Exhibit 3.1
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CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PATHNET, INC.
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Adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware
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We, William R. Smedberg, V, Vice President, Finance and
Corporate Development, and Michael A. Lubin, Vice President, General Counsel and
Secretary, of Pathnet, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DO HEREBY CERTIFY as follows:
FIRST: The Restated Certificate of Incorporation of the
Corporation is hereby amended by deleting the current Section 10 thereof it in
its entirety and renumbering Section 11 as new Section 10.
SECOND: This Amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by William R. Smedberg, V, Vice President, Finance and
Corporate Development, and attested to by Michael A. Lubin, Vice President,
General Counsel and Secretary, on this 8th day of December, 1998.
PATHNET, INC.
By: /s/ William R. Smedberg, V
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William R. Smedberg, V
Vice President,
Finance and Corporate Development
ATTEST:
By: /s/ Michael A. Lubin
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Michael A. Lubin
Vice President,
General Counsel and Secretary
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PATHNET, INC.
Pathnet, Inc., a corporation duly incorporated under the laws
of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Pathnet, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on 25th day of
August, 1995, under the name PathNet, Inc.
SECOND: This Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with Sections 242 and 245 of the Delaware
General Corporation Law (the "General Corporation Law").
THIRD: This Amended and Restated Certificate of Incorporation
hereby restates, integrates and amends the Certificate of Incorporation, as
amended, of the Corporation as follows:
1. NAME. The name of the corporation is PATHNET, INC. (the
"Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 1013 Centre Road, Wilmington, New Castle
County, Delaware 19805. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
3. PURPOSE. The purpose of the Corporation is to engage in,
carry on and conduct any lawful act or activity for which corporations may be
organized under the General Corporation Law.
4. NUMBER OF SHARES. The total number of shares of stock that
the Corporation shall have authority to issue is 75,470,595, divided as follows:
10,000,000 shares of Preferred Stock, par value of $0.01 per share (the
"Preferred Stock"), 1,000,000 shares of Series A Convertible Preferred Stock,
par value of $0.01 per share (the "Series A Preferred Stock"), 1,651,046 shares
of Series B Convertible Preferred Stock, par value of $0.01 per share (the
"Series B Preferred Stock"), 2,819,549 shares of Series C Convertible Preferred
Stock, par value of $0.01 per share (the "Series C Preferred Stock," and
together with the Series A Preferred Stock and the
Series B Preferred Stock, the "Series Preferred Stock"); and 60,000,000 shares
of Common Stock, par value of $0.01 per share (the "Common Stock").
5. DESIGNATION OF CLASSES; RELATIVE RIGHTS, ETC. The
designation, relative rights, preferences and limitations of the shares of each
class are as follows:
5.1 PREFERRED STOCK. The shares of Preferred Stock may be
issued from time to time in one or more series of any number of shares, provided
that the aggregate number of shares issued and not canceled of any and all such
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with such powers, preferences and rights and
qualifications, limitations or restrictions thereof, and such distinctive serial
designations, all as shall hereafter be stated and expressed in the resolution
or resolutions providing for the issue of such shares of Preferred Stock from
time to time adopted by the Board of Directors of the Corporation (the "Board of
Directors") pursuant to authority so to do which is hereby vested in the Board
of Directors. Each series of shares of Preferred Stock (a) may have such voting
rights or powers, full or limited, or may be without voting rights or powers;
(b) may be subject to redemption at such time or times and at such prices; (c)
may be entitled to receive dividends (which may be cumulative or non-cumulative)
at such rate or rates, on such conditions and at such times, and payable in
preference to, or in such relation to, the dividends payable on any other class
or classes or series of stock; (d) may have such rights upon the voluntary or
involuntary liquidation, winding up or dissolution of, or upon any distribution
of the assets of, the Corporation; (e) may be made convertible into or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation at such price
or prices or at such rates of exchange and with such adjustments; (f) may be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation and (h) may have such
other relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock. Any of
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of any such series of Preferred Stock may be made
dependent upon facts ascertainable outside of the resolution or resolutions
providing for the issue of such Preferred Stock adopted by the Board of
Directors pursuant to the authority vested in it by this Section 5.1, provided
that the manner in which such facts shall operate upon the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issue of such Preferred
Stock. The term "facts" as used in the next preceding sentence shall have the
meaning given to it in Section 151(a) of the General Corporation Law. Shares of
Preferred Stock of any series that have been redeemed (whether through the
operation of a sinking fund or otherwise) or that if
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convertible or exchangeable, have been converted into or exchanged for shares of
any other class or classes shall have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be reissued as a
part of the series of which they were originally a part or as part of a new
series of shares of Preferred Stock to be created by resolution or resolutions
of the Board of Directors or as part of any other series of shares of Preferred
Stock, all subject to the conditions or restrictions on issuance set forth in
the resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.
5.2 COMMON STOCK. Subject to the provisions of any applicable
law or of the Bylaws of the Corporation, as from time to time amended (the
"Bylaws"), with respect to the closing of the transfer books or the fixing of a
record date for the determination of stockholders entitled to vote and except as
otherwise provided herein with respect to any shares of Series Preferred Stock,
by law or by the resolution or resolutions providing for the issue of any series
of shares of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess voting power for the election of directors and for all
other purposes, each holder of record of shares of Common Stock being entitled
to one vote for each share of Common Stock standing in his or her name on the
books of the Corporation. Except as otherwise provided herein with respect to
any shares of Series Preferred Stock or by the resolution or resolutions
providing for the issue of any series of shares of Preferred Stock, the holders
of shares of Common Stock shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment shall have been made to the holders of shares of any
Series Preferred Stock and any Preferred Stock of the full amount to which they
shall be entitled pursuant to this Amended and Restated Certificate of
Incorporation or the resolution or resolutions providing for the issue of any
series of shares of Preferred Stock, the holders of shares of Common Stock shall
be entitled, to the exclusion of the holders of shares of Series Preferred Stock
and Preferred Stock of any and all series, to share, ratably according to the
number of shares of Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
5.3 SERIES PREFERRED STOCK.
5.3.1 SHARES.
(a) AUTHORIZED SHARES. The Corporation
shall have authority to issue Five Million Four Hundred Seventy Thousand Five
Hundred Ninety-Five (5,470,595) shares of Series Preferred Stock, of which One
Million (1,000,000) shares shall be designated the Series A Preferred Stock, One
Million Six Hundred Fifty One Thousand Forty Six (1,651,046) shares shall be
designated the Series B Preferred
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Stock and Two Million Eight Hundred Nineteen Thousand Five Hundred Forty-Nine
(2,819,549) shares shall be designated as the Series C Preferred Stock.
(b) DIVIDENDS. The holders of the Series
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, dividends (other than dividends paid in additional shares of Common
Stock) in preference to and at the same rate as dividends are paid with respect
to the Common Stock (treating each share of Series Preferred Stock as being
equal to the number of shares of Common Stock into which each such share of
Series Preferred Stock could be converted pursuant to the provisions of Section
5.3.4 hereof, with such number determined as of the record date for the
determination of holders of Common Stock entitled to receive such dividend).
5.3.2 LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DISTRIBUTIONS TO HOLDERS OF SERIES
PREFERRED STOCK. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock shall rank on a
parity with each other and shall rank prior to the Common Stock or any class of
stock ranking junior to the Series Preferred Stock. Upon such liquidation,
holders of each share of Series Preferred Stock outstanding shall be entitled to
be paid, out of the assets of the Corporation available for distribution to
stockholders and before any payment shall be made to the holders of any class of
Common Stock or of any stock ranking on liquidation junior to the Series
Preferred Stock, an amount in cash equal to the original purchase price paid by
such holder for each such share of Series Preferred Stock held (appropriately
adjusted for stock splits, stock dividends and the like) plus any declared but
unpaid dividends thereon. If upon any liquidation, dissolution or winding up of
the Corporation, the assets to be distributed to the holders of the Series
Preferred Stock under the foregoing sentence shall be insufficient to permit
payment to such stockholders of the full preferential amounts aforesaid, then
all of the assets of the Corporation available for distribution to such holders
under such sentence shall be distributed among the holders of Series Preferred
Stock, pro rata in accordance with the total amount of preference which would
have been payable to such holders if funds had been available to pay the full
preference under the previous sentence. After such payment shall have been made
in full to such holders of Series Preferred Stock, or funds necessary for such
payment shall have been set aside by the Corporation in trust for the account of
such holders so as to be available for such payment, the holders of the
outstanding shares of Common Stock and any class of stock ranking junior to the
Series Preferred Stock shall share ratably in the distribution of the remaining
assets and funds of the Corporation available for distribution to shareholders.
(b) DEEMED LIQUIDATIONS. In the case of
(i) a consolidation or merger of the Corporation (other than a consolidation or
merger upon
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consummation of which the holders of voting securities of the Corporation
immediately prior to such transaction, continue to own directly or indirectly
not less than a majority of the voting power of the surviving corporation) or a
sale of all or substantially all of the assets of the Corporation or other
similar transaction and (ii) either receipt by the Corporation of (x)
consideration less than the equivalent of $1.00 per share (appropriately
adjusted for stock splits, stock dividends and the like) of Series A Preferred
Stock plus any declared but unpaid dividends, (y) consideration less than the
equivalent of $3.28 per share (appropriately adjusted for stock splits, stock
dividends and the like) of Series B Preferred Stock plus any declared but unpaid
dividends, or (z) consideration less than the equivalent of $10.64 per share
(appropriately adjusted for stock splits, stock dividends and the like) of
Series C Preferred Stock plus any declared but unpaid dividends, such event
shall be regarded, at the option of the holders of a majority of the then
outstanding shares of Series Preferred Stock, as a liquidation, dissolution or
winding up of the affairs of the Corporation within the meaning of this Section
5.3.2.
Notwithstanding the foregoing, each holder
of Series Preferred Stock shall have the right to elect the benefits of the
provisions of Section 5.3.4(h) hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
Section 5.3.2(b). For purposes of this Section 5.3.2 and Section 5.3.6 hereof, a
sale of substantially all of the assets of the Corporation shall mean (x) the
sale or other disposition other than in the ordinary course of business of more
than 50% of such assets, as determined by reference to either (A) the book value
or (B) the fair market value, of such assets, or (y) any issuance of Common
Stock by the Corporation or transfer of Common Stock by the holder thereof to
any person or persons acting in concert or a group of affiliated persons, which
issuance or transfer results in such person or persons or group holding in the
aggregate more than 50% of the issued and outstanding Common Stock after giving
effect to such issuance or transfer.
(c) NON-CASH DISTRIBUTIONS. In the event
of a liquidation, dissolution or winding up of the Corporation resulting in the
availability of assets other than cash for distribution to the holders of the
Series Preferred Stock, the holders of the Series Preferred Stock shall be
entitled to a distribution of cash and/or assets equal in value to the
liquidation preference and other distribution rights stated in Section 5.3.2(a)
and Section 5.3.2(b) hereof. In the event that such distribution to the holders
of the Series Preferred Stock shall include any assets other than cash, the
following provisions shall govern. The Board of Directors shall first determine
the value of such assets for such purpose, and shall notify all holders of
shares of Series Preferred Stock of such determination. The value of such assets
for purposes of the distribution under this Section 5.3.2(c) shall be the value
as determined by the Board of Directors in good faith and with due care, unless
the holders of a majority of the outstanding shares of Series Preferred Stock
shall object thereto in writing within 15 days after the date of such notice. In
the event of such objection, the valuation of such
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assets for purposes of such distribution shall be determined by an arbitrator
selected by the objecting stockholders and the Board of Directors, or in the
event a single arbitrator cannot be agreed upon within 10 days after the written
objection sent by the objecting stockholders in accordance with the previous
sentence, the valuation of such assets shall be determined by arbitration in
which (i) the objecting stockholders shall name in their notice of objection one
arbitrator, (ii) the Board of Directors shall name a second arbitrator within 15
days from the receipt of such notice, (iii) the two arbitrators thus selected
shall select a third arbitrator within 15 days thereafter, and (iv) the three
arbitrators thus selected shall determine the valuation of such assets within 15
days thereafter for purposes of such distribution by majority vote. The costs of
such arbitration shall be borne by the Corporation or by the holders of the
Series Preferred Stock (on a pro rata basis out of the assets otherwise
distributable to them) as follows: (i) if the valuation as determined by the
arbitrators is greater than 95% of the valuation as determined by the Board of
Directors, the holders of the Series Preferred Stock shall pay the costs of the
arbitration, and (ii) otherwise, the Corporation shall bear the costs of the
arbitration.
5.3.3 VOTING RIGHTS.
(a) GENERAL. Except as otherwise
expressly provided herein or as required by law, the holder of each share of the
Series Preferred Stock shall be entitled to vote on any matters presented to the
holders of the Common Stock. Each share of Series Preferred Stock shall entitle
the holder thereof to such number of votes per share as shall equal the number
of shares of Common Stock into which such share of Series Preferred Stock is
convertible in accordance with the terms of Section 5.3.4 hereof at the record
date for the determination of stockholders entitled to vote on such matter or,
if no record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided
herein (including, without limitation, the provisions of Section 5.3.6 hereof)
or as required by law, the holders of shares of Series Preferred Stock and the
Common Stock shall vote together as a single class on any matters presented to
the holders of the Common Stock.
(b) BOARD OF DIRECTORS.
(i) INVESTOR DIRECTORS. The
holders of the Series A Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Corporation in any vote for
the election of directors of the Corporation, and shall be entitled to elect by
such class vote two directors (the "Series A Investor Directors"), one of which
Series A Investor Directors to be designated by Spectrum Equity Investors, L.P.
("Spectrum") for so long as it owns shares of Series A Preferred Stock and
thereafter by the holders of a majority of the issued and outstanding shares of
Series A Preferred Stock, and the other to be designated by New Enterprise
Associates VI, Limited Partnership or its affiliates (collectively, "NEA VI")
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for so long as it owns shares of Series A Preferred Stock and thereafter by the
holders of a majority of the issued and outstanding shares of Series A Preferred
Stock. The holders of the Series B Preferred Stock shall be entitled to vote as
a class separately from all other classes of stock of the Corporation in any
vote for the election of directors of the Corporation, and shall be entitled to
elect by such class vote one director (the "Series B Investor Director") to be
designated by Grotech Capital Group IV, LLC ("Grotech IV") for so long as it
owns shares of Series B Preferred Stock and thereafter by the holders of a
majority of the issued and outstanding shares of Series B Preferred Stock. The
holders of the Series C Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Corporation in any vote for
the election of directors of the Corporation, and shall be entitled to elect by
such class vote one director (the "Series C Investor Director") to be designated
by the holders of a majority of the issued and outstanding shares of Series C
Preferred Stock; provided, however, that if the holders of a majority of the
issued and outstanding shares of Series C Preferred Stock designate for election
as the Series C Investor Director an individual who is not a partner or
associate of a Series C Investor or an entity under substantially the same
management as a Series C Investor, such designee shall be elected as a director
only with the vote of a majority of the Common Stock Directors and Investor
Directors, voting together. Initially, the Series C Investor Director will be
designated by Toronto Dominion Capital (U.S.A.), Inc. In no event shall the
Series C Investor Director be (i) a partner or associate of Spectrum or an
entity under substantially the same management as Spectrum for so long as
Spectrum has designation rights under this Section 5.5.3(a), (ii) a partner or
associate of NEA VI or an entity under substantially the same management as NEA
VI for so long as NEA VI has designation rights under this Section 5.3.3(a), and
(iii) a partner or associate of Grotech IV or an entity under substantially the
same management as Grotech IV for so long as Grotech IV has designation rights
under this Section 5.3.3(a).
(ii) COMMON STOCK DIRECTORS. For
so long as any Series Preferred Stock remains outstanding, the holders of Common
Stock shall be entitled to vote as a class separately from all other classes in
any vote for the election of directors of the Corporation, and shall be entitled
to elect by such class vote two directors (the "Common Stock Directors").
(iii) APPOINTMENT OF CHIEF
EXECUTIVE OFFICER/OFFICER DIRECTOR. Upon the termination or resignation of the
Chief Executive Officer of the Corporation, the Corporation will select and hire
a successor Chief Executive Officer (and any successor thereto) by the
affirmative vote of a majority of the Common Stock Directors, the Series A
Investor Directors, the Series B Investor Director and the Series C Investor
Director, voting together. The Chief Executive Officer (and any replacement or
successor Chief Executive Officer) as so selected and hired shall be elected to
the Corporation's Board of Directors by the holders of the Series Preferred
Stock and the Common Stock voting together as a single class (the "Officer
Director"). David Schaeffer may serve as Chief Executive Officer of the
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Corporation in the discretion of the Board of Directors, but in no event shall
David Schaeffer be elected as the Officer Director.
(iv) REMOVAL OF DIRECTORS. The
removal of any director of the Corporation shall be as set forth in the Bylaws
of the Corporation.
(c) SPECIAL VOTING RIGHTS. The holders
of the Series Preferred Stock shall be entitled to the special voting rights set
forth in Section 5.3.6 hereof.
5.3.4 CONVERSION. The holders of the Series
Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT. Subject to and in
compliance with the provisions of this Section 5.3.4, any shares of the Series
Preferred Stock may, at any time or from time to time at the option of the
holder, be converted into fully-paid and non-assessable shares of Common Stock.
The number of shares of Common Stock to which a holder of the Series Preferred
Stock shall be entitled upon conversion shall be the product obtained by
multiplying the Applicable Conversion Rate (determined as provided in Section
5.3.4(c)) by the number of shares of Series Preferred Stock being converted.
(b) AUTOMATIC CONVERSION.
(i) Each share of the Series
Preferred Stock outstanding shall automatically be converted into the number of
shares of Common Stock into which such shares are convertible upon application
of the then effective Applicable Conversion Rate (determined as provided in
Section 5.3.4(c)) immediately upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, or under such other applicable securities regulations
covering the offer and sale of capital stock of the Corporation (other than a
registration relating solely to Rule 145 under such Act (or any successor
thereto) or to an employee benefit plan of the Corporation) (i) immediately
prior to the consummation of which, the Corporation is valued (based on the
per-share price paid in such public offering, but without regard to any proceeds
to be received by the Company in connection with such offering) at greater than
$50,000,000, (ii) in which the gross proceeds received by the Corporation exceed
$20,000,000, and (iii) in which the Corporation uses a nationally recognized
underwriter approved by holders of a majority in interest of the Series
Preferred Stock (a "Qualified Public Offering").
(ii) Upon the occurrence of an
event specified in Section 5.3.4(b)(i), the outstanding shares of Series
Preferred Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be
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obligated to issue certificates evidencing such shares of the Common Stock
unless certificates evidencing such shares of the Series Preferred Stock being
converted are either delivered to the Corporation or any transfer agent, as
hereinafter provided, or the holder notifies the Corporation or any transfer
agent, as hereinafter provided, that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith.
Upon the occurrence of the automatic
conversion of all of the outstanding Series Preferred Stock, the holders of the
Series Preferred Stock shall surrender the certificates representing such shares
at the office of the Corporation or of any transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to each such holder, promptly at
such office and in his name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of the Series Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred and cash as
provided in Section 5.3.4(k) below in respect of any fraction of a share of
Common Stock issuable upon such automatic conversion.
(c) APPLICABLE CONVERSION RATE. The
conversion rate in effect at any time for the applicable series of Series
Preferred Stock (the "Applicable Conversion Rate") shall equal the quotient
obtained by dividing $1.00 in the case of Series A Preferred Stock, $3.28 in the
case of Series B Preferred Stock or $10.64 in the case of the Series C Preferred
Stock by the Applicable Conversion Value, calculated as hereinafter provided.
(d) APPLICABLE CONVERSION VALUE. The
Applicable Conversion Value in effect initially, and until first adjusted in
accordance with Section 5.3.4(e) or Section 5.3.4(f) hereof, shall be $1.00 in
the case of Series A Preferred Stock, $3.28 in the case of Series B Preferred
Stock and $10.64 in the case of the Series C Preferred Stock.
(e) ADJUSTMENT FOR COMMON STOCK
DIVIDENDS, SUBDIVIDENDS AND COMBINATIONS OF COMMON STOCK, ETC. Upon the
happening of any of the following: (i) the issuance of additional shares of
Common Stock of any class as a dividend or other distribution of outstanding
Common Stock, (ii) the subdivision of outstanding shares of Common Stock of any
class into a greater number of shares of Common Stock, or (iii) the combination
of outstanding shares of Common Stock of any class into a smaller number of
shares of Common Stock (each an "Extraordinary Common Stock Event"), the
Applicable Conversion Value shall, simultaneously with the happening of such
Extraordinary Common Stock Event, be adjusted by dividing the then effective
Applicable Conversion Value by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (excluding treasury
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stock) immediately after such Extraordinary Common Stock Event and the
denominator of which shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately prior to such Extraordinary Common Stock
Event, and the quotient so obtained shall thereafter be the Applicable
Conversion Value. The Applicable Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
(f) ADJUSTMENTS FOR DILUTING ISSUES.
(i) Except as provided in
Section 5.3.4(e) above or for Excluded Shares (as defined below), if the
Corporation shall issue any additional shares of Common Stock of any class for
no consideration or at a price per share less than the Applicable Conversion
Value in effect for each applicable series of Series Preferred Stock immediately
prior to such issuance or sale, then in each such case such Applicable
Conversion Value shall be reduced to such lower price.
For purposes of this Section 5.3.4(f),
"Excluded Shares" shall mean (i) shares issued or delivered from treasury or
stock options (and shares of Common Stock issued upon the exercise thereof)
granted by the Corporation, with the approval of the Board of Directors, to
directors, officers, employees, agents or consultants of the Corporation for up
to an aggregate of 1,325,212 shares of the Common Stock (as adjusted for stock
splits, stock dividends and the like); (ii) warrants to purchase shares of
Common Stock (and any shares of Common Stock issued upon the exercise thereof)
issued by the Corporation in connection with the Corporation's offering of
units, each such unit consisting of $1,000 principal amount at maturity of
Senior Notes due 2008 (the "Notes") of the Corporation and warrants to purchase
shares of Common Stock; and (iii) warrants to purchase shares of Common Stock
(and any shares of Common Stock issued upon the exercise thereof) issued by the
Corporation in connection with the credit facilities among the Corporation
and/or its subsidiaries, its equipment vendors and certain other senior lenders.
For purposes of this Section 5.3.4(f),
if a part or all of the consideration received by the Corporation in connection
with the issuance of shares of the Common Stock or the issuance of any of the
securities described below in paragraph (ii) of this Section 5.3.4(f) consists
of property other than cash, such consideration shall be deemed to have the same
value as is determined by the Corporation's Board of Directors with respect to
receipt of such property so long as such determination was made reasonably and
in good faith, and shall otherwise be deemed to have a value equal to its fair
market value.
(ii) For the purpose of this
Section 5.3.4(f), the issuance of any warrants, options or other subscription or
purchase rights with respect to shares of Common Stock of any class and the
issuance of any securities convertible into shares of Common Stock of any class
(or the issuance of any warrants, options or any rights with respect to such
convertible securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the
Corporation for such Common Stock (as hereinafter determined) shall
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be less than the Applicable Conversion Value at the time of such issuance and,
except as hereinafter provided, an adjustment in the Applicable Conversion Value
shall be made upon each such issuance in the manner provided in paragraph (i) of
this Section 5.3.4(f) as if such Common Stock were issued at such Net
Consideration Per Share. No adjustment of the Applicable Conversion Value shall
be made under this Section 5.3.4(f) upon the issuance of any additional shares
of Common Stock which are issued pursuant to the exercise of any warrants,
options or other subscription or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any convertible securities if any
adjustment shall previously have been made upon the issuance of such warrants,
options or other rights. Any adjustment of the Applicable Conversion Value with
respect to this paragraph (ii) of this Section 5.3.4(f) shall be disregarded if,
as and when the rights to acquire shares of Common Stock upon exercise or
conversion of the warrants, options, rights or convertible securities which gave
rise to such adjustment expire or are canceled without having been exercised, so
that the Applicable Conversion Value effective immediately upon such
cancellation or expiration shall be equal to the Applicable Conversion Value in
effect immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or convertible securities, with such additional
adjustments as would have been made to that Applicable Conversion Value had the
expired or canceled warrants, options, rights or convertible securities not been
issued; provided, however, that no such readjustment of the Applicable
Conversion Value shall have the effect of increasing the Applicable Conversion
Value to an amount which exceeds the lower of (x) the Applicable Conversion
Value on the original adjustment date, or (y) the Applicable Conversion Value
that would have resulted from any issuance of any additional shares of Common
Stock pursuant to such warrants, options, rights or convertible securities
between the original adjustment date and such readjustment date. In the event
that the terms of any warrants, options, other subscription or purchase rights
or convertible securities previously issued by the Corporation are changed
(whether by their terms or for any other reason) so as to change the Net
Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or convertible securities originally
gave rise to an adjustment of the Applicable Conversion Value), the Applicable
Conversion Value shall be recomputed as of the date of such change, so that the
Applicable Conversion Value effective immediately upon such change shall be
equal to the Applicable Conversion Value in effect at the time of the issuance
of the warrants, options, rights or convertible securities subject to such
change, adjusted for the issuance thereof in accordance with the terms thereof
after giving effect to such change, and with such additional adjustments as
would have been made to that Applicable Conversion Value had the warrants,
options, rights or convertible securities been issued on such changed terms. For
purposes of this paragraph (ii), the Net Consideration Per Share which may be
received by the Corporation shall be determined as follows:
(A) The Net Consideration
Per Share shall mean the amount equal to the total amount of consideration, if
any, received by the Corporation for the issuance of such warrants, options,
rights or convertible securities, plus the minimum amount of consideration, if
any, payable to the
14
Corporation upon exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such warrants, options,
subscriptions, or other purchase rights or convertible securities were exercised
or converted at such net consideration per share.
(B) The Net Consideration
Per Share which may be received by the Corporation shall be determined in each
instance as of the date of issuance of warrants, options, rights or convertible
securities without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such warrants, options,
rights or convertible securities and which are contingent upon future events;
provided that in the case of an adjustment to be made as a result of a change in
terms of such warrants, options, rights or convertible securities, the Net
Consideration Per Share shall be determined as of the date of such change.
(g) ADJUSTMENTS FOR RECLASSIFICATION. If
the Common Stock issuable upon the conversion of the Series Preferred Stock
shall be changed into the same or different number of shares of any class or
classes of stock, whether by reclassification or otherwise (other than an
Extraordinary Common Stock Event, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5.3.4), then and in each
such event the holder of each share of Series Preferred Stock shall have the
right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such shares of Series Preferred Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein. Without limiting the
generality of the foregoing, the Applicable Conversion Rate, as defined in this
Section 5.3.4, in respect of such other shares or securities so receivable upon
conversion of shares of Series Preferred Stock shall thereafter be adjusted, and
shall be subject to further adjustment from time to time, in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section 5.3.4, and the remaining provisions
herein with respect to the Common Stock shall apply on like or similar terms to
any such other shares or securities.
(h) ADJUSTMENTS FOR REORGANIZATIONS. If
at any time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section 5.3.4) or a merger or
consolidation of the Corporation with or into another corporation or the sale of
all or substantially all of the Corporation's properties and assets to any other
person, then, as a part of and as a condition to the effectiveness of such
reorganization, merger, consolidation or sale, lawful and adequate provision
shall be made so that if the Corporation is not the surviving corporation, the
Series Preferred Stock shall be converted into preferred stock of the surviving
corporation having equivalent preferences, rights and privileges except that in
lieu of
15
being able to convert into shares of Common Stock of the Corporation or the
successor corporation the holders of the Series Preferred Stock (including any
such preferred stock issued upon conversion of the Series Preferred Stock) shall
thereafter be entitled to receive upon conversion of the Series Preferred Stock
(including any such preferred stock issued upon conversion of the Series
Preferred Stock) the number of shares of stock or other securities or property
of the Corporation or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of the number of shares of Common Stock
deliverable upon conversion of the Series Preferred Stock immediately prior to
the capital reorganization, merger, consolidation or sale would have been
entitled on such capital reorganization, merger, consolidation, or sale. In any
such case, appropriate provisions shall be made with respect to the rights of
the holders of the Series Preferred Stock (including any such preferred stock
issued upon conversion of the Series Preferred Stock) after the reorganization,
merger, consolidation or sale to the end that the provisions of this Section
5.3.4 (including, without limitation, provisions for adjustment of the
Applicable Conversion Value and the number of shares purchasable upon conversion
of the Series Preferred Stock or such preferred stock) shall thereafter be
applicable, as nearly as may be, with respect to any shares of stock, securities
or assets to be deliverable thereafter upon the conversion of the Series
Preferred Stock or such preferred stock.
Each holder of Series Preferred Stock upon
the occurrence of a capital reorganization, merger or consolidation of the
Corporation or the sale of all or substantially all of its assets and properties
as such events are more fully set forth in the first paragraph of this Section
5.3.4(h), shall have the option of electing treatment of his shares of Series
Preferred Stock under either this Section 5.3.4(h) or Section 5.3.2(b) hereof,
and except as otherwise provided in said Section 5.3.2(b), notice of which
election shall be submitted in writing to the Corporation at its principal
offices no later than 10 days before the effective date of such event, provided
that any such notice shall be effective if given not later than 15 days after
the date of the Corporation's notice, pursuant to Section 5.3.8, with respect to
such event.
(i) CERTIFICATE AS TO ADJUSTMENTS. In
each case of an adjustment or readjustment of the Applicable Conversion Rate,
the Corporation will promptly furnish each holder of Series Preferred Stock with
a certificate, prepared by the chief financial officer of the Corporation,
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(j) MECHANICS OF CONVERSION. To exercise
its conversion privilege, a holder of Series Preferred Stock shall surrender the
certificate or certificates representing the shares being converted to the
Corporation at its principal office, and shall give written notice to the
Corporation at that office that such holder elects to convert such shares. Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. The certificate or
16
certificates for shares of Series Preferred Stock surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation or in
blank. The date when such written notice is received by the Corporation together
with the certificate or certificates representing the shares of Series Preferred
Stock being converted, shall be the "Conversion Date." As promptly as
practicable after the Conversion Date, the Corporation shall issue and shall
deliver to the holder of the shares of Series Preferred Stock being converted, a
certificate or certificates in such denominations as it may request in writing
for the number of full shares of Common Stock issuable upon the conversion of
such shares of Series Preferred Stock in accordance with the provisions of this
Section 5.3.4 and cash as provided in Section 5.3.4(k) below in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series 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 shares of Common Stock
represented thereby.
(k) FRACTIONAL SHARES. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Series Preferred Stock. Instead of any fractional shares of
Common Stock that would otherwise be issuable upon conversion of Series
Preferred Stock, the Corporation shall pay to the holder of the shares of Series
Preferred Stock that were converted a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the market price per share
of the Common Stock (as determined in a manner prescribed in good faith by the
Board of Directors) at the close of business on the Conversion Date.
(l) PARTIAL CONVERSION. In the event
some but not all of the shares of Series Preferred Stock represented by a
certificate or certificates surrendered by a holder are converted, the
Corporation shall execute and deliver to or on the order of the holder, at the
expense of the Corporation, a new certificate representing the number of shares
of Series Preferred Stock which were not converted.
(m) RESERVATION OF COMMON STOCK. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series Preferred Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series Preferred Stock, the Corporation shall take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
17
5.3.5 REDEMPTION.
(a) OPTIONAL REDEMPTION.
(i) OPTIONAL REDEMPTION OF
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK. In the event that there
shall not have occurred a closing of a Qualified Public Offering (as defined in
Section 5.3.4(b) hereof) prior to December 23, 2000, at the election of any
holder of shares of Series A Preferred Stock or any holder of Series B Preferred
Stock outstanding as of December 24, 2000, the Corporation shall redeem all (but
not part) of the shares of Series A Preferred Stock and Series B Preferred Stock
then held by such holder. Payment of the Series A Redemption Price (as defined
below) to the holders of Series A Preferred Stock and the Series B Redemption
Price (as defined below) to the holders of shares of Series B Preferred Stock,
shall be made by the Corporation on January 23, 2001, for a cash price equal to
the original purchase price paid by such holders for each share of Series A
Preferred Stock and Series B Preferred Stock outstanding, adjusted for any stock
split, combined consolidation or stock distribution or stock dividends with
respect to such shares (the "Series A Redemption Price" and the "Series B
Redemption Price," respectively). On or prior to December 24, 2000, the
Corporation shall give written notice (the "Series A and Series B Redemption
Notice") by mail, postage prepaid, to the holders of the then outstanding shares
of Series A Preferred Stock and Series B Preferred Stock at the address of each
such holder appearing on the books of the Corporation or given by such holder to
the Corporation for the purpose of notice. Such notice shall set forth the
Series A Redemption Price and the Series B Redemption Price, as the case may be,
and shall further state that any holder of shares of Series A Preferred Stock or
Series B Preferred Stock who intends to request redemption of its Series A
Preferred Stock or Series B Preferred Stock, respectively, pursuant to this
Section 5.3.5(a) must give written notice to the Corporation of its request for
redemption on or before January 11, 2001. On or after January 11, 2001, each
holder of shares of Series A Preferred Stock and Series B Preferred Stock who
requested that such holder's shares of Series A Preferred Stock and Series B
Preferred Stock be so redeemed, shall surrender the certificate or certificates
evidencing such shares to the Corporation. In the case of any certificate or
certificates which have been lost, stolen or destroyed, the holder of such
certificate or certificates shall make and deliver an affidavit of that fact to
the Corporation without the necessity of giving the Corporation a bond.
(ii) MANDATORY REDEMPTION OF
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK. If after sending the
Series A and Series B Redemption Notice, the Corporation receives requests for
redemption on or prior to January 11, 2001 from the holders of at least
sixty-seven percent (67%) of the Series A Preferred Stock and Series B Preferred
Stock taken together, it shall give written notice by mail, postage prepaid, to
the holders of Series A Preferred Stock and Series B Preferred Stock that all
shares of the Series A Preferred Stock and Series B Preferred Stock then
outstanding will be redeemed on January 23, 2001 (the "Series A
18
and Series B Redemption Date") for a per share cash price equal to the Series A
Redemption Price and the Series B Redemption Price, as the case may be. The
notice shall further call upon such holders to surrender to the Corporation on
or before the Series A and Series B Redemption Date at the place designated in
the notice such holder's certificate or certificates representing the shares to
be redeemed. On or after the Series A and Series B Redemption Date, each holder
of shares of Series A Preferred Stock and Series B Preferred Stock called for
redemption shall surrender the certificate or certificates evidencing such
shares to the Corporation. In the case of any certificate or certificates which
have been lost, stolen or destroyed, the holder of such certificate or
certificates shall make and deliver an affidavit of that fact to the Corporation
without the necessity of giving the Corporation a bond.
(iii) OPTIONAL REDEMPTION OF
SERIES C PREFERRED STOCK. In the event there shall not have occurred a closing
of a Qualified Public Offering (as defined in Section 5.3.4(b) hereof) prior to
November 3, 2001, at the election of each holder of shares of Series C Preferred
Stock outstanding as of November 4, 2001, the Corporation shall redeem all (but
not part) of the shares of Series C Preferred Stock then held by such holder.
Payment of the applicable Series C Redemption Price (as defined below) to the
holders of Series C Preferred Stock shall be made by the Corporation on December
3, 2001, for a cash price equal to the original purchase price paid by such
holders for each share of Series C Preferred Stock outstanding, adjusted for any
stock split, combined consolidation or stock distribution or stock dividends
with respect to such shares (the "Series C Redemption Price"). On or prior to
November 4, 2001, the Corporation shall give written notice (the "Series C
Redemption Notice") by mail, postage prepaid, to the holders of the then
outstanding shares of Series C Preferred Stock at the address of each such
holder appearing on the books of the Corporation or given by such holder to the
Corporation for the purpose of notice. The Series C Redemption Notice shall set
forth the Series C Redemption Price and shall further state that any holder of
shares of Series C Preferred Stock who intends to request redemption of its
Series C Preferred Stock pursuant to this Section 5.3.5(a) must give written
notice to the Corporation of its request for redemption on or before November
21, 2001. On or after December 3, 2001, each holder of shares of Series C
Preferred Stock who requested that such holder's shares of Series C Preferred
Stock be so redeemed, shall surrender the certificate or certificates evidencing
such shares to the Corporation. In the case of any certificate or certificates
which have been lost, stolen or destroyed, the holder of such certificate or
certificates shall make and deliver an affidavit of that fact to the Corporation
without the necessity of giving the Corporation a bond.
(iv) MANDATORY REDEMPTION OF
SERIES C PREFERRED STOCK. If after sending the Series C Redemption Notice, the
Corporation receives requests for redemption on or prior to November 21, 2001
from the holders of at least sixty-seven percent (67%) of the Series C Preferred
Stock, it shall give written notice by mail, postage prepaid, to the holders of
Series C Preferred Stock that all shares of Series C Preferred Stock then
outstanding will be redeemed on December 3,
19
2001 (the "Series C Redemption Date") for a per share cash price equal to the
Series C Redemption Price. The notice shall further call upon such holders to
surrender to the Corporation on or before the Series C Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed on or after the Series C Redemption Date,
each holder of shares of Series C Preferred Stock called for redemption shall
surrender the certificate or certificates evidencing such shares to the
Corporation. In the case of any certificate or certificates which have been
lost, stolen or destroyed, the holder of such certificate or certificates shall
make and deliver an affidavit of that fact to the Corporation without the
necessity of giving the Corporation a bond.
(v) EXTENSION OF REDEMPTION DATES.
Notwithstanding the foregoing clauses (i) through (iv), in the event any
indebtedness under the Notes remains outstanding, the holders of shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall not have the right to require the Corporation to redeem any of such shares
until ninety (90) days after the later of (x) the date on which such Notes shall
be indefeasibly paid in full and (y) the applicable Redemption Date.
(b) TERMINATION OF RIGHTS. From and
after the Series A and Series B Redemption Date or the Series C Redemption Date
(each a "Redemption Date"), as the case may be, unless there shall have been a
default in payment or tender by the Corporation of the Series A Redemption Price
and the Series B Redemption Price or the Series C Redemption Price (each a
"Redemption Price"), as the case may be, all rights of the holders with respect
to such redeemed shares of the Series Preferred Stock (except the right to
receive the applicable Redemption Price upon surrender or their certificate)
shall cease and such shares shall not thereafter be transferred on the books of
this Corporation or be deemed to be outstanding for any purpose whatsoever.
(c) INSUFFICIENT FUNDS. If the funds of
the Corporation legally available for redemption of shares of the Series
Preferred Stock on the applicable Redemption Date are insufficient to redeem the
total number of shares of Series A Preferred Stock and Series B Preferred Stock
or Series C Preferred Stock, as the case may be, on such Redemption Date, the
Corporation will use its best efforts to engage in a recapitalization or the
sale of its business or businesses to generate sufficient funds to redeem all of
the shares of the Series A Preferred Stock and Series B Preferred Stock or the
Series C Preferred Stock, as the case may be. The Corporation shall use those
funds which are legally available to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of the Series Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obligated to redeem on the applicable Redemption Date but which it
has not redeemed at the applicable Redemption Price. If any shares of the Series
Preferred Stock are not
20
redeemed for the foregoing reason or because the Corporation otherwise failed to
pay or tender to pay the aggregate applicable Redemption Price on all
outstanding shares of Series Preferred Stock, all shares which have not been
redeemed shall remain outstanding and entitled to all the rights and preferences
provided herein, and the Corporation shall pay interest on the applicable
Redemption Price for the unredeemed portion at an aggregate per annum rate equal
to the greater of (i) twelve percent (12%) or (ii) the Base Rate or any similar
lending rate announced from time to time by The First National Bank of Boston or
any successor entity plus five percent (5%), increased, in each case, by one
percent (1%) at the end of each calendar quarter thereafter. All provisions
hereof are hereby expressly limited so that in no contingency or event
whatsoever shall the amount paid or agreed to be paid to the holders of the
Series Preferred Stock exceed the maximum amount which the holder is permitted
to receive under applicable law. If fulfillment of any provision hereof shall
involve exceeding such amount, then the obligation to be fulfilled shall
automatically be reduced to the limit of such maximum amount. As used herein,
the term "applicable law" shall mean the law in effect as of the date hereof,
provided, however, that in the event that there is a change in the law which
results in a higher permissible rate of interest, then these provisions shall be
governed by such new law as of its effective date.
5.3.6 RESTRICTIONS AND LIMITATIONS. The
Corporation shall not without the affirmative vote or written consent of the
holders of a majority of the then outstanding shares of the Series Preferred
Stock:
(i) Redeem, purchase or otherwise acquire
for value (or pay into or set aside for a sinking fund for such purpose), any
share or shares of Series Preferred Stock other than pursuant to Section 5.3.5
hereof;
(ii) Redeem, purchase or otherwise acquire
for value (or pay into or set aside for a sinking fund for such purpose) any of
the Common Stock of any class or any other capital stock of the Corporation
other than the Series Preferred Stock or any of the Corporation's options,
warrants or convertible or exchangeable securities, except that these provisions
will not prohibit the Corporation from repurchasing or redeeming any shares of
capital stock from individuals and entities who have entered into stockholder
agreements, stock option agreements, employment agreements or other similar
agreements with the Corporation in each case approved by a majority of the
Series A Investor Directors, Series B Investor Director and Series C Investor
Director under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including the termination of employment
and involuntary transfers by operation of law (and their permitted transferees);
provided, however, that any such agreement between such individual and the
Corporation under which the Corporation has such options to repurchase, must be
approved by the affirmative vote or written consent of the holders of a majority
of the then outstanding Series Preferred Stock before such agreement is executed
by the Corporation;
21
(iii) Authorize or issue, or obligate itself
to issue, any other debt or equity security, other than as provided in that
certain Investment and Stockholder's Agreement, by and among the Corporation and
the Investors named therein, dated as of October 31, 1997 (the "Investment
Agreement");
(iv) Increase or decrease (other than by
conversion as permitted hereby) the total number of authorized shares of Series
Preferred Stock;
(v) Pay or declare any dividend or
distribution on any of its capital stock;
(vi) Authorize any merger, consolidation of
the Corporation with or into any other company or entity, or authorize the
reorganization or sale of the Corporation or the sale of substantially all of
the assets of the Corporation;
(vii) Amend the charter documents of the
Corporation or amend the Bylaws of the Corporation in any manner that adversely
affects the preferences, powers, rights or privileges of the holders of Series
Preferred Stock;
(viii) Authorize any reclassification or
recapitalization of the outstanding capital stock of the Corporation;
(ix) Approve the annual operating budget of
the Corporation;
(x) Change the composition or compensation
of management of the Corporation except as provided in the Investment Agreement;
or
(xi) Incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any new or additional
indebtedness or liability in excess of $50,000, except as provided in the
Investment Agreement.
5.3.7 NO REISSUANCE OF SERIES PREFERRED STOCK. No
share or shares of the Series Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be canceled, retired, and eliminated from the shares which
the Corporation shall be authorized to issue. The Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Series Preferred Stock accordingly.
5.3.8 NOTICES OF RECORD DATE. In the event (i)
the Corporation establishes a record date to determine the holders of any class
of securities who are entitled to receive any dividend or other distribution, or
(ii) there occurs any capital
22
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation, or any transfer of all or substantially all of the assets of the
Corporation to any other company, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Series Preferred Stock
at least 20 days prior to the record date specified therein, a notice specifying
(a) the date of such record date for the purpose of such dividend or
distribution and a description of such dividend or distribution, (b) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (c) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
5.3.9 OTHER RIGHTS. Except as otherwise provided
in this Amended and Restated Certificate of Incorporation shares of each series
of the Series Preferred Stock and shares of Common Stock shall be identical in
all respects (each share of Series Preferred Stock having equivalent rights to
the number of shares of Common Stock into which it is then convertible), shall
have the same powers, preferences and rights, without preference of any such
class or share over any other such class or share, and shall be treated as a
single class of stock for all purposes.
5.3.10 RANKING. Each series of Series Preferred
Stock shall rank on a parity with the other series of Series Preferred Stock as
to the distribution of assets on liquidation, dissolution and winding up of the
Corporation. The Series Preferred Stock shall rank senior to the Common Stock as
to the distribution of assets on liquidation, dissolution and winding up of the
Corporation.
5.3.11 MISCELLANEOUS.
(a) All notices referred to herein shall
be in writing, and all notices hereunder shall be deemed to have been given,
upon the earlier of delivery thereof by hand delivery, by courier, or by
standard form of telecommunication, addressed: (i) if to the Corporation, to its
principal executive office (Attention: President) and to the transfer agent, if
any, for the Series Preferred Stock or other agent of the Corporation designated
as permitted hereby or (ii) if to any holder of the Series Preferred Stock or
Common Stock, as the case may be, to such holder at the address of such holder
as listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the Series Preferred Stock or Common Stock, as
the case may be) or (iii) to such other address as the Corporation or any such
holder, as the case may be, shall have designated by notice similarly given.
(b) The Corporation shall pay any and
all stock transfer and documentary stamp taxes that may be payable in respect of
any issuance or
23
delivery of shares of Series Preferred Stock or shares of Common Stock or other
securities issued on account of Series Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Series Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Series Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable. (c) The Corporation may appoint, and from
time to time discharge and change, a transfer agent of the Series Preferred
Stock. Upon any such appointment or discharge of a transfer agent, the
Corporation shall send notice thereof by hand delivery, by courier, by standard
form of telecommunication or by first class mail (postage prepaid), to each
holder of record of the Series Preferred Stock. 5.4 Subject to the provisions of
this Amended and Restated Certificate of Incorporation and except as otherwise
provided by law, the stock of the Corporation, regardless of class, may be
issued for such consideration and for such corporate purposes as the Board of
Directors may from time to time determine.
60 COMPROMISE, ARRANGEMENT OR REORGANIZATION. 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 the
General Corporation Law 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 General Corporation Law 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 stockholders or class of stockholders of this Corporation, as the case may
be, and also on this Corporation.
24
70 LIMITATION OF LIABILITY. No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a) for
any breach of the director's duty of loyalty 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) under Section 174 of
the General Corporation Law or (d) for any transaction from which the director
derived any improper personal benefits. If the General Corporation Law is
hereafter amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
80 INDEMNIFICATION.
8.1 INDEMNITY UNDERTAKING. To the extent not
prohibited by law, the Corporation shall indemnify any person (an "Eligible
Person") who is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative, including, without
limitation, an action by or in the right of the Corporation to procure a
judgment in its favor, by reason of the fact that such person, or a person of
whom such person is the legal representative, is or was a Director or officer of
the Corporation, or, while a Director or officer of the Corporation, is or was
serving, at the request of the Corporation, as a director or officer of any
other corporation or in a capacity with comparable authority or responsibilities
for any partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges).
8.2 PAYMENT OF EXPENSES. The Corporation shall,
from time to time pay to an Eligible Person the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred by or on behalf
of such Eligible Person in connection with any Proceeding, as such expenses are
incurred in advance of the final disposition of such Proceeding; provided,
however, that, if required by the General Corporation Law, such expenses
incurred by or on behalf of such Eligible Person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Eligible Person, to repay any such amount
so advanced if it shall ultimately be determined by final judicial decision from
which there is no further right of appeal that such Eligible Person is not
entitled to be indemnified for such expenses.
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8.3 CERTAIN EXCLUSIONS. Section 8.1 and 8.2
shall not include any Proceeding commenced by any Eligible Person without the
advance approval of the Board of Directors.
8.4 BINDING EFFECT. The provisions of this
Section 8 shall be a contract between the Corporation, on the one hand, and each
Eligible Person, on the other hand, pursuant to which the Corporation and each
such Eligible Person intend to be, and shall be, legally bound. No repeal or
modification of this Section 8 shall affect any rights or obligations with
respect to any state of facts then or theretofore existing or any proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.5 PROCEDURAL RIGHTS. The rights to
indemnification and payment of expenses provided by, or granted pursuant to,
this Section 8 shall be enforceable by an Eligible Person entitled to such
indemnification or payment of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or payment of expenses is not
appropriate shall be on the Corporation. Neither the failure of the Corporation
(including the disinterested Directors on its Board of Directors, a committee of
such disinterested Directors, the Corporation's independent legal counsel and
its stockholders) to have made a determination prior to the commencement of such
action that such indemnification or payment of expenses is proper in the
circumstances, nor an actual determination by the Corporation (including the
disinterested Directors on its Board of Directors, a committee of such
disinterested Directors, the Corporation's independent legal counsel and its
stockholders) that such person is not entitled to such indemnification or
payment of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Notwithstanding anything to the
contrary in Section 8.3, such Eligible Person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or payment of expenses, in whole or in part, in any such
proceeding.
8.6 SERVICE DEEMED AT CORPORATION'S REQUEST. Any
Director or officer of the Corporation serving (a) as a director or officer of
another corporation of which a majority of the shares entitled to vote in the
election of its directors is held, directly or indirectly, by the Corporation or
(b) any employee benefit plan of the Corporation or any corporation referred to
in clause (a) shall be deemed to be doing so at the request of the Corporation.
8.7 ELECTION OF APPLICABLE LAW. Any person
entitled to be indemnified or to payment of expenses as a matter of right
pursuant to this Section 8 may elect to have the right to indemnification or
payment of expenses interpreted on the basis of the applicable law in effect at
the time of the occurrence of the event or events giving rise to the applicable
Proceeding, to the extent permitted by law, or on the basis of the applicable
law in effect at the time such indemnification or payment of expenses is sought.
Such election shall be made, by a notice in writing to the
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Corporation, at the time indemnification or payment of expenses is sought;
provided, however, that if no such notice is given, the right to indemnification
or payment of expenses shall be determined by the law in effect at the time
indemnification or payment of expenses is sought.
8.8 RIGHTS NOT EXCLUSIVE. The rights to
indemnification and reimbursement or advancement of expenses provided by, or
granted pursuant to, this Section 8 shall not be deemed exclusive of any other
rights to which a person seeking indemnification or reimbursement or advancement
of expenses may have or hereafter be entitled under any statute, this Restated
Certificate of Incorporation, the By-laws, any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
8.9 CONTINUATION OF BENEFITS. The rights to
indemnification and reimbursement or advancement of expenses provided by, or
granted pursuant to, this Section 8 shall continue as to a person who has ceased
to be a Director or officer (or other person indemnified hereunder) and shall
inure to the benefit of the executors, administrators, legatees and distributees
of such person.
8.10 INSURANCE. 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 an
Other Entity, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Section 8 or under
Section 145 of the General Corporation Law or any other provision of law.
90 DIRECTORS. This Section is inserted for the management of
the business and for the conduct of the affairs of the Corporation and it is
expressly provided that it is intended to be in furtherance of and not in
limitation or exclusion of the powers conferred by applicable law.
9.1 NUMBER, ELECTION, AND TERMS OF OFFICE OF
BOARD OF DIRECTORS. The business of the Corporation shall be managed by a Board
of Directors consisting of not less than three or more than 15 members. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by resolution adopted
by a majority of the entire Board of Directors then in office, whether or not
present at a meeting. Directors need not be stockholders of the Corporation. The
directors shall be divided into three classes of approximately equal size with
the term of office of the first class to expire at the first annual meeting of
stockholders of the Corporation next following the end of the Corporation's
fiscal year ending December 31, 1998, the term of office of the
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second class to expire at the first annual meeting of stockholders of the
Corporation next following the end of the Corporation's fiscal year ending
December 31, 1999 and the term of office of the third class to expire at the
annual meeting of stockholders of the Corporation next following the end of the
Corporation's fiscal year ending December 31, 2000. At each annual meeting of
stockholders following such initial election as specified above, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election.
Notwithstanding the foregoing, whenever, pursuant to
the provisions of Section 5.1 of this Amended and Restated Certificate of
Incorporation, the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a series or together with holders of other
such series, to elect Directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto.
During any period when the holders of any series of
Preferred Stock have the right to elect additional Directors as provided for or
fixed pursuant to the provisions of this Amended and Restated Certificate of
Incorporation or any certificate of designation related thereto, then upon
commencement and for the duration of the period during which such right
continues: (i) the then otherwise total authorized number of Directors of the
Corporation shall automatically be increased by such specified number of
Directors, and the holders of such Preferred Stock shall be entitled to elect
the additional Directors so provided for or fixed pursuant to said provisions,
and (ii) each such additional Director shall serve until such Director's
successor shall have been duly elected and qualified, or until such Director's
right to hold such office terminates pursuant to said provisions, whichever
occurs earlier, subject to such Director's earlier death, disqualification,
resignation or removal. Except as otherwise provided by the Board in the
resolution or resolutions establishing such series, whenever the holders of any
series of Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
9.2 TENURE. Notwithstanding any provisions to
the contrary contained herein, (i) each director shall hold office until his or
her successor is elected and qualified, or until the earlier of such director's
death, resignation or removal and (ii) the term of any director who is also an
officer of the Corporation shall terminate if he or she ceases to be an officer
of the Corporation.
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9.3 NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the remaining
directors then in office although less than a quorum, or by a sole remaining
director and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which they have
been elected expires or, in each case, until their respective successors are
duly elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director. When
any director shall give notice of resignation effective at a future date, the
Board of Directors may fill such vacancy to take effect when such resignation
shall become effective. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
9.4 REMOVAL OF DIRECTORS. Any one or more or all
of the directors may be removed, at any time, but only for cause by the
stockholders having at least a majority in voting power of the then issued and
outstanding shares of capital stock of the Corporation.
100 ACTION BY STOCKHOLDERS. Notwithstanding the provisions of
Section 228 of the General Corporation Law (or any successor statute), any
action required or permitted by the General Corporation Law to be taken at any
annual or special meeting of stockholders of the Corporation may be taken only
at such an annual or special meeting of stockholders and cannot be taken by
written consent without a meeting. At any annual meeting or special meeting of
stockholders of the Corporation, only such business shall be conducted as shall
have been brought before such meeting in the manner provided by the By-laws.
110 ADOPTION, AMENDMENT AND/OR REPEAL OF BYLAWS. The Board of
Directors may from time to time adopt, amend or repeal the Bylaws; provided,
however, that any Bylaws adopted or amended by the Board of Directors may be
amended or repealed, and any Bylaws may be adopted, by a vote of the
stockholders having at least two-thirds of the voting power of the then issued
and outstanding shares of capital stock of the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certification of Incorporation this _____ day of August, 1998.
PATHNET, INC.
By:
--------------------------------
Richard A. Jalkut
President and Chief Executive Officer
Attest:
By:
--------------------------------
Michael A. Lubin
Vice President, General Counsel and Secretary