Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SECURE COMPUTING CORPORATION
The undersigned, James E. Nicholson, the Secretary of Secure Computing
Corporation, a Delaware corporation (the "Corporation"), hereby certifies as
follows:
1. The Corporation was originally incorporated pursuant to the General
Corporation Law of the State of Delaware under the name "SCC of Delaware, Inc.",
on September 5, 1995.
2. Pursuant to that certain Agreement and Plan of Merger (the
"Agreement of Merger") dated as of September 30, 1995, by and between the
Corporation and Secure Computing Corporation, a Maryland corporation
("Secure-Maryland"), Secure-Maryland merged with and into the Corporation, and
the name of the Corporation was changed to "Secure Computing Corporation".
3. At a meeting of the Board of Directors of the Corporation held on
December 13, 1995, the board duly adopted an Amended and Restated Certificate of
Incorporation of the Corporation.
4. In accordance with Section 245 of the General Corporation Law of the
State of Delaware, the Corporation is restating and integrating its Certificate
of Incorporation in its entirety without further amendment to its provisions as
heretofore adopted or supplemented, there being no discrepancy between the
provisions and the provisions of the Restated Certificate of Incorporation
attached hereto as Exhibit A.
5. The Restated Certificate of Incorporation shall be effective as of
March 6, 1996.
IN WITNESS WHEREOF, the undersigned hereunto set his hand.
/S/ JAMES E. NICHOLSON
---------------------------
James E. Nicholson
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me on this 6th day of
March, 1996 by James E. Nicholson, Secretary of Secure Computing Corporation, a
Delaware corporation, on behalf of the corporation.
/S/ ANNE. M. LONSBURY
---------------------------
Notary Public
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SECURE COMPUTING CORPORATION
FIRST: The name of the Corporation shall be Secure Computing
Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The registered agent of the Corporation at that address is the
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations maybe organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 27,000,000 shares,
consisting of 2,000,000 shares of Preferred Stock, par value $.01 per share, and
25,000,000 shares of Common Stock, par value $.01 per share.
The designations and the voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the Preferred Stock and the Common Stock
which are fixed by this Certificate of Incorporation and the express grant of
authority to the Board of Directors to fix by resolution or resolutions the
designations and the voting powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the Preferred Stock which are not fixed by this
Certificate of Incorporation are as follows and as elsewhere set forth in
Articles Fifth and Sixth:
1. The Preferred Stock may be issued at any time or from time to
time in any amount, provided not more than 2,000,000 shares thereof shall be
outstanding at any time, as Preferred Stock of one or more class or series, as
hereinafter provided. Each share of any one series of Preferred Stock shall be
identical in all respects except as to the date from which dividends thereof may
be cumulative, each class and series of Preferred Stock shall be distinctly
designated by letter or descriptive words, and all classes and series or
Preferred Stock shall rank equally and be identical in all respects except as
permitted by the provisions of Section 2 of this Article Fourth. Shares of
Preferred Stock shall be issued only as fully paid and nonassessable shares.
2. Authority is hereby expressly granted to and vested in the
Board of Directors at any time or from time to time, without action by or
approval of the stockholders, to issue the Preferred Stock as Preferred Stock of
one or more class or series, to fix by resolution or resolutions providing for
the issuance of shares of any class or series the designations and the voting
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of such
class or series so far as not inconsistent with the provisions of this Article
Fourth applicable to all classes and series of Preferred Stock, and to the full
extent now or hereafter permitted by the laws of the State of Delaware,
including the following:
(A) the distinctive designation of such class or series and
the number of shares which shall constitute such class or
series, which number may be increased (except where otherwise
provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of
Directors;
(B) the rate or rates of dividends payable on shares of such
class or series, whether dividends shall be cumulative and, if
so, the date or dates from which dividends shall be cumulative
on the shares of such class or series, the preferences,
restrictions, limitations and conditions upon the payment of
dividends, and the dates on which dividends, if declared,
shall be payable;
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(C) whether shares of such class or series shall be redeemable
and, if so, the terms and provisions of such redemption,
including the date or dates upon or after which they shall be
redeemable, the amount per share payable in case of
redemption, which amount may vary under different conditions
and at different redemption dates, and the manner of selecting
shares for redemption;
(D) the rights of the shares of such class or series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, and the relative
rights of priority, if any, of payment of shares of such class
or series;
(E) whether shares of such class or series shall have a
purchase, retirement or sinking fund for the purchase,
retirement or redemption of shares of such class or series
and, if so, the terms and provisions thereof;
(F) whether shares of such class or series shall have
conversion privileges and, if so, the terms and provisions
thereof, including provisions for adjustment of the conversion
rate in such events as the Board of Directors shall determine;
(G) whether shares of such class or series shall have voting
rights, in addition to voting rights provided by law, and, if
so, the terms and provisions thereof; and
(H) any other preferences and relative, participating,
optional and other special rights and the qualifications,
limitations or restrictions thereof.
3. The holders of the Preferred Stock of each class and series shall be
entitled to receive such dividends, when and as declared by the Board of
Directors, out of funds legally available therefor, as they may be entitled to
in accordance with the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such class or series, payable on such
dates as may be fixed in such resolution or resolutions. So long as there shall
be outstanding any shares of Preferred Stock of any class or series entitled to
cumulative dividends pursuant to the resolution or resolutions providing for the
issuance of such class or series, no dividend, whether in cash or property,
shall be paid or declared, nor shall any distribution be made, on the Common
Stock, nor shall any shares of Common Stock be purchased, redeemed or otherwise
acquired for value by the Corporation, if at the time of making such payment,
declaration, distribution, purchase, redemption or acquisition the Corporation
shall be in default with respect to any dividend payable on, or obligation to
maintain a purchase, retirement or sinking fund with respect to or to redeem,
shares of Preferred Stock of any class of series. Unless otherwise provided by
the Board of Directors pursuant to Section 2 of this Article Fourth, the
foregoing provisions of this Section 3 shall not, however, apply to a dividend
payable in Common Stock or to the acquisition of shares of Common Stock in
exchange for, or through application of the proceeds of the sale of, shares of
Common Stock. Subject to the foregoing and to any further limitations prescribed
in accordance with the provisions of Section 2 of this Article Fourth, the Board
of Directors may declare, out of funds legally available therefor, dividends
upon the then outstanding shares of Common Stock, and shares of Preferred Stock
of any class or series shall not be entitled to participate therein.
4. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Preferred Stock
of each class and series shall be entitled to receive, out of the assets of the
Corporation available for distribution to its stockholders, before any
distribution of assets shall be made to the holders of the Common Stock, the
amount per share provided by the Board of Directors pursuant to Section 2 of
this Article Fourth, which may include an amount equal to any cumulative
dividends thereon to the date of final distribution to the holders of the
Preferred Stock; and the holders of the Common Stock shall be entitled, to the
exclusion of the holders of the Preferred Stock of all classes and series, to
participate ratably in all the assets of the Corporation then remaining in
accordance with their respective rights and preferences. If upon any
liquidation, dissolution or winding up of the Corporation the assets available
for distribution shall be insufficient to pay the holders of all outstanding
shares of Preferred Stock the full amounts to which they respectively shall be
entitled, unless otherwise provided by the Board of Directors pursuant to
Section 2 of this Article Fourth, the holders of
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shares of Preferred Stock of all classes and series shall participate ratably in
any distribution of assets according to the respective amount which would be
payable in respect of the shares of Preferred Stock held by them upon such
distribution if all amounts payable in respect of the Preferred Stock of all
classes and series were paid in full. Unless otherwise provided by the Board of
Directors pursuant to Section 2 of this Article Fourth, neither a statutory
merger nor consolidation of the Corporation into or with any other corporation,
nor a statutory merger or consolidation of any other corporation into or with
the Corporation, nor a sale, transfer, exchange or lease of all or any part of
the assets of the Corporation, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 4.
5. The Corporation, at the option of the Board of Directors, may redeem
the whole or any part of the Preferred Stock of any class or series at the price
or prices and on the terms and conditions provided in the resolution or
resolutions of the Board of Directors providing for the issuance of such series.
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6. Anything herein or in an resolution or resolutions of the Board of
Directors providing for the issuance of any class or series of Preferred Stock
to the contrary notwithstanding, the rights of holders of all classes and series
of capital stock of the Corporation in respect of dividends and purchase,
retirement or sinking funds, if any, shall at all times be subject to the power
of the Board of Directors from time to time to set aside such reserves and to
make such other provisions, if any, as the Board of Directors shall deem to be
necessary or advisable for working capital, for expansion of the Corporation's
business (including the acquisition of real and personal property for that
purpose) and for any other purpose of the Corporation.
7. Except as otherwise provided by law or by the Certificate of
Incorporation or by the resolution or resolutions of the Board of Directors
providing for the issuance of any class or series of Preferred Stock, the
holders of the Preferred Stock shall not be entitled to vote and shall not be
entitled to receive notice of any meeting of stockholders at which they are not
entitled to vote. Except as otherwise provided by law or by this Certificate of
Incorporation or by the resolution or resolutions of the Board of Directors
providing for the issuance of any class or series of Preferred Stock, the vote
of the holders of all or any portion of any class or series of capital stock, as
a class or series, shall not be required for any action to be taken or
authorized by the stockholders of the Corporation, including any amendment of
this Certificate of Incorporation. Except as otherwise provided by law, each
holder of shares of Common Stock shall be entitled to one vote for each share of
Common Stock held by such holder.
8. Except as otherwise provided by law or the resolution or resolutions
of the Board of Directors providing for the issuance of any class or series of
Preferred Stock or by the instrument governing the security, obligation,
warrant, option or right, no holder of shares of any class or series of capital
stock of the Corporation or of any security or obligation convertible into, or
of any warrant, option or right to subscribe for, purchase or otherwise acquire,
shares of any class or series of capital stock of the Corporation, whether now
or hereafter authorized, shall, as such holder, have any preemptive right to
subscribe for, purchase or otherwise acquire shares of any class or series of
capital stock of the Corporation or any security or obligation convertible into,
or any warrant, option or right to subscribe for, purchase or otherwise acquire,
shares of any class or series of capital stock of the Corporation, whether now
or hereafter authorized.
9. Except as otherwise provided by law or the resolution or resolutions
of the Board of Directors providing for the issuance of any class or series of
Preferred Stock or by the instrument governing the security, obligation,
warrant, option or right, no holder of shares of any class or series of capital
stock of the Corporation or of any security or obligation convertible into, or
of any warrant, option or right to subscribe for, purchase or otherwise acquire,
shares of any class or series of capital stock of the Corporation, whether now
or hereafter authorized, shall, as such holder, have any preemptive right to
subscribe for, purchase or otherwise acquire shares of any class or series of
capital stock of the Corporation or any security or obligation convertible into,
or any warrant, option or right to subscribe for, purchase or otherwise acquire,
shares of any class or series of capital stock of the Corporation, whether now
or hereafter authorized.
10. Authority is hereby expressly granted to and vested in the Board of
Directors at any time and from time to time, without action by or approval of
the stockholders, to declare, create and issue, with respect to shares of any
class or series of capital stock of the Corporation, dividends or distributions
in, or options or rights to acquire, shares of any class or series of capital
stock of the Corporation, or other securities, and to fix by resolution or
resolutions providing for the declaration, creation and issuance of any such
dividend, distribution, option or right the terms, provisions, rights,
qualifications, limitations or restrictions thereof so far as not inconsistent
with the provisions of this Article Fourth, and to the full extent now or
hereafter permitted by the laws of the State of Delaware.
FIFTH: The following provisions shall govern the management of the
business and the conduct of the affairs of the Corporation and shall define,
limit and regulate the rights and powers of the Corporation and the Board of
Directors and stockholders:
<PAGE>
1. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors.
2. The Board of Directors shall consist of the number of directors
provided for in the By-laws but shall at no time consist of less than three
directors. From and after the 1996 annual meeting of stockholders, the directors
shall be divided into three classes as nearly equal in number as possible; the
term of one class shall expire at the 1997 annual meeting of stockholders; the
term of a second class shall expire at the 1998 annual meeting of stockholders;
and the term of a third class shall expire at the 1999 annual meeting of
stockholders; and at each annual meeting of stockholders successors to the class
of directors whose term shall then expire shall be elected to hold office for a
term expiring at the third annual meeting of stockholders next succeeding such
annual meeting of stockholders. The number of directors in the class to be
elected at an annual meeting of stockholders shall be determined by the Board of
Directors prior to such meeting or, in the absence of such determination, by the
stockholders at such meeting.
3. In the event of a vacancy occurring in any class, the Board of
Directors may reduce the number of directors in such class to eliminate the
vacancy, but in no case may the number of directors in such class be less than
one. The Board of Directors may increase the number of directors in a class. In
the event of a vacancy occurring in any class or a newly created directorship
resulting from an increase in the number of directors in any class, the Board of
Directors may fill such vacancy or newly created directorship for the remainder
of the unexpired term by vote of the majority of the remaining directors, though
less than a quorum. The directors of each class shall hold office for the term
for which elected and until the successors to such class have been duly elected
and qualified.
4. The stockholders of the Corporation shall not have the right to
remove any directors except for cause.
5. Notwithstanding the foregoing, whenever the holders of anyone or
more series of Preferred Stock issued by the Corporation shall have the right,
voting separately, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
provisions relating to such directorships shall be governed by the provisions of
this Certificate of Incorporation applicable thereto, including the resolution
or resolutions adopted by the Board of Directors pursuant to Section 2 of
Article Fourth and such directors so elected shall not be divided into classes
pursuant to Section 2 of this Article Fifth unless expressly provided by such
provisions.
6. Elections of directors need not be by written ballot unless the
By-laws of the Corporation so provide.
7. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by the director as a director; provided, however, that this Section 7 shall
not eliminate or limit the liability of a director to the extent provided by
applicable law (a) for any breach of the duty of loyalty of the director to the
Corporation or its stockholders , (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) for any
unlawful action under Section 174 of the General Corporation Law of the State of
Delaware, or (d) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Section 7 shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of the director
occurring prior to such amendment or repeal. If the laws of the State of
Delaware are hereafter changed to permit further elimination or limitation of
the liability of directors, then the liability of each director of the
Corporation shall thereupon be eliminated or limited to the fullest extent then
permitted by law.
8. The Board of Directors shall have concurrent power with the
stockholders to adopt, alter, amend or repeal the By-laws of the Corporation.
The Board of Directors may so adopt or change the By-laws upon the affirmative
vote of the number of directors which shall constitute, under the provisions of
the By-laws, the action of the Board of Directors. The stockholders may not so
adopt or change the By-laws except upon the affirmative
<PAGE>
vote of at least 75% of the votes entitled to be cast by the holders of all
outstanding shares of stock entitled to vote, voting together as a single class.
9. The Board of Directors may from time to time determine whether, to
what extent, at what times and places and under what conditions and regulations
the accounts, books and records of the Corporation, or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or document of the Corporation except as and
to the extent expressly provided by law or expressly authorized by resolution of
the Board of Directors.
10. In addition to the powers and authority herein or by law expressly
conferred upon them, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the laws of the State
of Delaware, this Certificate of Incorporation and any By-laws adopted by the
stockholders; provided, however, that no By-laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such By-laws had not been adopted.
11. The stockholders of the Corporation may not take action by written
consent or otherwise without a meeting; any such action shall be taken at an
annual meeting of stockholders, or special meeting of the stockholders called
for such purpose. The procedures for calling, and persons entitled to call, a
special meeting of the stockholders shall be specified in the By-laws.
SIXTH: Subject to the provisions of this Certificate of Incorporation, the
Corporation reserves the right to alter, amend or repeal any provision contained
in this Certificate of Incorporation, in the manner now or hereafter prescribed
by law, and all rights of stockholders or others hereunder are subject to such
reservation. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding that a
lesser percentage or separate class or series vote may be specified by law of by
this Certificate or Incorporation or by the By-laws of the Corporation, or
otherwise), the affirmative vote of the holders of at least 74% of the votes
entitled to be cast by the holders of all outstanding shares of capital stock
entitled to vote on all matters submitted to stockholders of the Corporation
generally, voting together as a single class, shall be required to alter, amend
or repeal, or adopt any provisions inconsistent with, Sections 4, 7 (except to
permit further elimination or limitation of the liability of directors), 8, 9,
10 and 11 of Article Fifth or this Article Sixth.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court or equitable
jurisdiction within the State of Delaware may, on the application n a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the 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 the Corporation, as the case may be,
agree to any 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 creditors or class of creditors,
and/or on all the stockholders or class of stockholders of the Corporation, as
the case may be, and also on the Corporation.
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SECURE COMPUTING CORPORATION
Secure Computing Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), pursuant to the
provisions of the General Corporation Law of the State of Delaware (the "GCL"),
does hereby certify as follows:
FIRST: That the fourth paragraph of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as
follows:
"FOURTH: The total number of shares of all classes of capital
stock which the corporation shall have authority to issue is
52,000,000 shares, consisting of 2,000,000 shares of Preferred
Stock, par value $.01 per share, and 50,000,000 shares of
Common Stock, par value $0.01 per share."
SECOND: The amendment to the Restated Certificate of Incorporation of
the Corporation set forth in this Certificate of Amendment has been duly adopted
in accordance with the provisions of Section 242 of the GCL: (a) the Board of
Directors of the Corporation having duly adopted a resolution setting forth such
amendment and declaring its advisability and submitting it to the stockholders
of the Corporation for their approval, and (b) the stockholders of the
Corporation having duly adopted such amendment by vote of the holders of a
majority of the outstanding stock entitled to vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by the Secretary of the Corporation this 11th day of
December, 1998.
SECURE COMPUTING CORPORATION
By: /S/ JEFFREY D. SAPER
------------------------------------
Jeffrey D. Saper, Secretary
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CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
SERIES E 4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
FOR
SECURE COMPUTING CORPORATION
SECURE COMPUTING CORPORATION, a Delaware corporation (the
"Corporation"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this Certificate of
Designations and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof:
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
17,500 shares, par value $0.01, to be designated "Series E 4% Cumulative
Convertible Preferred Stock" (the "Preferred Shares").
RESOLVED, that subject to the terms and conditions of the Put and Call
Agreement (as defined herein), 8,750 Preferred Shares may be issued in one
tranche ("Tranche A"), subject to adjustment as set forth in the Put and Call
Agreement (as defined herein) and 8,750 Preferred Shares may be issued in a
subsequent tranche ("Tranche B"), subject to adjustment as set forth in the Put
and Call Agreement.
RESOLVED, that each of the Preferred Shares shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. DESIGNATION. There is hereby created out of the authorized and
unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the "Series E 4% Cumulative Convertible Preferred Stock"
(the "Preferred Stock"). The number of shares constituting such series shall be
17,500.
2. DIVIDENDS.
(a) CUMULATIVE. The holders of the Preferred Shares shall be
entitled to receive cumulative dividends at the per share rate of four percent
(4%) of the Liquidation Preference of each Preferred Share, per annum accruing
daily and compounded quarterly on March 31, June 30, September 30 and December
31 of each year (each a "Dividend Payment Date") commencing with the first
Dividend Payment Date occurring after the original issuance
<PAGE>
date of such share, in preference and priority to any payment of any dividend on
the Common Stock (as defined below) or any other class or series of equity
security of the Corporation. Such dividends shall accrue on any given share from
the most recent date on which a dividend has been paid with respect to such
share, or if no dividends have been paid, from the date of the original issuance
of such share, and such dividends shall accrue from day to day whether or not
declared, based on the actual number of days elapsed. If at any time dividends
on the outstanding Preferred Shares at the rate set forth above shall not have
been paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of equity security of the Corporation. For
so long as any Preferred Shares are outstanding, the Corporation shall not pay
any dividends on any shares of Common Stock or any shares of any other capital
stock, or repurchase any shares of Common Stock (other than the repurchase of
shares of Common Stock issued pursuant to employment or consulting agreements
with the Corporation, which are repurchased upon termination of employment or
services for consideration no greater than the original issue price) or capital
stock, without having received written consent of two-thirds in interest of the
holders of Preferred Shares.
(b) PIK PAYMENT OR CASH PAYMENT. Any dividend payable on the
outstanding Preferred Shares shall be paid by adding the amount thereof to the
Liquidation Preference (as defined below) of such Preferred Shares. Upon the
payment of dividends as required by the immediately preceding sentence, such
dividends will be deemed paid in full. Notwithstanding the foregoing, the
Corporation may pay dividends in cash if on 10 Trading Days' (as defined below)
irrevocable prior written notice, it informs the holders of the Preferred Shares
of its election to pay cash dividends. Following notice of payment of cash
dividends by the Corporation, all dividends on the Preferred Shares shall be
paid in cash, until such time as the Corporation provides 10 Trading Days'
irrevocable written notice to the holders of Preferred Shares of its election to
pay dividends in-kind.
3. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Preferred Shares shall be entitled to receive, out of the assets of the
Corporation available for distribution to stockholders, prior and in preference
to any distribution of any assets of the Corporation to the holders of any other
class or series of equity securities, the amount of $1,000 per share plus (i)
dividends added to the Liquidation Preference in accordance with Section 2(b)
above; (ii) all accrued but unpaid dividends; and (iii) all "Monthly Delay
Payments" payable under the Registration Rights Agreement (as defined below)
(the "Liquidation Preference"). After payment of the full amount of the
Liquidation Preference, in the case of a liquidation dissolution or winding up
of the Corporation, the holders of Preferred Shares will not be entitled to any
further participation in any distribution of assets of the Corporation; provided
that the foregoing shall not affect any rights which holders of Preferred Shares
may have with respect to any requirement that the Corporation repurchase the
Preferred Shares or for any right to monetary damages. A Change of Control (as
defined below) shall not, IPSO FACTO, be deemed a liquidation, dissolution or
winding up of the Corporation.
2
<PAGE>
4. ISSUANCE OF PREFERRED SHARES. The Preferred Shares shall be issued
by the Corporation pursuant to a Put and Call Agreement, dated on or about the
date hereof ("Put and Call Agreement") between the Corporation and the initial
subscriber for the Preferred Shares thereunder (the "Subscriber"), and holders
of Preferred Shares shall enjoy the benefits of the Registration Rights
Agreement, dated the date hereof ("Registration Rights Agreement") between such
parties in connection with the Put and Call Agreement.
5. CONVERSION. Each holder of the Preferred Shares shall have the right
at any time and from time to time, at the option of such holder, to convert all
Preferred Shares held by such holder, or if converting less than all such
shares, Preferred Shares having an aggregate Liquidation Preference of at least
$250,000, for such number of fully paid, validly issued and nonassessable shares
("Common Shares") of common stock, par value $0.01 of the Corporation ("Common
Stock"), free and clear of any liens, claims or encumbrances, as is determined
by dividing (i) the Liquidation Preference times the number of Preferred Shares
being converted (the "Conversion Amount"), by (ii) the applicable Conversion
Price determined as hereinafter provided in effect on the Conversion Date.
Immediately following such conversion, the rights of the holders of converted
Preferred Shares shall cease and the persons entitled to receive the Common
Shares upon the conversion of Preferred Shares shall be treated for all purposes
as having become the owners of such Common Shares, subject to the rights
provided herein to holders.
(a) MECHANICS OF CONVERSION. To convert Preferred Shares into
Common Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
will be given by facsimile transmission no later than the Conversion Date and
sent via overnight delivery no later than one Trading day after the Conversion
Date) stating that such holder elects to convert the same and shall state
therein the number of Preferred Shares to be converted and the name or names in
which such holder wishes the certificate or certificates for Common Shares to be
issued (the date of such Conversion Notice shall be referred to herein as the
"Conversion Date"). A Conversion Notice may be sent by the holder concurrently
with, or at any time after, the delivery of a put or call notice under the Put
and Call Agreement pursuant to which the Preferred Shares being converted are to
be acquired, even if this Certificate of Designations has not yet been filed in
Delaware. However, the Corporation's obligation to issue Common Shares in such
event shall be conditional upon the consummation of the purchase of such
Preferred Shares. A Conversion Notice delivered pursuant to the preceding
sentence shall have the same effect as a Conversion Notice delivered after the
Preferred Shares being converted are issued, for all purposes, including without
limitation, determination of the Conversion Date and Conversion Price. Either
simultaneously with the delivery of the Conversion Notice, or within one (1)
Trading Day (as defined below) thereafter, the holder shall deliver (which also
may be done by facsimile transmission) page 2 to Exhibit A hereto indicating the
computation of the number of Common Shares to be received. As soon as possible
after delivery of the Conversion Notice, such holder shall surrender the
certificate or certificates representing the Preferred Shares being converted,
duly endorsed, at the office of the Corporation or, if identified in writing to
all the holders by the Corporation, at the offices of any transfer agent for
such shares. If the Conversion Notice is delivered prior to the delivery to the
holder by the Corporation of the Preferred Shares being converted, then the
delivery of such Preferred Shares to such holder, and surrender to the
Corporation of the certificates representing Preferred Shares, shall be deemed
to have occurred
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on the books of the Corporation and the holder shall have no obligation to
surrender certificates representing such Preferred Shares. The Corporation
shall, immediately upon receipt of such Conversion Notice, issue and deliver to
or upon the order of such holder, against delivery of the certificates
representing the Preferred Shares which have been converted, a certificate or
certificates for the number of Common Shares to which such holder shall be
entitled (with the number of and denomination of such certificates designated by
such holder), and the Corporation shall immediately issue and deliver to such
holder a certificate or certificates for the number of Preferred Shares
(including any fractional shares) which such holder has not yet elected to
convert hereunder but which are evidenced in part by the certificate(s)
delivered to the Corporation in connection with such Conversion Notice. The
Corporation shall effect such issuance of Common Shares (and certificates for
unconverted Preferred Shares) within three (3) Trading Days of the Conversion
Date, regardless of whether the Preferred Shares being converted were issued on
the Conversion Date, and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of such Conversion Notice ("T+3");
provided that prior to such date, the Corporation shall have received the stock
certificates representing the Preferred Shares (or an affidavit of lost
certificate). If such certificates or affidavit are not received by such date,
the Corporation will deliver certificates for Common Shares within one Trading
Day of receipt of the Preferred Share certificates or affidavit of lost
certificate. Notwithstanding the foregoing, the Corporation shall not be
required to honor the Conversion Notice unless it shall have received the
certificate or certificates representing the Preferred shares being converted
within 5 Trading Days of receipt of the Conversion Notice. If certificates
representing Preferred Shares have been delivered to the Corporation and if
certificates evidencing the Common Shares are not received by the holder within
five (5) Trading Days of the Conversion Notice, then the holder will be entitled
to revoke and withdraw its Conversion Notice, in whole or in part, at any time
prior to its receipt of those certificates. In lieu of delivering physical
certificates representing the Common Shares issuable upon conversion of
Preferred Shares, provided the Corporation's transfer agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the holder, the Corporation shall use its best efforts
to cause its transfer agent to electronically transmit the Common Shares
issuable upon conversion or exercise to the holder, by crediting the account of
the holder's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system. The time periods for delivery described above shall
apply to the electronic transmittals through the DWAC system. The parties agree
to coordinate with DTC to accomplish this objective. The conversion pursuant to
this Section 5 shall be deemed to have been made immediately prior to the close
of business on the Conversion Date. The person or persons entitled to receive
the Common Shares issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common Shares at the close of
business on the Conversion Date.
The term "Trading Day" means a day on which there is trading on
the Nasdaq National Market or such other market or exchange on which the Common
Stock is then principally traded.
If a holder of Preferred Shares converts any of such holder's
Preferred Shares, the Corporation shall pay any documentary or stamp or similar
issue or transfer tax due on the issue of shares of Common Stock upon the
conversion. However, such holder shall pay
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any such tax that is due because the shares of Common Stock are issued in a name
other than such holder's name.
THE CORPORATION'S OBLIGATION TO ISSUE COMMON SHARES UPON
CONVERSION OF PREFERRED SHARES SHALL, EXCEPT AS SET FORTH BELOW, BE ABSOLUTE, IS
INDEPENDENT OF ANY COVENANT OF ANY HOLDER OF PREFERRED SHARES, AND SHALL NOT BE
SUBJECT TO: (i) ANY OFFSET OR DEFENSE; OR (ii) ANY CLAIMS AGAINST THE HOLDERS OF
PREFERRED SHARES WHETHER PURSUANT TO THIS CERTIFICATE, THE PUT AND CALL
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY CLAIMS ARISING OUT OF ANY SELLING OR SHORT-SELLING ACTIVITY BY
HOLDERS OF PREFERRED SHARES. NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION
SHALL BE SUBJECT TO (1) THE HOLDER'S COMPLIANCE WITH THE NOTICE AND DELIVERY
REQUIREMENTS SET FORTH ABOVE IN THIS SECTION 5(a) AND (2) IN THE CASE WHERE A
CONVERSION NOTICE IS BEING SENT CONCURRENTLY WITH THE EXERCISE OF A PUT OR CALL
PURSUANT TO WHICH THE PREFERRED SHARES BEING CONVERTED ARE BEING PURCHASED, THE
CONSUMMATION OF SUCH PURCHASE.
(b) Determination of Conversion Price.
The Conversion Price applicable with respect to the Preferred
Shares in each Tranche (the "Conversion Price"), shall be the lesser
of:
(A) a price equal to 20% above the Market Price (as
defined below), as adjusted as set forth below (the "Fixed
Price") or
(B) 100% of the average of the two lowest daily low
trade prices ("Low Trade Prices") of the Common Stock recorded
on the Principal Market (as defined below) during the twelve
(12) consecutive Trading Days (the "Purchase Price Period")
ending on the day prior to and not including the Conversion
Date.
As used herein, "Principal Market" shall mean Nasdaq National
Market or such other market where the Common Stock is then listed for
trading.
As used herein, "Market Price" shall mean with respect to each
Tranche: (i) where such Tranche was acquired pursuant to the exercise
of a call option under the Put and Call Agreement, the average of the
five daily closing bid prices of the Common Stock for the five Trading
Day period ending on the Trading Day prior to the exercise of the call;
or (ii) where such Tranche was acquired pursuant to the exercise of a
put option under the Put and Call Agreement, the lesser of (A) the
average of the five daily closing bid prices of the Common Stock for
the five Trading Day period ending on the Trading day prior to exercise
of the put and (B) the average of the five daily closing bid prices of
the Common Stock for the five Trading Day Period beginning on the
Trading Day after the exercise of the put.
(c) Stock Splits; Dividends; Adjustments.
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(i) If the Corporation, at any time while the Preferred Shares
are outstanding, (A) shall pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including
instruments or securities convertible into or exchangeable for such
equity securities) in shares of Common Stock, (B) subdivide outstanding
shares of Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then each
Affected Conversion Price (as defined below) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding before such event and the denominator of which
shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 5(c)(i) shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination.
As used herein, the Affected Conversion Prices (each an
"Affected Conversion Price") shall refer to: (i) the Fixed Price; and
(ii) each reported price for the Common Stock on the Principal Market
occurring on any Trading Day included in the Purchase Price Period,
which Trading Day occurred before the record date in the case of events
referred to in clause (A) of this subparagraph 5(c)(i) and the
effective date, in the case of the events referred to in clauses (B)
and (C) of this subparagraph 5(c)(i).
(ii) In the event that the Corporation issues or sells any
Common Stock or securities which are convertible into or exchangeable
for its Common Stock (other than Preferred Shares), or any warrants or
other rights to subscribe for or to purchase or any options for the
purchase of its Common Stock (other than shares or options issued or
which may be issued pursuant to (i) the Corporation's current or future
employee, director or BONA FIDE consultant option plans or shares
issued upon exercise of options, warrants or rights outstanding on the
date of the Put and Call Agreement and listed in the Corporation's most
recent periodic report filed under the Securities Exchange Act of 1934,
as amended (ii) strategic corporate alliances not undertaken
principally for financing purposes, (iii) arrangements with the holders
of Preferred Shares or (iv) acquisitions of other entities by the
Corporation) at an effective purchase price per share which is less
than greater of (1) the closing market price per share of the Common
Stock on the Principal Market on the Trading Day next preceding such
issue or sale or, in the case of issuances to holders of its Common
stock, the date fixed for the determination of stockholders entitled to
receive such warrants, rights, or options ("Fair Market Price") or (2)
the Fixed Price, then in each such case, the Fixed Price in effect
immediately prior to such issue or sale or record date, as applicable,
shall be reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Fixed Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number
of shares of Common Stock and Convertible Securities (as defined below)
outstanding immediately prior to such issue or sale, plus (2) the
number of shares of Common Stock which the aggregate consideration
received by the Corporation for such additional shares
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<PAGE>
would purchase at such Fixed Price or Fair Market Price, as the case
may be; and (y) the denominator of which shall be the number of shares
of Common Stock and Convertible Securities (as defined below) of the
Corporation outstanding immediately after such issue or sale.
For purposes of the preceding paragraph, in the event
that the effective purchase price is less than both the Fair Market
Price and the Fixed Price, then the calculation method which yields the
greatest downward adjustment in the Conversion Price shall be used.
For the purposes of the foregoing adjustment, in the case
of the issuance of any convertible securities, warrants, options or
other rights to subscribe for or to purchase or exchange for, shares of
Common Stock ("Convertible Securities"), the maximum number of shares
of Common Stock issuable upon exercise, exchange or conversion of such
Convertible Securities shall be deemed to be outstanding, and the
aggregate consideration received by the Corporation for the issuance or
sale of such Convertible Securities shall be deemed to include any
consideration that would be received by the Corporation in connection
with the exercise, exchange or conversion of such Convertible
Securities, provided that no further adjustment shall be made upon the
actual issuance of Common Stock upon exercise, exchange or conversion
of such Convertible Securities.
(iii) If the Corporation, at any time while the Preferred
Shares are outstanding, shall distribute to all holders of Common Stock
evidences of its indebtedness or assets or cash or rights or warrants
to subscribe for or purchase any security of the Corporation or any of
its subsidiaries (excluding those referred to in Sections 5(c)(i) or
5(c)(ii) above), then concurrently with such distributions to holder of
Common Stock, the Corporation shall distribute to holders of the
Preferred Shares, the amount of such indebtedness, assets, cash or
rights or warrants which the holders of Preferred Shares would have
received had they converted their Preferred Shares into Common Shares
immediately prior to the record date for such distribution.
(iv) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(i), (ii) or (iii), the Corporation shall promptly mail to
each holder of the Preferred Shares a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(v) All calculations under this Section 5(c) shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may
be.
(vi) No adjustment in the Conversion Price shall reduce the
Conversion price below the then par value of the Common Stock.
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(vii) The Corporation from time to time may reduce the
Conversion Price by any amount for any period of time if the period is
at least 20 Trading Days and if the reduction is irrevocable during the
period. Whenever the Conversion Price is reduced, the Corporation shall
mail to the holders of Preferred Shares a notice of the reduction. The
Corporation shall mail, first class, postage prepaid, the notice at
least 15 days before the date the reduced Conversion Price takes
effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does
not change or adjust the Conversion Price otherwise in effect for
purposes of Section 5(c)(i), (ii), or (iii).
(d) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall deliver to each holder of Preferred Shares at least 20 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution,
security or right and the amount and character of such dividend, distribution,
security or right.
(e) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Preferred Shares pursuant hereto. However, the holder of any Preferred Shares
shall pay any tax that is due because the Common Shares issuable upon conversion
thereof are issued in a name other than such holder's name.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purposes of effecting the conversion of the
Preferred Shares, an amount of Common Shares equal to 200% of the number of
shares issuable upon conversion of the Preferred Shares at the then applicable
Conversion Price. The Corporation promptly will take such corporate action as
may, in the opinion of its outside 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, including without limitation engaging in best
efforts to obtain the requisite stockholder approval.
(g) FRACTIONAL SHARES. No fractional shares shall be issued upon
the conversion of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon conversion of more than one Preferred Share by a holder
thereof and all Preferred Shares issuable upon the purchase thereof shall be
aggregated for purposes of determining whether the conversion and/or purchase
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion and/or purchase would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, either round up the number of shares to
the next highest whole number or, at the Corporation's option, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date (as determined in good faith by the
Board of Directors of the Corporation).
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(h) REORGANIZATION, MERGER OR GOING PRIVATE. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale or transfer of all or substantially all of
the assets of the Corporation to any other person or a "going private"
transaction under Rule 13e-3 promulgated pursuant to the Exchange Act, then, as
part of such reorganization, consolidation, merger, or transfer if the holders
of shares of Common Stock receive any publicly traded securities as part or all
of the consideration for such reorganization, consolidation, merger or sale,
then it shall be a condition precedent of any such event or transaction that
provision shall be made such that each Preferred Share shall thereafter be
convertible into such new securities at a conversion price and pricing formula
which places the holders of Preferred Shares in an economically equivalent
position as they would have been if not for such event. In addition to the
foregoing, if the holders of shares of Common Stock receive any non-publicly
traded securities or other property or cash as part or all of the consideration
for such reorganization, consolidation, merger or sale, then such distribution
shall be treated to the extent thereof as a distribution under Section 5(c)
above and such Section shall also apply to such distribution.
(i) Mandatory Conversion.
(x) Subject to subsection (i)(y) below, the Preferred Shares
in each Tranche shall be automatically converted into Common Shares
four months after the effectiveness of the registration statement
covering the Common Shares issuable upon conversion of Preferred Shares
in such Tranche and filed pursuant to the Registration Rights Agreement
(a "Registration Statement") (a "Mandatory Conversion Date"); provided
that such Mandatory Conversion Date shall be deferred, at the sole
option of a holder of Preferred Shares, for such number of days as is
equal to the number of days (A) there is a lack of Effective
Registration (as defined below), but not including the first 60 days
after the Closing pursuant to which such Tranche was acquired; (B)
there is not a sufficient amount of Common Stock available for
conversion of all outstanding Preferred Shares, (C) for any other
reason the Corporation refuses or announces its refusal to honor
conversion of Preferred Shares, other than for failure to comply with
the notice and delivery requirements of Section 5(a) above; or (D) for
any reason, after the Registration Statement initially is declared
effective, there is a suspension, restriction or limitation in the
ability of holders of Preferred Shares to sell Common Shares received
upon conversion of Preferred Shares pursuant to the prospectus included
in the Registration Statement.
For purposes of the preceding paragraph, a lack of
Effective Registration shall be deemed to have occurred at any time the
Common Shares issuable upon conversion of the Preferred Shares are not
capable of being sold on an Approved Market (as defined in the Put and
Call Agreement) pursuant to an effective registration statement and
deliverable prospectus.
(y) Notwithstanding the preceding subsection (i)(x), no holder
of Preferred Shares shall be obligated to convert any Preferred Shares
held by such holder on a Mandatory Conversion Date unless and until
each of the following conditions has
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been satisfied or exists, each of which shall be a condition precedent
to any such forced conversion:
(A) no material default or breach exists which has
not been cured, and no event shall have occurred which
constitutes (or would constitute with notice or the passage of
time or both) a material default or breach of the Put and Call
Agreement, the Registration Rights Agreement, or this
Certificate of Designations, which has not been cured;
(B) none of the events described in clauses (i)
through (iv) of Section 2(b) of the Registration Rights
Agreement shall have occurred and be continuing;
(C) the Registration Statement is effective and
holders have received unlegended certificates representing
Common Shares with respect to all conversions for which
Conversion Notices have been given; and
(D) the Corporation and its subsidiaries on a
consolidated basis has assets with a net realizable fair
market value exceeding its liabilities and is able to pay all
its debts as they become due in the ordinary course of
business, and the Corporation is not subject to any
liquidation, dissolution or winding up of its affairs.
(z) Notwithstanding, Section 5(i)(x) above, no holder's
Preferred Shares shall be subject to mandatory conversion to the extent
such mandatory conversion would result in the holder of Preferred
Shares exceeding the limitation contained in Section 5(j) below;
provided that for purposes of this Section 5(i)(z), beneficial
ownership of shares of Common Stock acquired other than through
ownership of Preferred Shares or other preferred stock of the
Corporation and acquired after the date of the Put and Call Agreement
shall be disregarded. In such event, the Preferred Shares of such
holder would be converted in such amount until such limitation is
reached and with respect to the balance of such holder's Preferred
Shares, the Mandatory Conversion Date shall be moved to a date 90 days
thereafter, subject to the provisions of Section 5(i) applying to such
balance.
Such forced conversion shall be subject to and governed
by all the provisions relating to voluntary conversion of the Preferred
Shares contained herein.
(j) LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
(i) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by
the holder upon conversion pursuant to the terms hereof shall not
exceed a number that, when added to the total number of shares of
Common Stock deemed beneficially owned
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by such holder (other than by virtue of the ownership of securities or
rights to acquire securities that have limitations on the holder's
right to convert, exercise or purchase similar to the limitation set
forth herein), together with all shares of Common Stock deemed
beneficially owned by the holder's "affiliates" (as defined in Rule 144
of the Act) ("Aggregation Parties") that would be aggregated for
purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99%
of the total issued and outstanding shares of the Common Stock (the
"RESTRICTED OWNERSHIP PERCENTAGE"); provided that (w) each holder shall
have the right at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon notice to the
Corporation and (x) each holder shall have the right (subject to
waiver) at any time and from time to time, to increase its Restricted
Ownership Percentage immediately in the event of the announcement as
pending or planned, of a transaction or event referred to in Section
5(m) below.
(ii) Each time (a "COVENANT TIME") the holder or an
Aggregation Party makes a Triggering Acquisition (as defined below) of
shares of Common Stock (the "TRIGGERING SHARES"), the holder will be
deemed to covenant that it will not, during the balance of the day on
which such Triggering Acquisition occurs, and during the 61-day period
beginning immediately after that day, acquire additional shares of
Common Stock pursuant to rights-to-acquire existing at that Covenant
Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x)
9.99% of the number of shares of Common Stock outstanding at that
Covenant Time (including the Triggering Shares) minus (y) the number of
shares of Common Stock actually owned by the holder at that Covenant
Time (regardless of how or when acquired, and including the Triggering
Shares). A "TRIGGERING ACQUISITION" means the giving of a Conversion
Notice or any other acquisition of Common Stock by the holder or an
Aggregation Party; provided, however, that with respect to the giving
of such Conversion Notice, if the associated issuance of shares of
Common Stock does not occur, such event shall cease to be a Triggering
Acquisition and the related covenant under this paragraph shall
terminate. At each Covenant Time, the holder shall be deemed to waive
any right it would otherwise have to acquire shares of Common Stock to
the extent that such acquisition would violate any covenant given by
the holder under this paragraph. Notwithstanding anything to the
contrary in the Transaction Documents, in the event of a conflict
between any covenant given under this paragraph and any obligation of
the holder to convert Preferred Shares pursuant to the Transaction
Documents, the former shall supersede the latter, and the latter shall
be reduced accordingly. For the avoidance of doubt:
(A) The covenant to be given pursuant to this
paragraph will be given at every Covenant Time and shall be calculated
based on the circumstances then in effect. The making of a covenant at
one Covenant Time shall not terminate or modify any prior covenants.
(B) The holder may therefore from time to time be
subject to multiple such covenants, each one having been made at a
different Covenant Time, and some
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possibly being more restrictive than others. The holder must comply
with all such covenants then in effect.
(k) CERTIFICATE FOR CONVERSION PRICE ADJUSTMENT. The Corporation shall
promptly furnish or cause to be furnished to each holder a certificate prepared
by the Corporation setting forth any adjustments or readjustments of the
Conversion Price pursuant to this Section 5.
(l) SPECIFIC ENFORCEMENT. The Corporation agrees that irreparable
damage would occur in the event that any of the provisions of this Certificate
of Designations were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the holders of Preferred
Shares shall be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(m) MANDATORY REPURCHASE. Each holder shall have the unilateral option
and right to compel the Corporation to repurchase any or all of such holder's
Preferred Shares within 3 days of a written notice requiring such repurchase, at
a price per Preferred Share equal to 115% of the Liquidation Preference then in
effect if any of the following events involving the Corporation shall have
occurred:
(i) A Change in Control Transaction (as defined below);
(ii) A "going private" transaction under Rule 13e-3
promulgated pursuant to the Exchange Act; or
(iii) A tender offer by the Corporation under Rule 13e-4
promulgated pursuant to the Exchange Act.
A "Change in Control Transaction" will be deemed to exist if
(i) there occurs any consolidation or merger of the Corporation with or into any
other corporation or other entity or person (whether or not the Corporation is
the surviving corporation), or any other corporate reorganization or transaction
or series of related transactions in which in excess of 50% of the Corporation's
voting power is transferred through a merger, consolidation, tender offer or
similar transaction, (ii) any person (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), together with
its affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act of 1933, as amended (the "Act")), beneficially owns or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act without
regard to the 60-day exercise period) in excess of 50% of the Corporation's
voting power, (iii) there is a replacement of more than one-half of the members
of the Corporation's Board of Directors which is not approved by those
individuals who are members of the Corporation's Board of Directors on the date
thereof, in one or a series of related transactions or (iv) a sale or transfer
of all or substantially all of the assets of the Corporation, determined on a
consolidated basis.
(n) MANDATORY REPURCHASE IN EVENT OF NON-COMPLIANCE WITH WARRANTS. In
the event that the Corporation (i) is not in compliance with its obligations to
deliver Common
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Shares pursuant to the terms of Warrants issued pursuant to the Common Stock
Investment Agreement, dated as of October 4, 1999 by and between the Corporation
and Manchester Securities Corp. ("Manchester") (the "Warrants"), which Warrants
are held by a holder of Preferred Shares or an affiliate of such holder or (ii)
repudiates or disavows such obligations, then such holder of Preferred Shares
shall have the unilateral option and right, in addition to any other rights or
remedies which such holder or Manchester may have, all of which shall be
cumulative, to compel the Corporation to repurchase any and all of such holder's
Preferred Shares within 3 days of a written notice requiring such repurchase, at
a price per Preferred Share equal to the greater of: (1) 125% of the Liquidation
Preference per share then in effect or (2) the Liquidation Preference per share
divided by the Conversion Price multiplied by the greater of the last closing
price of the Common Shares on the date a holder exercises its option pursuant to
this provision to require repurchase of Preferred Shares or the date on which
the event triggering the holder's remedies under this provision first occurred.
6. VOTING RIGHTS. In addition to all other requirements imposed by
Delaware law, and all other voting rights granted under the Corporation's
Certificate of Incorporation, the affirmative vote of two-thirds in interest of
the Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment, modification or repeal of this Certificate of Designations (whether
by merger, consolidation or otherwise) or for any merger, reclassification,
consolidation or reorganization,) or (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or change or
adversely affect any of the rights, preferences, or privileges of the Preferred
Shares, provided, however, that holders of Preferred Shares (other than the
investor under the Put and Call Agreement and its affiliates) who are affiliates
of the Corporation (and the Corporation itself) shall not participate in such
vote and the Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.
7. NOTICES. The Corporation shall distribute to the holders of
Preferred Shares copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
8. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Preferred Shares held by any holder of Preferred Shares may be exchanged by such
holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Preferred Shares, as
reasonably requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
9. ATTORNEYS' FEES. In connection with enforcement by a holder of
Preferred Shares of any obligation of the orporation hereunder, the prevailing
party shall be entitled to recovery of reasonable attorneys' fees and expenses
incurred.
10. NO REISSUANCE. No Preferred Shares acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.
13
<PAGE>
11. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Preferred Shares set forth in this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation herein
set forth be deemed dependent upon any such other right, preference or
limitation unless so expressed herein.
12. LIMITATIONS. Except as may otherwise be required by law and as are
set forth in the Put and Call Agreement and the Registration Rights Agreement,
the Preferred Shares shall not have any powers, preference or relative
participating, optional or other special rights other than those specifically
set forth in this Certificate of Designation (as may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
Signed on January 26, 2000
SECURE COMPUTING CORPORATION
By: /S/ Mary Budge
--------------------------------------
Name: Mary Budge
Title: Assistant Corporate Secretary
14
<PAGE>
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
SERIES E 4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of SERIES E 4% Cumulative
Convertible Preferred Stock ("Preferred Shares") of Secure Computing Corporation
(the "Corporation"), hereby irrevocably elects to convert _____________
Preferred Shares for shares ("Common Shares") of common stock, par value $0.01
per share (the "Common Stock"), of the Corporation according to the terms and
conditions of the Certificate of Designations for the Preferred Shares as of the
date written below. The undersigned hereby requests that share certificates for
the Common Shares to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. No fee will be charged to the Holder of Preferred
Shares for any conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER:
By:
Print Name:
Print Title:
Print Address of Holder:
-----------------------------------------------
-----------------------------------------------
Issue Common Stock to:
------------------------
at:
-------------------------------------------
----------------------------------------------
Preferred Shares acquire through
-Put
-Call
IF COMMON SHARES ARE TO BE ISSUED TO A PERSON OTHER THAN HOLDER,
HOLDER'S SIGNATURE MUST BE GUARANTEED BELOW:
SIGNATURE GUARANTEED BY:
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
PAGE 1 OF CONVERSION NOTICE
<PAGE>
PAGE 2 TO CONVERSION NOTICE DATED FOR:
------------------- ---------------------
(CONVERSION DATE) (NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
-----------------------------------------------------
Number of Preferred Shares converted: ____________ shares
Number of Preferred Shares converted x Liquidation Preference $
TOTAL DOLLAR AMOUNT CONVERTED $
============
CONVERSION PRICE $
Number of Common Shares = Total dollar amount converted =
----------------------------- ------------
Conversion Price
NUMBER OF COMMON SHARES =
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
16
<PAGE>
CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
SERIES F 4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
FOR
SECURE COMPUTING CORPORATION
SECURE COMPUTING CORPORATION, a Delaware corporation (the
"Corporation"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this Certificate of
Designations and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof:
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
15,250 shares, par value $0.01, to be designated "Series F 4% Cumulative
Convertible Preferred Stock" (the "Preferred Shares").
RESOLVED, that subject to the terms and conditions of the Put and Call
Agreement (as defined herein), 5,250 Preferred Shares may be issued in one
tranche ("Tranche A"), subject to adjustment as set forth in the Put and Call
Agreement (as defined herein) and 10,000 Preferred Shares may be issued in a
subsequent tranche ("Tranche B"), subject to adjustment as set forth in the Put
and Call Agreement.
RESOLVED, that each of the Preferred Shares shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. DESIGNATION. There is hereby created out of the authorized and
unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the "Series F 4% Cumulative Convertible Preferred Stock"
(the "Preferred Stock"). The number of shares constituting such series shall be
15,250.
2. DIVIDENDS.
(a) CUMULATIVE. The holders of the Preferred Shares shall be
entitled to receive cumulative dividends at the per share rate of four percent
(4%) of the Liquidation Preference of each Preferred Share, per annum accruing
daily and compounded quarterly on March 31, June 30, September 30 and December
31 of each year (each a "Dividend Payment Date") commencing with the first
Dividend Payment Date occurring after the original issuance
<PAGE>
date of such share, in preference and priority to any payment of any dividend on
the Common Stock (as defined below) or any other class or series of equity
security of the Corporation. Such dividends shall accrue on any given share from
the most recent date on which a dividend has been paid with respect to such
share, or if no dividends have been paid, from the date of the original issuance
of such share, and such dividends shall accrue from day to day whether or not
declared, based on the actual number of days elapsed. If at any time dividends
on the outstanding Preferred Shares at the rate set forth above shall not have
been paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of equity security of the Corporation. For
so long as any Preferred Shares are outstanding, the Corporation shall not pay
any dividends on any shares of Common Stock or any shares of any other capital
stock, or repurchase any shares of Common Stock (other than the repurchase of
shares of Common Stock issued pursuant to employment or consulting agreements
with the Corporation, which are repurchased upon termination of employment or
services for consideration no greater than the original issue price) or capital
stock, without having received written consent of two-thirds in interest of the
holders of Preferred Shares.
(b) PIK PAYMENT OR CASH PAYMENT. Any dividend payable on the
outstanding Preferred Shares shall be paid by adding the amount thereof to the
Liquidation Preference (as defined below) of such Preferred Shares. Upon the
payment of dividends as required by the immediately preceding sentence, such
dividends will be deemed paid in full. Notwithstanding the foregoing, the
Corporation may pay dividends in cash if on 10 Trading Days' (as defined below)
irrevocable prior written notice, it informs the holders of the Preferred Shares
of its election to pay cash dividends. Following notice of payment of cash
dividends by the Corporation, all dividends on the Preferred Shares shall be
paid in cash, until such time as the Corporation provides 10 Trading Days'
irrevocable written notice to the holders of Preferred Shares of its election to
pay dividends in-kind.
3. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Preferred Shares shall be entitled to receive, out of the assets of the
Corporation available for distribution to stockholders, prior and in preference
to any distribution of any assets of the Corporation to the holders of any other
class or series of equity securities, the amount of $1,000 per share plus (i)
dividends added to the Liquidation Preference in accordance with Section 2(b)
above; (ii) all accrued but unpaid dividends; and (iii) all "Monthly Delay
Payments" payable under the Registration Rights Agreement (as defined below)
(the "Liquidation Preference"). After payment of the full amount of the
Liquidation Preference, in the case of a liquidation, dissolution or winding up
of the Corporation, the holders of Preferred Shares will not be entitled to any
further participation in any distribution of assets of the Corporation; provided
that the foregoing shall not affect any rights which holders of Preferred Shares
may have with respect to any requirement that the Corporation repurchase the
Preferred Shares or for any right to monetary damages. A Change of Control (as
defined below) shall not, IPSO FACTO, be deemed a liquidation, dissolution or
winding up of the Corporation.
2
<PAGE>
4. ISSUANCE OF PREFERRED SHARES. The Preferred Shares shall be issued
by the Corporation pursuant to a Put and Call Agreement, dated on or about the
date hereof ("Put and Call Agreement") between the Corporation and the initial
subscriber for the Preferred Shares thereunder (the "Subscriber"), and holders
of Preferred Shares shall enjoy the benefits of the Registration Rights
Agreement, dated on or about the date hereof ("Registration Rights Agreement")
between such parties in connection with the Put and Call Agreement.
5. CONVERSION. Each holder of the Preferred Shares shall have the right
at any time and from time to time, at the option of such holder, to convert all
Preferred Shares held by such holder, or if converting less than all such
shares, Preferred Shares having an aggregate Liquidation Preference of at least
$250,000, for such number of fully paid, validly issued and nonassessable shares
("Common Shares") of common stock, par value $0.01 of the Corporation ("Common
Stock"), free and clear of any liens, claims or encumbrances, as is determined
by dividing (i) the Liquidation Preference times the number of Preferred Shares
being converted (the "Conversion Amount"), by (ii) the applicable Conversion
Price determined as hereinafter provided in effect on the Conversion Date.
Immediately following such conversion, the rights of the holders of converted
Preferred Shares shall cease and the persons entitled to receive the Common
Shares upon the conversion of Preferred Shares shall be treated for all purposes
as having become the owners of such Common Shares, subject to the rights
provided herein to holders.
(a) MECHANICS OF CONVERSION. To convert Preferred Shares into
Common Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
will be given by facsimile transmission no later than the Conversion Date and
sent via overnight delivery no later than one Trading day after the Conversion
Date) stating that such holder elects to convert the same and shall state
therein the number of Preferred Shares to be converted and the name or names in
which such holder wishes the certificate or certificates for Common Shares to be
issued (the date of such Conversion Notice shall be referred to herein as the
"Conversion Date"). A Conversion Notice may be sent by the holder concurrently
with, or at any time after, the delivery of a put or call notice under the Put
and Call Agreement pursuant to which the Preferred Shares being converted are to
be acquired, even if this Certificate of Designations has not yet been filed in
Delaware. However, the Corporation's obligation to issue Common Shares in such
event shall be conditional upon the consummation of the purchase of such
Preferred Shares. A Conversion Notice delivered pursuant to the preceding two
sentences shall have the same effect as a Conversion Notice delivered after the
Preferred Shares being converted are issued, for all purposes, including without
limitation, determination of the Conversion Date and Conversion Price. Either
simultaneously with the delivery of the Conversion Notice, or within one (1)
Trading Day (as defined below) thereafter, the holder shall deliver (which also
may be done by facsimile transmission) page 2 to Exhibit A hereto indicating the
computation of the number of Common Shares to be received. As soon as possible
after delivery of the Conversion Notice, such holder shall surrender the
certificate or certificates representing the Preferred Shares being converted,
duly endorsed, at the office of the Corporation or, if identified in writing to
all the holders by the Corporation, at the offices of any transfer agent for
such shares. If the Conversion Notice is delivered prior to the delivery to the
holder by the Corporation of the Preferred Shares being converted, then the
delivery of such Preferred Shares to such holder, and surrender to the
Corporation of the certificates representing Preferred Shares, shall be deemed
to have occurred
3
<PAGE>
on the books of the Corporation and the holder shall have no obligation to
surrender certificates representing such Preferred Shares. The Corporation
shall, immediately upon receipt of such Conversion Notice, issue and deliver to
or upon the order of such holder, against delivery of the certificates
representing the Preferred Shares which have been converted, a certificate or
certificates for the number of Common Shares to which such holder shall be
entitled (with the number of and denomination of such certificates designated by
such holder), and the Corporation shall immediately issue and deliver to such
holder a certificate or certificates for the number of Preferred Shares
(including any fractional shares) which such holder has not yet elected to
convert hereunder but which are evidenced in part by the certificate(s)
delivered to the Corporation in connection with such Conversion Notice. The
Corporation shall effect such issuance of Common Shares (and certificates for
unconverted Preferred Shares) within three (3) Trading Days of the Conversion
Date, regardless of whether the Preferred Shares being converted were issued on
the Conversion Date, and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of such Conversion Notice ("T+3");
provided that prior to such date, the Corporation shall have received the stock
certificates representing the Preferred Shares (or an affidavit of lost
certificate). If such certificates or affidavit are not received by such date,
the Corporation will deliver certificates for Common Shares within one Trading
Day of receipt of the Preferred Share certificates or affidavit of lost
certificate. Notwithstanding the foregoing, the Corporation shall not be
required to honor the Conversion Notice unless it shall have received the
certificate or certificates representing the Preferred shares being converted
within 5 Trading Days of receipt of the Conversion Notice. If certificates
representing Preferred Shares have been delivered to the Corporation and if
certificates evidencing the Common Shares are not received by the holder within
five (5) Trading Days of the Conversion Notice, then the holder will be entitled
to revoke and withdraw its Conversion Notice, in whole or in part, at any time
prior to its receipt of those certificates. In lieu of delivering physical
certificates representing the Common Shares issuable upon conversion of
Preferred Shares, provided the Corporation's transfer agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the holder, the Corporation shall use its best efforts
to cause its transfer agent to electronically transmit the Common Shares
issuable upon conversion or exercise to the holder, by crediting the account of
the holder's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system. The time periods for delivery described above shall
apply to the electronic transmittals through the DWAC system. The parties agree
to coordinate with DTC to accomplish this objective. The conversion pursuant to
this Section 5 shall be deemed to have been made immediately prior to the close
of business on the Conversion Date. The person or persons entitled to receive
the Common Shares issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common Shares at the close of
business on the Conversion Date.
The term "Trading Day" means a day on which there is trading
on the Nasdaq National Market or such other market or exchange on which the
Common Stock is then principally traded.
If a holder of Preferred Shares converts any of such holder's
Preferred Shares, the Corporation shall pay any documentary or stamp or similar
issue or transfer tax due on the issue of shares of Common Stock upon the
conversion. However, such holder shall pay
4
<PAGE>
any such tax that is due because the shares of Common Stock are issued in a name
other than such holder's name.
THE CORPORATION'S OBLIGATION TO ISSUE COMMON SHARES UPON
CONVERSION OF PREFERRED SHARES SHALL, EXCEPT AS SET FORTH BELOW, BE ABSOLUTE AND
IS INDEPENDENT OF ANY COVENANT OF ANY HOLDER OF PREFERRED SHARES, AND SHALL NOT
BE SUBJECT TO: (i) ANY OFFSET OR DEFENSE; OR (ii) ANY CLAIMS AGAINST THE HOLDERS
OF PREFERRED SHARES WHETHER PURSUANT TO THIS CERTIFICATE, THE PUT AND CALL
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY CLAIMS ARISING OUT OF ANY SELLING OR SHORT-SELLING ACTIVITY BY
HOLDERS OF PREFERRED SHARES. NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION
SHALL BE SUBJECT TO (1) THE HOLDER'S COMPLIANCE WITH THE NOTICE AND DELIVERY
REQUIREMENTS SET FORTH ABOVE IN THIS SECTION 5(a) AND (2) IN THE CASE WHERE A
CONVERSION NOTICE IS BEING SENT CONCURRENTLY WITH THE EXERCISE OF A PUT OR CALL
PURSUANT TO WHICH THE PREFERRED SHARES BEING CONVERTED ARE BEING PURCHASED, THE
CONSUMMATION OF SUCH PURCHASE.
(b) DETERMINATION OF CONVERSION PRICE.
The Conversion Price applicable with respect to the Preferred
Shares in each Tranche (the "Conversion Price"), shall be the lesser
of:
(A) a price equal to 20% above the Market Price (as
defined below), as adjusted as set forth below (the "Fixed
Price"), or
(B) 100% of the average of the two lowest daily low
trade prices ("Low Trade Prices") of the Common Stock recorded
on the Principal Market (as defined below) during the twelve
(12) consecutive Trading Days (the "Purchase Price Period")
ending on the day prior to and not including the Conversion
Date.
As used herein, "Principal Market" shall mean Nasdaq
National Market or such other market where the Common Stock is then
listed for trading.
As used herein, "Market Price" shall mean with
respect to each Tranche: (i) where such Tranche was acquired pursuant
to the exercise of a call option under the Put and Call Agreement, the
average of the five daily closing bid prices of the Common Stock for
the five Trading Day period ending on the Trading Day prior to the
exercise of the call; or (ii) where such Tranche was acquired pursuant
to the exercise of a put option under the Put and Call Agreement, the
lesser of (A) the average of the five daily closing bid prices of the
Common Stock for the five Trading Day period ending on the Trading day
prior to exercise of the put and (B) the average of the five daily
closing bid prices of the Common Stock for the five Trading Day Period
beginning on the Trading Day after the exercise of the put.
5
<PAGE>
(c) STOCK SPLITS; DIVIDENDS; ADJUSTMENTS.
(i) If the Corporation, at any time while the Preferred Shares
are outstanding, (A) shall pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including
instruments or securities convertible into or exchangeable for such
equity securities) in shares of Common Stock, (B) subdivide outstanding
shares of Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then each
Affected Conversion Price (as defined below) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding before such event and the denominator of which
shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 5(c)(i) shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination.
As used herein, the Affected Conversion Prices (each
an "Affected Conversion Price") shall refer to: (i) the Fixed Price;
and (ii) each reported price for the Common Stock on the Principal
Market occurring on any Trading Day included in the Purchase Price
Period, which Trading Day occurred before the record date in the case
of events referred to in clause (A) of this subparagraph 5(c)(i) and
the effective date, in the case of the events referred to in clauses
(B) and (C) of this subparagraph 5(c)(i).
(ii) In the event that the Corporation issues or sells any
Common Stock or securities which are convertible into or exchangeable
for its Common Stock (other than Preferred Shares), or any warrants or
other rights to subscribe for or to purchase or any options for the
purchase of its Common Stock (other than shares or options issued or
which may be issued pursuant to (i) the Corporation's current or future
employee, director or BONA FIDE consultant option plans or shares
issued upon exercise of options, warrants or rights outstanding on the
date of the Put and Call Agreement and listed in the Corporation's most
recent periodic report filed under the Securities Exchange Act of 1934,
as amended (ii) strategic corporate alliances not undertaken
principally for financing purposes, (iii) arrangements with the holders
of Preferred Shares or (iv) acquisitions of other entities by the
Corporation) at an effective purchase price per share which is less
than greater of (1) the closing market price per share of the Common
Stock on the Principal Market on the Trading Day next preceding such
issue or sale or, in the case of issuances to holders of its Common
stock, the date fixed for the determination of stockholders entitled to
receive such warrants, rights, or options ("Fair Market Price") or (2)
the Fixed Price, then in each such case, the Fixed Price in effect
immediately prior to such issue or sale or record date, as applicable,
shall be reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Fixed Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number
of shares of Common Stock and Convertible Securities (as defined below)
outstanding immediately
6
<PAGE>
prior to such issue or sale, plus (2) the number of shares of Common
Stock which the aggregate consideration received by the Corporation for
such additional shares would purchase at such Fixed Price or Fair
Market Price, as the case may be; and (y) the denominator of which
shall be the number of shares of Common Stock and Convertible
Securities (as defined below) of the Corporation outstanding
immediately after such issue or sale.
For purposes of the preceding paragraph, in the event
that the effective purchase price is less than both the Fair Market
Price and the Fixed Price, then the calculation method which yields the
greatest downward adjustment in the Conversion Price shall be used.
For the purposes of the foregoing adjustment, in the
case of the issuance of any convertible securities, warrants, options
or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock ("Convertible Securities"), the maximum number of
shares of Common Stock issuable upon exercise, exchange or conversion
of such Convertible Securities shall be deemed to be outstanding, and
the aggregate consideration received by the Corporation for the
issuance or sale of such Convertible Securities shall be deemed to
include any consideration that would be received by the Corporation in
connection with the exercise, exchange or conversion of such
Convertible Securities, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange
or conversion of such Convertible Securities.
(iii) If the Corporation, at any time while the Preferred
Shares are outstanding, shall distribute to all holders of Common Stock
evidences of its indebtedness or assets or cash or rights or warrants
to subscribe for or purchase any security of the Corporation or any of
its subsidiaries (excluding those referred to in Sections 5(c)(i) or
5(c)(ii) above), then concurrently with such distributions to holder of
Common Stock, the Corporation shall distribute to holders of the
Preferred Shares, the amount of such indebtedness, assets, cash or
rights or warrants which the holders of Preferred Shares would have
received had they converted their Preferred Shares into Common Shares
immediately prior to the record date for such distribution.
(iv) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(i), (ii) or (iii), the Corporation shall promptly mail to
each holder of the Preferred Shares a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(v) All calculations under this Section 5(c) shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may
be.
(vi) No adjustment in the Conversion Price shall reduce the
Conversion price below the then par value of the Common Stock.
7
<PAGE>
(vii) The Corporation from time to time may reduce the
Conversion Price by any amount for any period of time if the period is
at least 20 Trading Days and if the reduction is irrevocable during the
period. Whenever the Conversion Price is reduced, the Corporation shall
mail to the holders of Preferred Shares a notice of the reduction. The
Corporation shall mail, first class, postage prepaid, the notice at
least 15 days before the date the reduced Conversion Price takes
effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does
not change or adjust the Conversion Price otherwise in effect for
purposes of Section 5(c)(i), (ii), or (iii).
(d) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall deliver to each holder of Preferred Shares at least 20 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution,
security or right and the amount and character of such dividend, distribution,
security or right.
(e) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Preferred Shares pursuant hereto. However, the holder of any Preferred Shares
shall pay any tax that is due because the Common Shares issuable upon conversion
thereof are issued in a name other than such holder's name.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purposes of effecting the conversion of the
Preferred Shares, an amount of Common Shares equal to 200% of the number of
shares issuable upon conversion of the Preferred Shares at the then applicable
Conversion Price. The Corporation promptly will take such corporate action as
may, in the opinion of its outside 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, including without limitation engaging in best
efforts to obtain the requisite stockholder approval.
(g) FRACTIONAL SHARES. No fractional shares shall be issued upon
the conversion of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon conversion of more than one Preferred Share by a holder
thereof and all Preferred Shares issuable upon the purchase thereof shall be
aggregated for purposes of determining whether the conversion and/or purchase
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion and/or purchase would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, either round up the number of shares to
the next highest whole number or, at the Corporation's option, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date (as determined in good faith by the
Board of Directors of the Corporation).
8
<PAGE>
(h) REORGANIZATION, MERGER OR GOING PRIVATE. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale or transfer of all or substantially all of
the assets of the Corporation to any other person or a "going private"
transaction under Rule 13e-3 promulgated pursuant to the Exchange Act, then, as
part of such reorganization, consolidation, merger, or transfer, if the holders
of shares of Common Stock receive any publicly traded securities as part or all
of the consideration for such reorganization, consolidation, merger or sale,
then it shall be a condition precedent of any such event or transaction that
provision shall be made such that each Preferred Share shall thereafter be
convertible into such new securities at a conversion price and pricing formula
which places the holders of Preferred Shares in an economically equivalent
position as they would have been if not for such event. In addition to the
foregoing, if the holders of shares of Common Stock receive any non-publicly
traded securities or other property or cash as part or all of the consideration
for such reorganization, consolidation, merger or sale, then such distribution
shall be treated to the extent thereof as a distribution under Section 5(c)
above and such Section shall also apply to such distribution.
(i) MANDATORY CONVERSION.
(x) Subject to subsection (i)(y) below, the Preferred Shares
in each Tranche shall be automatically converted into Common Shares
four months after the effectiveness of the registration statement
covering the Common Shares issuable upon conversion of Preferred Shares
in such Tranche and filed pursuant to the Registration Rights Agreement
(a "Registration Statement") (a "Mandatory Conversion Date"); provided
that such Mandatory Conversion Date shall be deferred, at the sole
option of a holder of Preferred Shares, for such number of days as is
equal to the number of days (A) there is a lack of Effective
Registration (as defined below), but not including the first 60 days
after the Closing pursuant to which such Tranche was acquired; (B)
there is not a sufficient amount of Common Stock available for
conversion of all outstanding Preferred Shares, (C) for any other
reason the Corporation refuses or announces its refusal to honor
conversion of Preferred Shares, other than for failure to comply with
the notice and delivery requirements of Section 5(a) above; or (D) for
any reason, after the Registration Statement initially is declared
effective, there is a suspension, restriction or limitation in the
ability of holders of Preferred Shares to sell Common Shares received
upon conversion of Preferred Shares pursuant to the prospectus included
in the Registration Statement.
For purposes of the preceding paragraph, a lack of
Effective Registration shall be deemed to have occurred at any time the Common
Shares issuable upon conversion of the Preferred Shares are not capable of being
sold on an Approved Market (as defined in the Put and Call Agreement) pursuant
to an effective registration statement and deliverable prospectus.
(y) Notwithstanding the preceding subsection (i)(x), no holder
of Preferred Shares shall be obligated to convert any Preferred Shares
held by such holder on a Mandatory Conversion Date unless and until
each of the following conditions has
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been satisfied or exists, each of which shall be a condition precedent
to any such forced conversion:
(A) no material default or breach exists which has
not been cured, and no event shall have occurred which
constitutes (or would constitute with notice or the passage of
time or both) a material default or breach of the Put and Call
Agreement, the Registration Rights Agreement, or this
Certificate of Designations, which has not been cured;
(B) none of the events described in clauses (i)
through (iv) of Section 2(b) of the Registration Rights
Agreement shall have occurred and be continuing;
(C) the Registration Statement is effective and
holders have received unlegended certificates representing
Common Shares with respect to all conversions for which
Conversion Notices have been given; and
(D) the Corporation and its subsidiaries on a
consolidated basis has assets with a net realizable fair
market value exceeding its liabilities and is able to pay all
its debts as they become due in the ordinary course of
business, and the Corporation is not subject to any
liquidation, dissolution or winding up of its affairs.
(z) Notwithstanding Section 5(i)(x) above, no holder's
Preferred Shares shall be subject to mandatory conversion to the extent
such mandatory conversion would result in the holder of Preferred
Shares exceeding the limitation contained in Section 5(j) below;
provided that for purposes of this Section 5(i)(z), beneficial
ownership of shares of Common Stock acquired other than through
ownership of Preferred Shares or other preferred stock of the
Corporation and acquired after the date of the Put and Call Agreement
shall be disregarded. In such event, the Preferred Shares of such
holder would be converted in such amount until such limitation is
reached and with respect to the balance of such holder's Preferred
Shares, the Mandatory Conversion Date shall be moved to a date 90 days
thereafter, subject to the provisions of Section 5(i) applying to such
balance.
Such forced conversion shall be subject to and
governed by all the provisions relating to voluntary conversion of the Preferred
Shares contained herein.
(j) LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
(A) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be
acquired by the holder upon conversion pursuant to the terms hereof
shall not exceed a number that, when added to the total number of
shares of Common Stock deemed beneficially owned by such holder
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<PAGE>
(other than by virtue of the ownership of securities or rights to
acquire securities (including the Preferred Shares) that have
limitations on the holder's right to convert, exercise or purchase
similar to the limitation set forth herein), together with all shares
of Common Stock deemed beneficially owned (other than by virtue of the
ownership of securities or rights to acquire securities that have
limitations on the right to convert, exercise or purchase similar to
the limitation set forth herein) by the holder's "AFFILIATES" (as
defined in Rule 144 of the Act) ("AGGREGATION PARTIES") that would be
aggregated for purposes of determining whether a group under Section
13(d) of the Securities Exchange Act of 1934 as amended, exists, would
exceed 9.99% of the total issued and outstanding shares of the Common
Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each holder shall have
the right (w) at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon notice to the
Corporation and (x) (subject to waiver) at any time and from time to
time, to increase its Restricted Ownership Percentage immediately in
the event of the announcement as pending or planned, of a transaction
or event referred to in Section 5(m) below.
(B) The holder covenants at all times on each day
(each such day being referred to as a "Covenant Day") as follows:
During the balance of such Covenant Day and the succeeding sixty-one
(61) days (the balance of such Covenant Day and the succeeding 61 days
being referred to as the "Covenant Period") such holder will not
acquire shares of Common Stock pursuant to any right (including
conversion of Preferred Shares) existing at the commencement of the
Covenant Period to the extent the number of shares so acquired by such
holder and its Aggregation Parties (ignoring all dispositions) would
exceed:
(x) the Restricted Ownership Percentage of the total
number of shares of Common Stock outstanding at the
commencement of the Covenant Period, minus
(y) the number of shares of Common Stock actually owned
by such holder and its Aggregation Parties at the
commencement of the Covenant Period.
A new and independent covenant will be deemed to be given by the holder
as of each moment of each Covenant Day. No covenant will terminate,
diminish or modify any other covenant. The holder agrees to comply with
each such covenant. This Section 5(j)(B) controls in the case of any
conflict with any other provision of the Put and Call Agreement or any
agreement entered into in connection therewith.
(C) The Corporation's obligation to issue Common
Shares which would exceed such limits referred to in this Section 5(j)
shall be suspended to the extent necessary until such time, if any, as
shares of Common Stock may be issued in compliance with such
restrictions.
(k) CERTIFICATE FOR CONVERSION PRICE ADJUSTMENT. The Corporation
shall promptly furnish or cause to be furnished to each holder a certificate
prepared by the Corporation setting forth any adjustments or readjustments of
the Conversion Price pursuant to this Section 5.
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<PAGE>
(l) SPECIFIC ENFORCEMENT. The Corporation agrees that irreparable
damage would occur in the event that any of the provisions of this Certificate
of Designations were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the holders of Preferred
Shares shall be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(m) MANDATORY REPURCHASE. Each holder shall have the unilateral
option and right to compel the Corporation to repurchase any or all of such
holder's Preferred Shares within 3 days of a written notice requiring such
repurchase, at a price per Preferred Share equal to 115% of the Liquidation
Preference then in effect if any of the following events involving the
Corporation shall have occurred:
(i) A Change in Control Transaction (as defined below);
(ii) A "going private" transaction under Rule 13e-3
promulgated pursuant to the Exchange Act; or
(iii) A tender offer by the Corporation under Rule 13e-4
promulgated pursuant to the Exchange Act.
A "Change in Control Transaction" will be deemed to
exist if (i) there occurs any consolidation or merger of the Corporation with or
into any other corporation or other entity or person (whether or not the
Corporation is the surviving corporation), or any other corporate reorganization
or transaction or series of related transactions in which in excess of 50% of
the Corporation's voting power is transferred through a merger, consolidation,
tender offer or similar transaction, (ii) any person (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
together with its affiliates and associates (as such terms are defined in Rule
405 under the Securities Act of 1933, as amended (the "Act")), beneficially owns
or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange
Act without regard to the 60-day exercise period) in excess of 50% of the
Corporation's voting power, (iii) there is a replacement of more than one-half
of the members of the Corporation's Board of Directors which is not approved by
those individuals who are members of the Corporation's Board of Directors on the
date thereof, in one or a series of related transactions or (iv) a sale or
transfer of all or substantially all of the assets of the Corporation,
determined on a consolidated basis.
(n) MANDATORY REPURCHASE IN EVENT OF NON-COMPLIANCE WITH WARRANTS.
In the event that the Corporation (i) is not in compliance with its obligations
to deliver Common Shares pursuant to the terms of any warrants (the "Warrants")
held by a holder of Preferred Shares or an affiliate of such holder or (ii)
repudiates or disavows such obligations, then such holder of Preferred Shares
shall have the unilateral option and right, in addition to any other rights or
remedies which such holder or affiliate may have, all of which shall be
cumulative, to compel the Corporation to repurchase any and all of such holder's
Preferred Shares within 3 days of a written notice requiring such repurchase, at
a price per Preferred Share equal to the greater of: (1) 125% of the Liquidation
Preference per share then in effect or (2) the Liquidation
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<PAGE>
Preference per share divided by the Conversion Price multiplied by the greater
of the last closing price of the Common Shares on the date a holder exercises
its option pursuant to this provision to require repurchase of Preferred Shares
or the date on which the event triggering the holder's remedies under this
provision first occurred.
6. VOTING RIGHTS. In addition to all other requirements imposed by
Delaware law, and all other voting rights granted under the Corporation's
Certificate of Incorporation, the affirmative vote of two-thirds in interest of
the Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment, modification or repeal of this Certificate of Designations (whether
by merger, consolidation or otherwise) or for any merger, reclassification,
consolidation or reorganization, or (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or change or
adversely affect any of the rights, preferences, or privileges of the Preferred
Shares, provided, however, that holders of Preferred Shares (other than the
investor under the Put and Call Agreement and its affiliates) who are affiliates
of the Corporation (and the Corporation itself) shall not participate in such
vote and the Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.
7. NOTICES. The Corporation shall distribute to the holders of
Preferred Shares copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
8. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Preferred Shares held by any holder of Preferred Shares may be exchanged by such
holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Preferred Shares, as
reasonably requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
9. ATTORNEYS' FEES. In connection with enforcement by a holder of
Preferred Shares of any obligation of the Corporation hereunder, the prevailing
party shall be entitled to recovery of reasonable attorneys' fees and expenses
incurred.
10. NO REISSUANCE. No Preferred Shares acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.
11. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Preferred Shares set forth in this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation herein
set forth be deemed dependent upon any such other right, preference or
limitation unless so expressed herein.
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12. LIMITATIONS. Except as may otherwise be required by law and as are
set forth in the Put and Call Agreement and the Registration Rights Agreement,
the Preferred Shares shall not have any powers, preference or relative
participating, optional or other special rights other than those specifically
set forth in this Certificate of Designation (as may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
Signed on June 30, 2000
SECURE COMPUTING CORPORATION
By: /S/ John McNulty
-------------------------------------
Name: John McNulty
Title: Chairman and CEO
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<PAGE>
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
SERIES F 4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of Series F 4% Cumulative
Convertible Preferred Stock ("Preferred Shares") of Secure Computing Corporation
(the "Corporation"), hereby irrevocably elects to convert _____________
Preferred Shares for shares ("Common Shares") of common stock, par value $0.01
per share (the "Common Stock"), of the Corporation according to the terms and
conditions of the Certificate of Designations for the Preferred Shares as of the
date written below. The undersigned hereby requests that share certificates for
the Common Shares to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. No fee will be charged to the Holder of Preferred
Shares for any conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER:__________________________
By:
-------------------------------------------------
Print Name:
-----------------------------------------
Print Title:
----------------------------------------
Print Address of Holder:
-----------------------------------------------------
-----------------------------------------------------
Issue Common Stock to:
------------------------------
at:
-------------------------------------------------
-----------------------------------------------------
Preferred Shares acquire through
-Put
-Call
IF COMMON SHARES ARE TO BE ISSUED TO A PERSON OTHER THAN HOLDER,
HOLDER'S SIGNATURE MUST BE GUARANTEED BELOW:
SIGNATURE GUARANTEED BY:
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
PAGE 1 OF CONVERSION NOTICE
<PAGE>
PAGE 2 TO CONVERSION NOTICE DATED FOR:
------------------- ---------------------
(CONVERSION DATE) (NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of Preferred Shares converted: _______ shares
Number of Preferred Shares converted x Liquidation Preference $
TOTAL DOLLAR AMOUNT CONVERTED $
=============
CONVERSION PRICE $
Number of Common Shares = Total dollar amount converted =
----------------------------- --------------
Conversion Price
NUMBER OF COMMON SHARES =
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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