entitled to receive
an amount equal to the product derived by multiplying the total amount available
for distribution by a fraction the numerator of which shall be the number of
shares of Preferred Stock held by such person and the denominator of which the
total number of shares of Preferred Stock then outstanding.
3. Voting Rights.
3.01 General Voting Rights. Except in circumstances in which
the holders of Preferred Stock and Common Stock respectively shall be required
to vote separately as a class, with respect to all matters upon which the
Corporation's stockholders shall vote or be entitled to vote, the holders of all
Preferred Stock and Common Stock shall vote together as a single class with each
holder being entitled to one vote per share on all such matters.
3.02 Election of Directors. For so long as there shall be
issued and outstanding more than 250,000 shares of Preferred Stock:
(a) By-Laws; Number of Directors. Notwithstanding the
provisions of Article Seventh hereof, the by-laws of the Corporation
shall provide for the election of five directors and may not be
amended, modified, altered or repealed except by the approval of the
holders of two-thirds of the outstanding shares of Preferred Stock
voting separately as a class.
(b) Election of Directors.
(i) Four of the five directors of the
Corporation shall be elected by the
holders of a majority of the
outstanding shares of Preferred
Stock voting separately as a class;
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(ii) One director shall be elected by the
holders of a majority of the
outstanding shares of Common Stock
and Preferred Stock voting together
as a single class.
If at any time after December 31, 1996, there shall be outstanding less
than 250,000 shares of Preferred Stock, the foregoing provisions shall
thereafter no longer be in effect and all directors of the Corporation
thereafter shall be elected by the holders of the outstanding Common
Stock and Preferred Stock voting together as a single class.
3.03 Voting in Certain Circumstances. The following actions
shall require the approval of the holders of two-thirds of the outstanding
shares of Common Stock and Preferred Stock voting together as a single class, by
written consent, or in person or by proxy at a special meeting of stockholders
called for such purpose:
(i) Any amendment of the Certificate of
Incorporation of the Corporation;
(ii) Any merger or consolidation of the
Corporation or any subsidiary of the
Corporation with any other corporation;
(iii) Authorization of or the taking of any action
to dissolve, liquidate or wind up the
business of the Corporation; or
(iv) The sale, lease transfer or other
disposition of all or any substantial part
of the corporation's assets in any one or a
series of related transactions.
3.04 Quorum. At any meeting of the stockholders of the
Corporation, the presence in person or by proxy of a majority in number of the
issued and outstanding shares of Common Stock and Preferred Stock, as a single
class, shall be sufficient to constitute a quorum.
4. Conversion Rights.
4.01 Conversion Rights and Procedure.
(a) Right of Conversion. Each holder of shares of
Preferred Stock shall be entitled to exercise all or a portion of the
conversion rights provided herein at any time or from time to time.
(b) Rate of Conversion. Upon exercise of the right of
conversion hereunder with respect to shares of Preferred Stock, the
holder thereof shall be entitled to receive that number of shares of
Common Stock determined by dividing the Conversion Value per share of a
share of Preferred Stock multiplied by the number of shares of
Preferred Stock converted and divided by the Conversion Price of the
Common Stock. The "Conversion Value" per share of each share of
Preferred Stock shall be the sum of the par value of such share and all
accrued and unpaid dividends thereon as of the date of conversion.
Subject to adjustment as provided in Section 4.02, the "Conversion
Price" per
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share of Common Stock shall be Thirty-five Cents ($.35) per share. The
shares of Common Stock to be issued upon conversion of shares of
Preferred Stock as provided herein are referred to herein as
"Conversion Shares."
(c) Method of Conversion. A holder of shares of
Preferred Stock shall exercise such holder's conversion rights
hereunder by (i) delivering or mailing to the Corporation, by certified
or registered mail, return receipt requested, a written notice stating
such holder's intention to exercise such rights and specifying the
number of shares of Preferred Stock as to which the conversion right is
exercised and (ii) accompanying such notice with a certificate or
certificates representing such shares duly endorsed in blank or
accompanied with a stock power duly endorsed in blank. The right of
exercise shall be deemed to have been exercised on the date that such
notice shall be delivered to the Corporation or mailed in accordance
with this section ("Exercise Time").
(d) Delivery of Certificates. Certificates for
Conversion Shares shall be delivered to the holder named therein within
15 days after the Exercise Time. Unless all of the Preferred Stock
evidenced by the certificate delivered to the Corporation shall have
been converted or redeemed, the Corporation shall within such 15 day
period prepare a new certificate, substantially identical to that
surrendered, representing the balance of the shares of Preferred Stock
formerly represented by the certificate which shall not have been
converted or redeemed and shall within the said 15 day period deliver
such certificate to the person designated as the holder thereof.
(e) The Corporation covenants and agrees that:
(i) At all times during which any shares
of Preferred Stock are issued and
outstanding, the Corporation shall
reserve and maintain a sufficient
number of authorized and unissued
shares of Common Stock sufficient to
issue shares of Common Stock upon
conversion of all of the then issued
and outstanding Preferred Stock,
including additional shares which
may become issuable by reason of an
adjustment in the conversion rate
pursuant to Section 4.02 hereof. The
Corporation shall not issue any
shares of Common Stock if, after the
issuance thereof, the number of
authorized and unissued shares of
Common Stock would then be
insufficient to issue shares of
Common Stock to holders of the then
issued and outstanding Preferred
Stock if all of such holders were to
exercise their rights of conversion
hereunder;
(ii) The Conversion Shares issuable upon
any conversion of any shares of
Preferred Stock shall be deemed to
have been issued to the person
exercising such conversion privilege
at the Exercise Time, and the person
exercising such conversion privilege
shall be deemed for all purposes to
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have become the record holder of
such Common Stock shares at the
Exercise Time.
(iii) All Conversion Shares which may be
issued upon any conversion of any
shares of Preferred Stock will, upon
issuance, be fully paid and
non-assessable and free from all
taxes, liens and charges with
respect to the issue thereof.
4.02 Anti-dilution Provisions.
(a) Anti-dilution; Initial Conversion Price. In order
to prevent dilution of the rights granted hereunder, the Conversion
Price per share of Common Stock and the number of shares of Common
Stock which a holder of Preferred Stock shall be entitled to receive
upon exercise of the conversion rights herein shall be subject to
adjustment from time to time in accordance with this Section 4.02. For
purposes of this section the initial Conversion Price of each share of
Common Stock shall be Thirty-five Cents ($.35). The Conversion Price
per share of Common Stock shall be the initial Conversion Price, as
adjusted from time to time pursuant to the provisions of this Section
4.02.
(b) Adjustment of Conversion Price; Resulting
Adjustment of Number of Shares of Common Stock Upon Conversion. The
initial Conversion Price per share of Common Stock shall be subject to
adjustment from time to time as hereinafter provided (such price or
such price as last adjusted pursuant to the terms hereof, as the case
may be, is herein called the "Conversion Price"). Upon each adjustment
of the Conversion Price, the holder of shares of Preferred Stock shall
be entitled to receive upon exercise of the conversion rights provided
herein, at the Conversion Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the number of
shares of Preferred Stock converted by the Conversion Value per share
of Preferred Stock and dividing the product thereof by the Conversion
Price resulting from such adjustment.
(c) Adjustment of Conversion Price Upon Issuance of
Common Stock. If and whenever after the date hereof the Corporation
shall issue or sell any shares of its common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to
the time of such issue or sale (except if such issue or sale shall be
made pursuant to the exercise of Executive options, as defined below),
then, forthwith upon such issue or sale, the Conversion Price shall be
reduced to the price, calculated to the nearest cent, determined by
dividing (a) the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the
then existing Conversion Price and (ii) the consideration, if any,
received by the Company upon such issue or sale, by (b) the total
number of shares of Common Stock outstanding immediately after such
issue or sale. No adjustment of the Conversion Price, however, shall be
made in an amount less than $0.01 per share, but any such lesser
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with all
adjustment so carried forward shall amount to $0.01 per share or more.
The provisions of this subparagraph (c) shall not apply with respect to
Executive Options. "Executive Options" shall mean and include options
to purchase Common Stock of the Corporation which may be granted from
time to time by act of the
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Board of Directors of the Corporation to executives or employees of the
Corporation not exceeding, in the aggregate 500,000 shares.
For the purposes of this paragraph (c), the following paragraphs 4.02
(d) to 4.02(m), inclusive, subject to the exception set forth above, shall also
be applicable:
(d) Issuance of Rights or Options. In case at any
time the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock
or securities convertible into or exchangeable for Common Stock, (such
rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein 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 conversion or exchange of such
Convertible Securities (determined as provided in the following
sentence) shall be less than the Conversion Price in effect immediately
prior to the time of granting such Options, then the total maximum
number of shares of Common Stock issuable upon the exercise of all such
Options or upon conversion or exchange of the total maximum amount of
such Convertible Securities shall be deemed to have been issued for
such price per share as of the date of the granting of such Options and
thereafter shall be deemed to be outstanding. The price per share for
which Common Stock is issuable, as referred to in the preceding
sentence, shall be determined by dividing (a) the sum of (i) the total
amount, if any, received or receivable by the Company as consideration
for the granting of such Options, plus (ii) the minimum aggregate
amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (iii) in the case of all such
Options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of all such Convertible Securities [to the extent not counted
under the immediately preceding clause (ii)] and upon the conversion or
exchange of all such Convertible Securities into Common Stock, by (b)
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. The consideration received or receivable by the
Company shall in each case be determined in accordance with paragraph
4.02(h) below. Except as otherwise provided in paragraph 4.02(f) below,
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.
(e) Issuance of Convertible Securities. In case the
Company 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 thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined as provided in the
following sentence) 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
13
thereafter shall be deemed to be outstanding, provided that (a) except
as otherwise provided in paragraph 4.02(f) below, 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 for which adjustment of the Conversion
Price have been or are to be made pursuant to other provisions of this
paragraph 4, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale. The price per share for which
Common Stock is issuable, as referred to in the preceding sentence,
shall be determined by dividing (i) the sum of (A) the total amount
received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus (B) the minimum aggregate
amount of additional consideration, if any, payable upon the conversion
or exchange of such Convertible Securities into Common Stock, by (ii)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities. The
consideration received or receivable by the Company shall in each case
be determined in accordance with paragraph 4.02(h) below.
(f) 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 paragraph 4.02 (d)
above and still outstanding, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities
referred to in paragraph 4.02(d) or 4.02(e) above and still
outstanding, or the rate at which any such Convertible Securities are
convertible into or exchangeable for Common Stock shall change at any
time (other than 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 provide for such changed purchase price, additional
consideration, or conversion rate, as the case may be, at the time
initially granted, issued, or sold. On the expiration of any Option
referred to in paragraph 4.02(d) above prior to the exercise thereof or
the termination of right to convert or exchange any Convertible
Securities referred to in paragraph 4.02(d) or 4.02(e) above prior to
the exercise of such right, 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 expiration or termination
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued,
and the Common Stock issuable thereunder shall no longer be deemed to
be outstanding for the purposes of any calculation under paragraph
4.02(d) or 4.02(e) above.
(g) Determination of Consideration Upon Dividend or
Other Distribution. In case the Company shall declare a dividend or
make any other distribution upon any stock of the Company payable in
Common Stock, Options or Convertible Securities, 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.
(h) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration
14
received therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any expenses incurred
or any reasonable underwriting commissions or concessions paid or
allowed by the Company (or deducted from amounts received by the
Company) 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 Company shall be deemed to be the fair value
of such consideration as determined reasonably and in good faith by the
Board of Directors of the Company, without deduction of any expenses
incurred or any reasonable underwriting commissions or concessions paid
or allowed by the Company (or deducted from amounts received by the
Company) in connection therewith. The amount of consideration deemed to
be received by the Company pursuant to the foregoing provisions of this
paragraph 4.02(h) upon any issuance and/or sale, pursuant to an
established compensation plan of the Company, to directors, officers or
employees of the Company or any subsidiary of the Company in connection
with their employment of shares of Common Stock, Options or convertible
Securities, shall be increased by the amount of any tax benefit
realized by the Company as a result of such issuance and/or sale, the
amount of such tax benefit being the amount by which the federal and/or
state income or other tax liability of the Company shall be reduced by
reason of any deduction or credit in respect of such issuance and/or
sale. In case any Common Stock, Options or Convertible Securities shall
be issued in connection with any merger or consolidation in which the
Company is the surviving Corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of
the Company shall be changed into or exchanged for the stock or other
securities of another corporation), the amount of consideration
received therefor shall be deemed to be the fair value as determined
reasonably in good faith by the Board of Directors of the Company of
such portion of the assets and business of the non-surviving
corporation as such Board may determine to be attributable to such
shares of Common Stock, Options or convertible Securities, as the case
may be. In the event of any consolidation or merger of the Company in
which the Company is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Company shall be
changed into or exchanged for the stock or other securities of another
corporation, or in the event of any sale or all or substantially all of
the assets of the Company for stock or other securities of any
corporation, the Company shall be deemed to have issued a number of
shares of its Common Stock for all outstanding stock or securities of
the other corporation of the nature received in exchange for the
Company's Common Stock computed on the basis of the actual exchange
ratio on which the transaction was predicated and for a consideration
equal to the fair market value on the date of such transaction of all
such stock or securities of the other corporation, and if such
calculation results in adjustment of the Conversion Price, the
determination of the number of shares of Common Stock issuable upon
conversion of the Preferred Stock immediately prior to such merger,
consolidation or sale, for purposes of paragraph 4.02(l) below, shall
be made after giving effect to such adjustment of the Conversion Price.
In case any shares of Common Stock shall be issued (or issuable)
pursuant to any Options for the purchase of the same, the consideration
deemed to be received (or receivable) therefor shall be deemed to be
the total amount, if any, received (or total minimum amount receivable)
by the Company as consideration for the granting of such Options, plus
the aggregate amount of additional consideration paid (or minimum
amount payable) to the Company upon the exercise of such Options. In
case
15
any shares of Common Stock shall be issued (or issuable) upon the
conversion or exchange of any Convertible Securities, the consideration
deemed to be the total amount received (or receivable) therefore shall
be deemed to be the total amount received (or total minimum amount
receivable) by the Company as consideration for the granting of any
Options to subscribe to or purchase such Convertible Securities, plus
the total amount of additional consideration paid (or minimum amount
payable) to the Company as consideration for issue or sale of such
Convertible Securities, plus the total amount of additional
consideration, if any, paid (or minimum amount payable) to the Company
upon the conversion or exchange thereof.
(i) Record Date. In case the Company shall take a
record of the holders of its Common stock for the purpose of entitling
them to receive a dividend or other distribution payable in 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.
(j) 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 Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock for
the purposes of this Section 4.02.
(k) Subdivision or Combination of Stock. In case at
any time the Company shall in any manner subdivide its outstanding
shares of Common Stock into a greater number of shares or combine such
shares of Common Stock into a smaller number of shares, then the
Conversion Price in effect immediately subsequent to such subdivision
or combination shall be equal to the product of (a) the Conversion
Price in effect immediately prior to such subdivision or combination
multiplied by (b) a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such
subdivision or combination and the denominator of which is the number
of shares of Common Stock outstanding immediately thereafter.
(l) Reorganization, Reclassification, Consolidation,
Merger or Sale. If any reorganization or reclassification of the
capital stock of the Company, or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially
all of the Company's 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 provisions shall be
made whereby the holder thereof shall thereafter have the right to
purchase and receive such shares of stock, securities, or assets as may
be issued or payable with respect to or exchange for a number of
outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in
any such case appropriate provision shall be made with respect to the
rights and interests of the holder of the Preferred to the end that the
provisions hereof (including, without limitation, provision
16
for adjustment of the Conversion Price and of the number of shares
purchasable and receivable upon the Conversion of the Preferred) 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 the rights represented hereby (including an immediate
adjustment, by reason of such consolidation or merger, of the
Conversion Price to the value of the Common Stock reflected by terms of
such consolidation or merger if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation or
merger).
In the event of a merger or consolidation of the
Company with or into another corporation as a result of which a number
of shares of common stock of the surviving corporation greater or
lesser than the number of shares of Common Stock of the Company
outstanding immediately prior to such merger or consolidation are
issuable to holders of Common Stock of the Company, then the Conversion
Price in effect immediately prior to such merger or consolidation shall
be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Company.
The Company shall not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger of
the corporation into or for the securities of which the previously
outstanding stock of the Company shall be exchanged in connection with
such consolidation or merger, or the corporation purchasing such
assets, as the case may be, shall assume, by written instrument
executed and mailed or delivered to the holder hereof at the last
address of such holder appearing on the books of the company, the
obligation to deliver to such holder such shares of stock, securities,
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. If a purchase, tender, or exchange offer
is made to and accepted by the holders of more than 50% of the
outstanding shares of the Common Stock of the Company, the Company
shall not effect any consolidation, merger, or sale with the Person
having made such offer or with any Affiliate of such Person unless,
prior to the consummation of such consolidation, merger, or sale, the
holder of the Preferred shall have been given a reasonable opportunity
to then elect to receive either the stock, securities, or assets then
issuable upon the Conversion of the Preferred. As used herein, the term
"Person" shall mean and include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization,
and a government or any department or agency thereof, and an
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control
with, such other Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities by
contract, or otherwise. The provisions of this Section 4.02(l)
governing the substitution of another corporation for the Company shall
similarly apply to successive instances in which the corporation then
deemed to be the Company hereunder shall either sell all or
substantially all of its properties and assets to any other
corporation, shall consolidate with or merge into any other
corporation, or shall be the surviving corporation of the merger into
it of any other corporation as a result of which the holders of any of
its stock or other securities shall be deemed to have become the
holders of, or shall become entitled to, the stock or
17
other securities of any corporation other than the corporation at the
time deemed to be the Company hereunder.
(m) Notice of Adjustment. The Company shall give to
the holder of the Preferred Stock prompt written notice of every
adjustment of the Conversion price by first class mail, postage
prepaid, addressed to the address of such holder as shown on the books
of the Company, which notice shall state the Conversion Price resulting
from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the conversion of the
Preferred Stock, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation was based.
5. Redemption.
5.01 Right to Redeem. From and after January 1, 2000, the
Corporation shall have the right to redeem all or any part of the then
outstanding shares of Preferred Stock at any time or from time to time expressed
by resolution of its Board of Directors, in the manner prescribed in this
Section 5, provided that in (i) any single redemption, the Corporation shall
redeem not less than 100,000 shares of Preferred Stock and (ii) the Corporation
shall not be entitled to redeem shares of Preferred Stock unless at or prior to
the Redemption Date the Corporation shall have paid to all holders of Preferred
Stock all dividends on the Preferred Stock accrued to the last day of the
calendar quarter immediately preceding the Redemption Date.
5.02 Redemption Notice. Before making any redemption of
Preferred Stock hereunder, the Corporation shall mail by certified or registered
mail, return receipt requested, to each record holder of any Preferred Stock at
the address shown on the Corporation's records, a written notice ('Redemption
Notice") stating: (i) the number of shares of Preferred Stock held by record by
such holder which the Corporation proposes to redeem, (ii) the date (herein
called the "Redemption Date") on which the Corporation proposes to pay the
Redemption Price for the shares to be redeemed, (iii) the Redemption Price which
is to be paid for each share repurchased; and (iv) the place at which the shares
to be redeemed may be surrendered in exchange for the Redemption Price for such
shares. Upon the mailing of a Redemption Notice, subject to the right of the
holder to convert the shares to be redeemed to Common Stock as provided herein,
the Corporation shall have the right, and shall become obligated, to redeem the
Preferred Stock specified in such notice on the date specified in such notice as
the Redemption Date. Each Redemption Notice shall be mailed at least 35 days
before the Redemption Date, provided that if the Corporation fails to pay the
Redemption Price on such date, the Redemption Date shall be the date on which
the Corporation actually pays the Redemption Price.
5.03 Allocation of Redeemed Shares. With respect to any
redemption, the Corporation shall designate, by resolution of its Board of
Directors, the aggregate number of shares of Preferred Stock to be redeemed. The
number of shares of Preferred Stock to be redeemed from each holder thereof in
any redemption shall be determined by multiplying the aggregate number of shares
of Preferred Stock to be redeemed by a fraction, the numerator of which shall be
the total number of shares of Preferred Stock held by such holder and the
denominator of which shall be the total number of shares of Preferred Stock then
outstanding.
18
5.04 Right of Holder to Convert. Notwithstanding the provision
of this Section 5, a holder of shares of Preferred Stock shall have the right to
convert the shares of Preferred Stock as to which a Redemption Notice shall have
been give to such holder by converting such shares to Common Stock at any time
prior to the Redemption Date in accordance with the provisions of Section 4
hereof. Any conversion of shares of Preferred Stock made by a holder after the
date of a Redemption Notice and prior to the Redemption Date shall be deemed to
be conversion of the shares to be redeemed pursuant to the Redemption Notice
and, thereafter, (i) with respect to such shares, the Corporation shall not have
the right or obligation to redeem such shares and (ii) the aggregate number of
shares to be redeemed by the Corporation shall be reduced by the number of
shares converted to Common Stock by such holder.
5.05 Redemption Price.
(a) For each share of Preferred Stock which shall be
redeemed by the Corporation at any time, the Corporation shall be
obligated to pay to the holder of such share an amount (herein called
the "Redemption Price") equal to the par value of such share. The
Corporation shall be obligated to pay on any Redemption Date both the
Redemption Price for each share redeemed and all dividends which shall
have accrued (computed on a daily basis) on each share redeemed to and
including the Redemption Date and which shall not previously have been
paid. Such payments which the Corporation shall be obligated to make on
any redemption Date shall be deemed to become "due" for all purposes of
this Section regardless of whether the Corporation shall be able or
legally permitted to make such payments on the Redemption Date.
(b) Each holder of Preferred Stock shall be entitled
to receive on or at any time after the Redemption Date the full
Redemption Price, plus accrued dividends, for each share of Preferred
Stock held by such holder which the Corporation shall be obligated to
redeem on such Redemption Date upon surrender by such holder at the
Corporation's principal office of the certificate representing such
share duly endorsed in blank or accompanied by appropriate form of
assignment duly endorsed in blank. After payment by the Corporation of
the full Redemption price for any share of Preferred Stock redeemed,
plus accrued dividends thereon, all rights of the holder of such share
shall (whether or note the certificate representing such share shall
have been surrendered for cancellation) cease and terminate with
respect to such share.
6. Required Conversion.
6.01 Public Offering. Notwithstanding anything contained
herein to the contrary, upon the Closing by the Company of a public offering of
its securities for gross proceeds equal to or greater than $5,000,000 all shares
of Preferred Stock then outstanding shall, without further act on anyone's part,
be converted into an aggregate of 1,098,901 shares of Class B Common Stock
effective upon such Closing, and stock certificates formerly representing such
shares of Preferred Stock shall thereafter be deemed to represent such number of
shares of Class B Common Stock.
6.02 Effect of Conversion. Upon the conversion of all shares
of Preferred Stock to shares of Class B Common Stock, any additional shares of
Preferred Stock issued shall not be
19
subject to the foregoing provisions, but may be issued from time to time with
such designations, preferences, conversion rights, cumulative, relative,
participating, option or other rights, qualifications, limitations or
restrictions thereof as shall be stated and expressed in the resolution or
resolutions providing for the issuance of such Preferred Stock adopted by the
Board of Directors pursuant to the authority in this paragraph given.
FIFTH: The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the by-laws of the Corporation.
SIXTH: 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 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 of this Corporation,
as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as 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 of
the stockholders or class of stockholders of this Corporation as the case may
be, and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
(a) The number of directors of the Corporation shall
be as specified in the by-laws of the Corporation, but such number may
from time to time be increased or decreased in such manner as shall be
provided in the by-laws of the Corporation. The number of directors
shall not be less than the minimum prescribed by law. The election of
directors need not be by ballot. Directors need not be stockholders.
(b) In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the board of
directors is expressly authorized and empowered to make, alter, amend
and repeal by-laws, subject to the power of the stockholders to alter
or repeal by-laws made by the board of directors.
20
(c) Any director or any officers elected or appointed
by the stockholders or by the board of directors may be removed at any
time in such manner as shall be provided in the by-laws of the
Corporation.
(d) In the absence of fraud, no contract or other
transaction between the Corporation and any other corporation and no
act of the Corporation, shall in any way be affected or invalidated by
the fact that any of the directors of the Corporation are peculiarly or
otherwise interested in, or are directors or officers of, such other
corporation; and in the absence of fraud, any director, individually,
or any firm of which any director may be a member, may be a party to,
or may be peculiarly or otherwise interested in, any contract or
transaction of the Corporation, provided in any case, that the fact
that he or such firm is so interested shall be disclosed or shall have
been known to the Board of Directors or the majority thereof; and any
director of the Corporation, who is also a director or officer of any
such other corporation, or who is also interested may be counted in
determining the existence of quorum at any seating of the Board of
Directors of the Corporation which shall authorize any such contract,
act or transaction, may vote thereat to authorize any such contract,
act or transaction, with like force and effect as if he were not such
director or officer of such other corporation, or not so interested.
EIGHTH:
(a) The Corporation shall have power to indemnify any
person who was or is 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 (other than an action
by or in the right of the Corporation) by the reason of the fact that
he is or was a director, officer, employee or agent 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
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Corporation and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a director, officer,
21
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
of and in a manner he reasonably believes to be in or not opposed to
the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
he reasonably believes to be in or not opposed to the best interest of
the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of this duty to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall
deem proper.
(c) No director of the Corporation shall be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (1) any breach
of the director's duty of loyalty to the Corporation or its
stockholders; (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (3) acts under
Section 174 of the Delaware General Corporation law; or (4) any
transaction from which the director derived an improper personal
benefit.
(d) Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the board of directors in the specific case upon receipt
of an undertaking by or on behalf of the director or officer, to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this
Article Eighth. Such expenses incurred by other employees or agents may
be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
(e) Any indemnification under paragraphs (a), (b) and
(c) (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in paragraphs (a), (b) and (c). Such determination
shall be made (1) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2), if such a quorum is not obtainable, or,
even if obtainable and a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the
stockholders.
(f) The indemnification provided by this Article
Eighth shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-laws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee
22
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent 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 any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article Eighth.
(h) For the purpose of this Article Eighth, reference
to "the Corporation" shall include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or
was serving at the request of such constituent corporation,
partnership, joint venture, trust or other enterprise shall stand in
the same position under the provisions of this section with respect to
the resulting or surviving corporation in the same capacity.
NINTH: From time to time any of the provision of this Restated
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate are granted subject to the provisions of this Article Ninth.
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IN WITNESS WHEREOF, CTI Industries Corporation has caused the
Certificate to be signed by Howard W. Schwan, being the President of the
Corporation this 22nd day of July, 1997.
By: /s/ Howard W. Schwan
--------------------
Howard W. Schwan, President
ATTEST:
/s/ Stephen M. Merrick
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Secretary
24
STATE OF ILLINOIS )
) ss
COUNT OF COOK )
BE IT REMEMBERED, that personally appeared before me, the undersigned,
a Notary Public authorized to take acknowledgment of deed by the laws of the
place where the foregoing Restated Certificate of Incorporation was signed
Howard W. Schwan, the President who signed the foregoing Restated Certificate of
Incorporation, known to me personally to be such, and I having make known to him
the contents of said Restated Certificate of Incorporation, he acknowledged that
the same to be his act and deed, and that the facts therein stated are truly set
forth.
GIVEN UNDER my hand and seal this 22nd day of July, 1997.
/s/ Cheryl J. Stevens
------------------
Notary Public
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