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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
|X| Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
NETGURU, INC.
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK, $0.01 PAR VALUE
(2) Aggregate number of securities to which transaction applies:
155,000,000 SHARES
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): NOT
APPLICABLE
(4) Proposed maximum aggregate value of transaction: NOT APPLICABLE
(5) Total fee paid: NOT APPLICABLE
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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NETGURU, INC.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
NOTICE OF ACTIONS TO BE TAKEN
PURSUANT TO THE WRITTEN CONSENT
OF STOCKHOLDERS
To Our Stockholders:
The written consent of the holders of the issued and outstanding shares
of common stock, $0.01 par value, of netGuru, Inc., a Delaware corporation (the
"Company"), is being solicited to approve and adopt the consummation by the
Company of the following corporate actions:
1. The adoption of the Company's Restated Certificate of
Incorporation.
2. The adoption of the Company's 2000 Stock Option Plan.
The Board of Directors has fixed the close of business on April 17,
2000 as the record date for the determination of stockholders entitled to notice
of and consent to the approval and adoption of the foregoing corporate actions.
Your attention is directed to the attached Consent Statement.
BY ORDER OF THE BOARD OF DIRECTORS
AMRIT K. DAS,
Chief Executive Officer
Yorba Linda, California
April 28, 2000
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NETGURU, INC.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
----------------------
CONSENT STATEMENT
----------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This Consent Statement is furnished by the Board of Directors of
netGuru, Inc., a Delaware corporation (the "Company"), to the holders of record
of the issued and outstanding shares of common stock, $0.01 par value (the
"Common Stock"), of the Company (the "Stockholders"), at the close of business
on April 17, 2000 (the "Record Date") in connection with the execution by the
Stockholders of a written consent (the "Written Consent"), pursuant to which the
Stockholders will approve and adopt the consummation by the Company of the
following corporate actions: (1) the adoption of the Company's Restated
Certificate of Incorporation which reflects an increase in the authorized
capital stock of the Company from 25,000,000 shares to 155,000,000 shares, of
which 150,000,000 shares will be designated as Common Stock, $0.01 par value,
12,000 shares will be designated as Series B Cumulative Convertible Preferred
Stock, $0.01 par value, and 4,988,000 shares will be designated as Preferred
Stock, $0.01 par value; and (2) the adoption of the Company's 2000 Stock Option
Plan (the "2000 Plan") effective as of March 15, 2000.
Only Stockholders of record at the close of business on the Record Date
are entitled to notice of and to approve and adopt the foregoing actions
pursuant to the Written Consent. As of the Record Date, _______ shares of Common
Stock were issued and outstanding. Execution and return of the Written Consent
by a Stockholder means that all shares of Common Stock held of record on the
Record Date by the Stockholder will be counted for approval of the foregoing
actions, with each share of Common Stock held of record on the Record Date
representing one vote for purposes of determining whether a majority of the
issued and outstanding shares have approved and adopted the foregoing actions.
Mr. Amrit K. Das, Chief Executive Officer, Chairman of the Board and a director
of the Company, Mr. Jyoti Chatterjee, President, Chief Operating Officer and a
director of the Company, Mr. Dan Heil, a director of the Company, and Mr.
Santanu Das, a director of the Company, who collectively have voting power over
approximately 45.5% of the issued and outstanding shares of Common Stock, have
already approved the foregoing actions as of March 15, 2000, in their capacity
as directors of the Company, and have indicated that they will approve the
foregoing actions as Stockholders of the Company. Accordingly, it is expected
that the foregoing actions will be approved and adopted by the Stockholders.
There are no dissenters' rights with respect to any of the foregoing actions to
be approved and adopted pursuant to the Written Consent.
The Company will pay the expenses of furnishing this Consent Statement,
including the cost of preparing, assembling and mailing this Consent Statement.
It is anticipated that this Consent Statement will first be sent to the
Stockholders of the Corporation on or about April 28, 2000.
The Board of Directors does not know of any matters, other than the
consent of the Stockholders to (i) the adoption of the Company's Restated
Certificate of Incorporation, and (ii) the adoption of the Company's 2000 Stock
Option Plan, that are to be presented for consideration for approval by the
Stockholders pursuant to the Written Consent.
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THE CONSENT SOLICITATION
The Company is seeking the consent of the Stockholders to the adoption
of the Company's Restated Certificate of Incorporation. The Company expects to
file the Restated Certificate of Incorporation with the Secretary of State of
Delaware on or about May __, 2000. The Company is also seeking the consent of
the Stockholders to the adoption of the Company's 2000 Stock Option Plan, to be
effective as of March 15, 2000.
Each Stockholder may consent to the actions proposed and previously
approved by the Board of Directors by completing, signing, dating and mailing
the enclosed Written Consent. Executed consents may be revoked at any time,
provided that a written revocation which clearly identifies the consent being
revoked is executed and delivered to the Company at its principal executive
offices located at 22700 Savi Ranch Parkway, Yorba Linda, California 92887,
Attention: President, prior to the time that the action authorized by the
consents becomes effective.
CAREFULLY REVIEW THIS CONSENT STATEMENT. YOUR CONSENT IS IMPORTANT. THE
BOARD OF DIRECTORS HAS DETERMINED THAT THE ADOPTION OF THE PROPOSED ACTIONS IS
ADVISABLE AND HAS ACCORDINGLY APPROVED THE PROPOSED ACTIONS. IN THAT REGARD, YOU
ARE URGED TO GRANT YOUR CONSENT TO THE PROPOSED ACTIONS BY COMPLETING, SIGNING,
DATING AND MAILING THE ENCLOSED WRITTEN CONSENT TO THE COMPANY, AT ITS PRINCIPAL
OFFICES, IN THE ENCLOSED ENVELOPE. IF YOU SIGN YOUR WRITTEN CONSENT BUT DO NOT
CHECK ANY OF THE BOXES THEREON, YOU WILL BE DEEMED TO HAVE CONSENTED TO THE
ACTIONS DESCRIBED THEREIN.
THE PROPOSED ACTIONS
RESTATEMENT OF THE CERTIFICATE OF INCORPORATION
Effective March 15, 2000, the Board of Directors approved the Company's
Restated Certificate of Incorporation, with such Restated Certificate of
Incorporation to be effective upon its filing with the Delaware Secretary of
State. The Company's Restated Certificate of Incorporation reflects an increase
the total number of authorized capital stock of the Company from 25,000,000
shares to 155,000,000 shares, of which 150,000,000 shares will be designated as
Common Stock, $0.01 par value, 12,000 shares will be designated as Series B
Cumulative Convertible Preferred Stock, $0.01 par value, and 4,988,000 shares
will be designated as Preferred Stock, $0.01 par value. A copy of the Company's
Restated Certificate of Incorporation is attached to this Consent Statement as
Exhibit A.
ADOPTION OF THE 2000 STOCK OPTION PLAN
On April 16, 1996, the Board of Directors and the then sole stockholder
of the Company adopted the Company's 1996 Stock Option Plan (the "1996 Plan") by
action taken without a meeting of the directors and sole stockholder by written
consent. On February 6, 1997, the Board of Directors adopted the 1997 Stock
Option Plan (the "1997 Plan") by action taken without a meeting of the directors
by written consent. The 1997 Plan was approved by a majority of the stockholders
at the annual meeting of stockholders on September 25, 1997. On November 4,
1998, the Board of Directors adopted the 1998 Stock Option Plan (the "1998
Plan") by action taken without a meeting of the directors by written consent.
The 1998 Plan was approved by a majority of the stockholders at the annual
meeting of stockholders on December 15, 1998. Effective March 15, 2000, the
Board of Directors approved the Company's 2000 Stock Option Plan (the "2000
Plan") by action taken without a meeting of the directors by written consent.
The 1996 Plan, the 1997 Plan, the 1998 Plan and the 2000 Plan are sometimes
referred to collectively as the "Plans."
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The Plans are designed to enable the Company to offer an
incentive-based compensation system to employees, officers and directors of the
Company and to employees of companies who do business with the Company. The
Plans provide for the grant of incentive stock options ("ISOs"), nonqualified
stock options ("NQOs") and the 1996 Plan provides for the grant of director
nonqualified stock options ("Director NQOs") (ISOs, NQOs and Director NQOs are
collectively referred to herein as "Options"). As of March 15, 2000, the Company
had a total of 330 employees, officers and directors eligible to receive Options
under the Plans.
As of March 15, 2000, a total of 174,647 NQOs granted under the 1996
Plan were outstanding, a total of 25,000 Director NQOs granted under the 1996
Plan were outstanding, and a total of 40,300 ISOs granted under the 1996 Plan
were outstanding. As of March 15, 2000, a total of 91,500 NQOs granted under the
1997 Plan were outstanding and a total of 182,775 ISOs granted under the 1997
Plan were outstanding. As of March 15, 2000, a total of 233,250 NQOs granted
under the 1998 Plan were outstanding and a total of 235,100 ISOs granted under
the 1998 Plan were outstanding. As of March 15, 2000, an aggregate of 52,203
shares of the Company's Common Stock have been issued pursuant to the exercise
of NQOs granted under the 1996 Plan, the 1997 Plan and the 1998 Plan. As of that
same date, an aggregate of 33,525 shares of the Company's Common Stock have been
issued pursuant to the exercise of ISOs granted under the 1996 Plan, the 1997
Plan and the 1998 Plan.
The Company has registered, at the Company's expense, with the
Securities and Exchange Commission (the "Commission") on a Form S-8 Registration
Statement, the shares of Common Stock issuable under the 1996 Plan, the 1997
Plan and the 1998 Plan.
The following summary description of the Plans is qualified in its
entirety by reference to the full text of the Plans. A copy of the 2000 Plan is
attached to this Consent Statement as EXHIBIT B.
SHARES SUBJECT TO THE PLANS
A total of 294,000 shares of the Company's Common Stock are authorized
for issuance under the 1996 Plan. A total of 300,000 shares of the Company's
Common Stock are authorized for issuance under the 1997 Plan. A total of 500,000
shares of the Company's Common Stock are authorized for issuance under the 1998
Plan. A total of 1,000,000 shares of the Company's Common Stock are authorized
for issuance under the 2000 Plan. Any shares of Common Stock which are subject
to an award but are not used because the terms and conditions of the award are
not met, or any shares which are used by participants to pay all or part of the
purchase price of any Option, may again be used for awards under the Plans.
ADMINISTRATION
The Plans are administered by a Committee ("Committee") of not less
than two nor more than five persons appointed by the Board of Directors, each of
whom must be a director of the Company. The 1996 Plan provides that members of
the Committee are not eligible to receive Options under the 1996 Plan (other
than Director NQOs). It is the intent of the Plans that they be administered in
a manner such that option grants and exercises would be "exempt" under Rule
16b-3 of the Exchange Act. The Committee currently comprises Messrs. Amrit Das
and Dan Heil.
The Committee is empowered to select those eligible persons to whom
Options shall be granted under the Plans; to determine the time or times at
which each Option shall be granted, whether Options will be ISOs or NQOs, and
the number of shares to be subject to each Option; and to fix the time and
manner in which each such Option may be exercised, including the exercise price
and option period, and other terms and conditions of such Options, all subject
to the terms and conditions of the Plans. The Committee has sole discretion to
interpret and administer the Plans, and its decisions regarding the Plans are
final.
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OPTION TERMS
ISOs granted under the Plans must have an exercise price of not less
than 100% of the fair market value of the Common Stock on the date the ISO is
granted and must be exercised within ten years from the date of grant. In the
case of an ISO granted to an optionee who owns more than 10% of the total voting
securities of the Company on the date of grant, such exercise price shall be not
less than 110% of fair market value on the date of grant, and the option period
may not exceed five years. NQOs granted under the Plans must have an exercise
price of not less than 85% of the fair market value of the Common Stock on the
date the NQO is granted.
Options may be exercised during a period of time fixed by the Committee
except that no Option (other than an ISO granted to a stockholder owning more
than 10% of the voting securities of the Company) may be exercised more than ten
years after the date of grant. In the discretion of the Committee, payment of
the purchase price for the shares of stock acquired through the exercise of an
Option may be made in cash, shares of the Company's Common Stock or a
combination of cash and shares of the Company's Common Stock.
AMENDMENT AND TERMINATION
The Plans may be wholly or partially amended or otherwise modified,
suspended or terminated at any time and from time to time by the Board of
Directors. The Board of Directors may not (i) materially impair any outstanding
Options without the express consent of the optionee or (ii) materially increase
the number of shares subject to the Plans, materially increase the benefits
acquiring to optionees under the Plans, materially modify the requirements as to
eligibility to participate in the Plans or alter the method of determining the
Option exercise price without stockholder approval. No Option may be granted
under the 1996 Plan, the 1997 Plan, the 1998 Plan and the 2000 Plan after April
15, 2006, February 5, 2007, November 3, 2008 and March 15, 2010 respectively.
FEDERAL INCOME TAX CONSEQUENCES
NQOS.
-----
Holders of NQOs do not realize income as a result of a grant of the
Option, but normally realize compensation income upon exercise of an NQO to the
extent that the fair market value of the shares of Common Stock on the date of
exercise of the NQO exceeds the exercise price paid. The Company will be
required to withhold taxes on ordinary income realized by an optionee upon the
exercise of a NQO.
In the case of an optionee subject to the "short-swing" profit
recapture provisions of Section 16(b) of the Exchange Act, the optionee realizes
income only upon the lapse of the six-month period under Section 16(b), unless
the optionee elects to recognize income immediately upon exercise of his Option.
ISOS.
-----
Holders of ISOs will not be considered to have received taxable income
upon either the grant of the Option or its exercise. Upon the sale or other
taxable disposition of the shares, long-term capital gain will normally be
recognized on the full amount of the difference between the amount realized and
the Option exercise price paid if no disposition of the shares has taken place
within either (a) two years from the date of grant of the Option or (b) one year
from the date of transfer of the shares to the optionee upon exercise. If the
shares are sold or otherwise disposed of before the end of the one-year or
two-year periods, the holder of the ISO must include the gain realized as
ordinary income to the extent of the lesser of (1) the fair market value of the
Option stock minus the Option price, or (2) the amount realized minus the Option
price. Any gain in excess of these amounts, presumably, will be treated as
capital gain. The Company will be entitled to a tax deduction in regard to an
ISO only to the extent the optionee has ordinary income upon the sale or other
disposition of the Option shares.
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Upon the exercise of an ISO, the amount by which the fair market value
of the purchased shares at the time of exercise exceeds the Option price will be
an "item of tax preference" for purposes of computing the optionee's alternative
minimum tax for the year of exercise. If the shares so acquired are disposed of
prior to the expiration of the one-year or two-year periods described above,
there should be no "item of tax preference" arising from the Option exercise.
POSSIBLE ANTI-TAKEOVER EFFECTS
Although not intended as an anti-takeover measure by the Board of
Directors, one of the possible effects of the Plans could be to place additional
shares, and to increase the percentage of the total number of shares
outstanding, in the hands of the directors and officers of the Company. Such
persons may be viewed as part of, or friendly to, incumbent management and may,
therefore, under certain circumstances be expected to make investment and voting
decisions in response to a hostile takeover attempt that may serve to discourage
or render more difficult the accomplishment of such attempt.
In addition, Options may, in the discretion of the Committee, contain a
provision providing for the acceleration of the exercisability of outstanding,
but unexercisable, installments upon the first public announcement of a tender
offer, merger, consolidation, sale of all or substantially all of the assets of
the Company, or other attempted changes in the control of the Company. In the
opinion of the Board of Directors, such an acceleration provision merely ensures
that optionees under the Plans will be able to exercise their Options as
intended by the Board of Directors and stockholders of the Company prior to any
such extraordinary corporate transaction which might serve to limit or restrict
such right. The Board of Directors is, however, presently unaware of the
possibility of any hostile takeovers involving the Company.
REQUIRED VOTE OF STOCKHOLDERS
The favorable vote of a majority of the shares of Common Stock is
required to approve the 2000 Plan. As noted, the Board approved the 2000 Plan.
Stockholders should be aware, however, that the Board may be viewed as having a
conflict of interest in approving, and recommending that stockholders approve,
the 2000 Plan.
THE CONSENT PROCEDURE
ACTIONS BY WRITTEN CONSENT
Under the Delaware General Corporation Law and the Company's Bylaws,
any action which may be taken at any meeting of the Stockholders may also be
taken without a meeting, and without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted (here, a majority of the
outstanding shares of Common Stock of the Company) and delivered to the Company.
THE RECORD DATE
The Company's Bylaws provide that the Board of Directors may fix, in
advance, a date not more than sixty nor less than ten days before the date then
fixed for the holding of any meeting of the Stockholders of the Company or
before the last day on which the consent of the Stockholders may be effectively
expressed for any purpose without a meeting, as the time as of which the
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stockholders entitled to notice of and to vote at such meeting or whose consent
is required or may be expressed for any purpose, as the case may be, shall be
determined, and all persons who were stockholders of record of Common Stock at
such time, and all persons who were stockholders of record of Series A Preferred
at such time, shall be entitled to notice of and to vote at such meeting or to
express their consent, as the case may be.
Effective March 15, 2000, by action by written consent in lieu of a
special meeting of the Board of Directors, the Board of Directors of the Company
fixed March 15, 2000 as the Record Date for purposes of this Written Consent
solicitation. Only Stockholders of record on the Record Date are eligible to
give their consent to the actions proposed above. Persons owning shares of
Common Stock beneficially (but not of record), such as persons whose ownership
of shares of Common Stock is through a broker, bank or other financial
institution, may contact such broker, bank or financial institution and instruct
such person to execute the enclosed form of Written Consent on their behalf or
to have such broker, bank or financial institution's nominee (i.e., a central
depositary such as Cede & Co.) execute such document.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), proposals by stockholders which are intended for
inclusion in the Company's proxy statement and proxy and to be presented at the
Company's next annual meeting of stockholders must have been received by the
Company at its principal executive offices on or before June 15, 2000 for
consideration by the Company for possible inclusion in the proxy material for
that meeting. Such proposals shall be addressed to the Company's Secretary and
may be included in the proxy materials for that meeting if they comply with
certain rules and regulations of the Commission governing stockholder proposals.
For all other proposals by stockholders to be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive offices
of the Company not later than August 29, 2000. If a stockholder fails to so
notify the Company of any such proposal prior to such date, management of the
Company will be allowed to use their discretionary voting authority with respect
to proxies held by management when the proposal is raised at the annual meeting
(without any discussion of the matter in the Company's proxy statement).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Commission relating to its business, financial statements and other
matters. Reports and information statements filed pursuant to the informational
requirements of the Exchange Act and other information filed with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Midwest Regional Offices at 500 West Madison
Street, Chicago, Illinois 60606 and Northeast Regional Office at 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be obtained electronically by visiting the
Commission's web site on the Internet at http://www.sec.gov. The Common Stock of
the Company is listed for quotation on the Nasdaq National Market under the
symbol "NGRU."
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NETGURU, INC.
WRITTEN CONSENT
OF
HOLDERS OF COMMON STOCK
The undersigned hereby makes the following election with regard to the
proposed action described briefly below and described more fully in the netGuru,
Inc. Consent Statement accompanying this Written Consent:
CONSENT [ ] WITHHOLD CONSENT [ ] to adoption of the Company's Restated
Certificate of Incorporation which reflects an increase the authorized number of
shares of capital stock of the Company from 25,000,000 shares to 155,000,000
shares, of which 150,000,000 shares will be designated as Common Stock, $0.01
par value, 12,000 shares will be designated Series B Cumulative Convertible
Preferred Stock, $0.01 par value, and 4,988,000 shares will be designated as
Preferred Stock, $0.01 par value.
CONSENT [ ] WITHHOLD CONSENT [ ] to adoption of the Company's 2000 Stock Option
Plan, pursuant to which the Company may grant options to the Company's key
employees, directors, consultants and advisors to purchase up to 1,000,000
shares of Common Stock of the Company.
All other consents heretofore given by the undersigned in connection
with the action proposed above are hereby expressly revoked. This Written
Consent may be revoked at any time, provided that a written revocation which
clearly identifies the consent being revoked is executed and delivered to
netguru, inc. in the manner described in the netguru, inc. Consent Statement.
Dated:_____________, 2000 _____________________________________________
(Signature)
_____________________________________________
(Signature)
NOTE: PLEASE DATE THIS WRITTEN CONSENT AND SIGN IT EXACTLY AS YOUR NAME OR NAMES
APPEAR ON YOUR SHARES. IF YOU SIGN THIS WRITTEN CONSENT BUT DO NOT CHECK ANY OF
THE BOXES HEREIN, YOU WILL BE DEEMED TO HAVE CONSENTED TO THE ACTIONS DESCRIBED
HEREIN. IF SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, GUARDIAN OR TRUSTEE,
PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN FULL CORPORATE
NAME BY DULY AUTHORIZED OFFICER OR OFFICERS, AFFIX CORPORATE SEAL AND ATTACH A
CERTIFIED COPY OF RESOLUTION OR BYLAWS EVIDENCING AUTHORITY.
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EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
NETGURU, INC.
netGuru, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
A. The present name of the Corporation is netGuru, Inc. The Corporation
was originally incorporated under the name Research Engineers, Inc., and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware on April 16, 1996.
B. Pursuant to Sections 245 and 242 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates,
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation.
C. The text of the Certificate of Incorporation of this Corporation
shall be amended and restated to read in full as follows:
I
1.1 NAME. The name of the Corporation is NETGURU, INC.
1.2 PURPOSE AND DURATION. The purpose of the Corporation is to engage
in any lawful act or activity for which corporations may now or hereafter be
organized under the General Corporation Law of the State of Delaware. The
Corporation is to have perpetual existence.
II
2.1 REGISTERED OFFICE AND AGENT. The address of the Corporation's
registered office in the State of Delaware is 1013 Centre Road, City of
Wilmington, New Castle County, Delaware 19805-1297. The registered agent for
service of process at that address is Corporation Service Company.
2.2 DIRECTORS. The number of directors which shall constitute the whole
Board of Directors of the Corporation (the "Board of Directors") shall be fixed
by or in the manner provided in the Bylaws of the Corporation. Directors need
not be elected by written ballot.
2.3 CHANGES TO CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to the
terms and conditions contained herein, the Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
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III
3.1 AUTHORIZED SHARES. The Corporation is authorized to issue two
classes of shares, designated "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation shall have authority to issue is
155,000,000, of which 150,000,000 shall be designated Common Stock, par value of
$.0l per share, and 5,000,000 shall be designated Preferred Stock, par value of
$.0l per share. Of the 5,000,000 shares designated as Preferred Stock, 12,000
shares shall be designated Series B Cumulative Convertible Preferred Stock (the
"Series B Preferred") and shall have the rights, preferences, privileges and
restrictions specified in Section 3.3 below.
3.2 UNDESIGNATED PREFERRED STOCK. Subject to Section 3.3 hereof, the
remaining 4,988,000 shares of Preferred Stock may be issued from time to time in
one or more classes or series as the Board of Directors, by resolution or
resolutions, may from time to time determine, each of said classes or series to
be distinctively designated. The voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations or restrictions thereof, if any, of each such class or series may
differ from those of any and all other classes or series of Preferred Stock at
any time outstanding, and the Board of Directors is hereby expressly granted
authority, subject to any limitations contained in any class or series of
Preferred Stock at any time outstanding, to fix or alter, by resolution or
resolutions, the designation, number, voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, of each such class or series, including,
but without limiting the generality of the foregoing, the following:
(a) The distinctive designation of, and the number of shares
of Preferred Stock that shall constitute, such class or series, which number
(except as otherwise provided by the Board of Directors in the resolution
establishing such class or series) may be increased or decreased (but not below
the number of shares of such class or series then outstanding) from time to time
by like action of the Board of Directors;
(b) The rights in respect of dividends, if any, of such class
or series of Preferred Stock, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or classes or any
other series of the same or other class or classes of capital stock of the
Corporation, and whether such dividends shall be cumulative or noncumulative;
(c) The right, if any, of the holders of such class or series
of Preferred Stock to convert the same into, or exchange the same for, shares of
any other class or classes or of any other series of the same or any other class
or classes of capital stock of the Corporation and the terms and conditions of
such conversion or exchange;
(d) Whether or not shares of such class or series of Preferred
Stock shall be subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions on which, shares of such
class or series of Preferred Stock may be redeemed;
(e) The rights, if any, of the holders of such class or series
of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation or in the event of any merger or consolidation of
or sale of assets by the Corporation;
(f) The terms of any sinking fund or redemption or purchase
account, if any, to be provided for shares of such class or series of Preferred
Stock;
(g) The voting powers, if any, of the holders of any class or
series of Preferred Stock generally or with respect to any particular matter,
which may be less than, equal to or greater than one vote per share, and which
may, without limiting the generality of the foregoing, include the right, voting
as a class or series by itself or together with the holders of any other class
or classes or series of the same or other class or classes of Preferred Stock or
all classes or series of Preferred Stock, to elect one or more directors of the
Corporation (which, without limiting the generality of the foregoing, may
include a specified number or portion of the then-existing number of authorized
directorships of the Corporation, or a specified number or portion of
directorships in addition to the then-existing number of authorized
directorships of the Corporation) generally or under such specific circumstances
and on such conditions, as shall be provided in the resolution or resolutions of
the Board of Directors adopted pursuant hereto; and
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(h) Such other powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, as the Board of Directors shall determine.
3.3 SERIES B PREFERRED. A statement of the rights, preferences,
privileges and restrictions granted to or imposed on the Series B Preferred and
the holders thereof is as follows:
3.3.1 DIVIDENDS. The holders of Series B Preferred shall have
dividend rights as follows:
(a) CUMULATIVE. The holders of the Series B Preferred
shall be entitled to receive cumulative dividends at the per share rate of five
percent (5%) of the Liquidation Preference (as defined below) of each Preferred
Share, per annum accruing daily and payable 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 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 (or shall be
deemed to have accrued) 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 March 8, 2000, 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 Series B Preferred 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 Series B Preferred 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 or
capital stock, without having received written consent of two-thirds in interest
of the holders of Series B Preferred, except as otherwise provided herein or in
the Purchase Agreement or Registration Rights Agreement (as such terms are
defined herein) with respect to the Option Shares, Series B Preferred, Warrants
and underlying Common Shares thereof. For purposes of computing any per diem
accrual, calculations shall be made using a 360-day year.
(b) PIK PAYMENT OR CASH PAYMENT. Any dividend payable
on the outstanding Series B Preferred shall be paid by adding the amount thereof
to the Liquidation Preference (as defined below) of such Series B Preferred.
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 Series B
Preferred of its election to pay cash dividends. Following notice of payment of
cash dividends by the Corporation, all dividends on the Series B Preferred shall
be paid in cash, until such time as the Corporation provides 10 Trading Days'
irrevocable written notice to the holders of Series B Preferred of its election
to pay dividends in-kind.
3.3.2 LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series B Preferred 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 3.3.1(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").
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3.3.3 ISSUANCE OF SERIES B PREFERRED. The Series B Preferred
have been issued by the Corporation pursuant to that certain Exchange Agreement,
dated as of March 30, 2000 ("Exchange Agreement") between the Corporation and
the initial subscriber(s) for the Series B Preferred thereunder (the
"Subscriber"), in exchange for Series A Cumulative Convertible Preferred Stock,
which were issued to the Subscriber pursuant to that certain Securities Purchase
Agreement dated as of March 8, 2000 ("Purchase Agreement") between the
Corporation and the Subscriber. The holders of Series B Preferred shall enjoy
the benefits of the Registration Rights Agreement, dated as of March 8, 2000
("Registration Rights Agreement") between such parties in connection with the
Purchase Agreement.
3.3.4 CONVERSION. Each holder of the Series B Preferred shall
have the right at any time and from time to time, at the option of such holder,
to convert any or all Series B Preferred held by such holder, 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 Series B Preferred 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 Series B Preferred shall
cease and the persons entitled to receive the Common Shares upon the conversion
of Series B Preferred 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 Series B
Preferred into Common Shares, the holder shall give written notice ("Conversion
Notice") to the Corporation in the form of page 1 of the form previously
provided to and agreed to by Subscriber (which Conversion Notice may be given by
facsimile transmission no later than the Conversion Date) stating that such
holder elects to convert the same and shall state therein the number of Series B
Preferred to be converted and the name or names in which such holder wishes the
certificate or certificates for Common Shares to be issued (the conversion date
specified in such Conversion Notice shall be referred to herein as the
"Conversion Date"). 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) the second page
of the form previously provided to and agreed to by Subscriber 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 Series B Preferred 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. 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 Series B Preferred 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
Series B Preferred (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 Series B Preferred) within three (3) Trading Days
of 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"). 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
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certificates representing the Common Shares issuable upon conversion of Series B
Preferred, 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 3.3.4 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 Series B Preferred converts any of
such holder's Series B Preferred, 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 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 Series B Preferred shall, except as set forth below, be
absolute, is independent of any covenant of any holder of Series B Preferred,
and shall not be subject to: (i) any offset or defense; or (ii) any claims
against the holders of Series B Preferred whether pursuant to this Restated
Certificate of Incorporation, the Purchase Agreement, the Registration Rights
Agreement, the Exchange Agreement or otherwise.
(b) DETERMINATION OF CONVERSION PRICE. The Conversion
Price applicable with respect to the Series B Preferred (the "Conversion
Price"), shall be as follows:
(i) Subject to clause (iii) below, beginning on
the date of closing of the Purchase Agreement (the "Closing Date") up until and
including the 20th Trading Day following the Closing Date, the Conversion Price
(subject to adjustment as hereinafter set forth as if such price were an
Affected Conversion Price, as defined in Section 3.3.4(c) below) shall be a
price equal to 120% of the Closing Price;
(ii) Subject to clause (iii) below, on and after
the 21st Trading Day following the Closing Date up until but not including the
90th day following the Closing Date, the Conversion Price shall be a price equal
to 120% of the Closing Price, subject to adjustment as hereinafter set forth
(the "Fixed Price").
(iii) Beginning on the earlier of (a) the 90th
day after the Closing Date or (b) the date of any announcement or public
disclosure (or the event itself, if earlier) of any event described in Section
3.3.4(l) below, and at all times thereafter, the Conversion Price shall be the
lesser of:
(A) the Fixed Price or
(B) the Market Price.
As used herein "Closing Price" shall equal
$23.75.
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As used herein, "Market Price" shall mean the average
of the lowest closing bid prices of the Common Stock recorded on the Principal
Market (as reported by the Bloomberg financial network or any successor
reporting service) on any 5 Trading Days out of the 20 Trading Days (the "Market
Price Period") immediately prior to the Conversion Date (including the Trading
Day immediately preceding the Conversion Date); PROVIDED, HOWEVER, that in the
event of any default under Section 3.16 of the Purchase Agreement or, if
earlier, upon any announcement or public disclosure that the transactions or
events described in Section 3.16 of the Purchase Agreement will not occur or
will not longer be in effect, the "Market Price" shall equal ninety percent
(90%) of the average of the five (5) lowest closing bid prices of Common Stock
during the Market Price Period.
As used herein, "Principal Market" shall mean Nasdaq
National Market or such other market where the Common Stock is then listed for
trading.
From time to time and at any time there is an
announcement or public disclosure that the transactions or events described in
Section 3.16 of the Purchase Agreement will not occur or will not longer be in
effect, and on June 30, 2000 or any subsequent time if there shall be any
default under such Section 3.16 of the Purchase Agreement, the "Fixed Price"
hereunder shall be adjusted downward to equal 120% of the lowest 5 closing bid
prices of Common Stock recorded on the Principal Market for the 20 Trading Days
immediately following such time or date. In no event shall the Fixed Price be
increased, and no decrease shall be reversed upon any cure of any such default.
(c) STOCK SPLITS; DIVIDENDS; ADJUSTMENTS.
(i) If the Corporation, at any time while the Series
B Preferred 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 Common Shares 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 3.3.4(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 Market Price Period, which Trading Day occurred
before the record date in the case of events referred to in clause (A) of this
subparagraph 3.3.4(c)(i) and the effective date in the case of the events
referred to in clauses (B) and (C) of this subparagraph 3.3.4(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 Series B Preferred), 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 Purchase Agreement and listed in the
Corporation's most recent periodic report filed under the Securities Exchange
Act of 1934, as amended, (ii) arrangements with the holders of Series B
Preferred, (iii) an underwriting agreement, to one or more underwriters in
connection with a bona fide public offering (as defined herein), or (iv)
strategic acquisitions of other entities by the Corporation which engage in
businesses related or complementary to the Corporation's business) at an
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effective purchase price per share which is less than the 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
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 Company 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, 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
Series B Preferred 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 3.3.4(c)(i) or
3.3.4(c)(ii) above), then concurrently with such distributions to holder of
Common Stock, the Corporation shall distribute to holders of the Series B
Preferred, the amount of such indebtedness, assets, cash or rights or warrants
which the holders of Series B Preferred would have received had they converted
all their Series B Preferred into Common Shares immediately prior to the record
date for such distribution.
(iv) Whenever the Conversion Price is adjusted
pursuant to Section 3.3.4(c)(i) or (ii) above or the Corporation makes a
distribution as described in Section 3.3.4(c)(iii) above, the Corporation shall
promptly mail to each holder of the Series B Preferred a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment, or setting forth a description of the
distribution and the facts surrounding same.
(v) All calculations under this Section 3.3.4(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.
(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 Series B Preferred 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 3.3.4(c)(i), (ii), or (iii).
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(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 Series B Preferred 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
Series B Preferred pursuant hereto. However, the holder of any Series B
Preferred 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 Series B Preferred, an amount of Common Shares equal to 200% of the
number of shares issuable upon conversion of the Series B Preferred 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 Series B Preferred. All Common Shares (including
fractions thereof) issuable upon conversion of more than one Preferred Share by
a holder thereof and all Series B Preferred 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).
(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 Series B Preferred 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 3.3.4(c)
above and such Section shall also apply to such distribution.
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(i) 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 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 3.3.4(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 Series B
Preferred 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 possibly being more restrictive than others.
The holder must comply with all such covenants then in effect.
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(iii) OVERALL LIMIT ON COMMON STOCK ISSUABLE.
Notwithstanding anything contained herein to the contrary, the number of shares
of Common Stock issuable by the Company and acquirable by the holders hereunder
shall not exceed 2,645,093 shares of Common Stock, subject to appropriate
adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Common Stock (the "Maximum Common Stock Issuance"), unless the
issuance of shares hereunder in excess of the Maximum Common Stock Issuance
shall first be approved by the Company's shareholders in accordance with
applicable law and the By-laws and Articles of Incorporation of the Company. The
Company agrees that if at any point in time (the "Trigger Date") the number of
Common Shares issued pursuant to conversion of the Series B Preferred and
exercise of the Warrants, together with the number of Common Shares issued and
issuable pursuant to the option under Section 1.4 of the Purchase Agreement and
the number of Common Shares that would then be issuable by the Company in the
event of conversion of all the Series B Preferred and exercise of all the
Warrants then outstanding, would exceed the Maximum Common Stock Issuance but
for this Section 3.3.4(i)(iii), then the Company shall promptly call a
shareholders meeting to obtain shareholder approval for the issuance of Common
Shares hereunder in excess of the Maximum Common Stock Issuance. If such
shareholder approval is not obtained within 60 days of the Trigger Date, then
each holder of Series B Preferred shall have the right to sell to the Company
such number of Series B Preferred and Warrants which cannot be converted or
exercised due to such Maximum Common Stock Issuance limitation at a redemption
price equal to the "Mandatory Repurchase Price" (as defined in the Registration
Rights Agreement).
(j) 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 3.3.4.
(k) SPECIFIC ENFORCEMENT. The Corporation agrees that
irreparable damage would occur in the event that any of the provisions of this
Restated Certificate of Incorporation were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the holders of Series B Preferred shall be entitled to specific performance,
injunctive relief or other equitable remedies to prevent or cure breaches of the
provisions of this Restated Certificate of Incorporation 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.
(l) MANDATORY REPURCHASE. Each holder shall have the
unilateral option and right to compel the Corporation to repurchase any or all
of such holder's Series B Preferred within 3 days of a written notice requiring
such repurchase, at a price per Preferred Share equal to the Mandatory
Repurchase Price 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.
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(n) MANDATORY CONVERSION.
(x) Subject to subsection (m)(y) below, the Series B
Preferred shall be automatically converted into Common Shares on the three year
anniversary of the Closing Date (the "Mandatory Conversion Date"); provided,
however, that such Mandatory Conversion Date shall be deferred, at the sole
option of a holder of Series B Preferred, for such number of days as is equal to
1.5 times the number of days (A) there is a lack of Effective Registration (as
defined below), but not including the first 120 days after the Closing; (B)
there is not a sufficient amount of Common Stock available for conversion of all
outstanding Series B Preferred and exercise of the Warrants, (C) for any other
reason the Corporation refuses or announces its refusal to honor conversion of
Series B Preferred or exercise of the Warrants, other than for failure to comply
with the notice and delivery requirements of Section 3.3.4(a) above; or (D) for
any other reason there is a suspension, restriction or limitation in the ability
of holders of Series B Preferred or Warrants to sell Common Shares received upon
conversion of Series B Preferred or exercise of the Warrants pursuant to the
prospectus included in the Registration Statement (as defined in the
Registration Rights Agreement).
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 Series B Preferred or exercise of the
Warrants are not capable of being sold on an Approved Market (as defined in the
Purchase Agreement) pursuant to an effective registration statement and
deliverable prospectus.
(y) Notwithstanding the preceding subsection (m)(x),
no holder of Series B Preferred shall be obligated to convert any Series B
Preferred held by such holder on the Mandatory Conversion Date (and there shall
be no automatic conversion) unless and until each of the following conditions
has 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 Purchase Agreement, the Registration Rights Agreement, the
Exchange Agreement, the Warrants or this Restated Certificate of Incorporation,
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 (as defined in the
Registration Rights Agreement) is effective and holders have received unlegended
certificates representing Common Shares with respect to all conversions for
which Conversion Notices have been given and with respect to all exercises of
Warrants for which Notices or Exercise 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, or any bankruptcy,
insolvency or similar proceeding.
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(z) Notwithstanding Section 3.3.4(m)(x) above, no
holder's Series B Preferred shall be subject to mandatory conversion to the
extent such mandatory conversion would result in the holder of Series B
Preferred exceeding any of the limitations contained in Section 3.3.4(i) above.
In such event, the shares of Series B Preferred of such holder shall be
converted in such amount until such limitation is reached, and the remaining
Series B Preferred shall be purchased by the Corporation at the Mandatory
Redemption Price (as defined in the Registration Rights Agreement).
Such forced conversion shall be subject to and
governed by all the provisions relating to voluntary conversion of the Series B
Preferred contained herein.
3.3.5 PUBLIC OFFERINGS. In the event the Corporation completes
a "bona fide public offering" (as defined below) on or before June 30, 2000, for
90 days immediately following the closing of such an offering, no holder of
Series B Preferred shall be entitled to sell any Common Shares issued upon
conversion of Series B Preferred during such 90 day period. Beginning on the
90th day following the closing of such bona fide public offering until 180 days
following such closing, a holder of Series B Preferred shall be entitled to sell
only up to 50% of any Common Shares issued upon conversion of Series B
Preferred. Thereafter, a holder shall not be restricted in any way from selling
Common Shares.
A "bona fide public offering" shall mean a firm commitment,
fixed price underwritten public offering of at least $50 million in aggregate
proceeds to the Corporation.
The foregoing restrictions on the sale of Common Shares shall
terminate if any of the following shall have occurred and be continuing:
(A) there is a lack of Effective Registration (as defined
below), but not including the first 120 days after the Closing; (B) there is not
a sufficient amount of Common Stock available for conversion of all outstanding
Series B Preferred and exercise of all Warrants and exercise of the option
contained in Section 1.4 of the Purchase Agreement in full, (C) for any other
reason the Corporation refuses or announces its refusal to honor conversion of
Series B Preferred or exercise of the Warrants, other than for failure to comply
with the notice and delivery requirements of Section 3.3.4(a) above; or (D) for
any other reason there is a suspension, restriction or limitation in the ability
of holders of Series B Preferred to sell Common Shares received upon conversion
of Series B Preferred pursuant to the prospectus included in the Registration
Rights Agreement.
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 Series B Preferred or exercise of the Warrants
are not capable of being sold on an Approved Market (as defined in the Purchase
Agreement) pursuant to an effective registration statement and deliverable
prospectus.
Notwithstanding the preceding provisions of this subsection,
no holder of Series B Preferred shall be restricted from selling any Common
Shares issued upon conversion of Series B Preferred unless and until each of the
following conditions has been satisfied or exists, each of which shall be a
condition precedent to any such restrictions:
(1) 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
Purchase Agreement (including without limitation any breach of Sections 2.1(ff)
or 3.16 thereof), the Registration Rights Agreement, the Exchange Agreement, the
Warrants (as defined in the Purchase Agreement) or this Restated Certificate of
Incorporation, which has not been cured;
(2) 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;
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(3) the Registration Statement (as defined in the Registration
Rights Agreement) is effective and holders have received unlegended certificates
representing Common Shares with respect to all conversions for which Conversion
Notices have been given and with respect to all exercises of the Warrants for
which Notices of Exercise have been given;
(4) 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, or any bankruptcy, insolvency or
similar proceeding;
(5) no event described in Section 3.3.4(l) above occurred or
was announced or publicly disclosed that it would or has occurred; and
(6) each member of management of the Corporation is subject to
the same restriction on selling shares of Common Stock for at least the same
percentage and time period as the holders of Series B Preferred hereunder.
3.3.6 VOTING RIGHTS. In addition to all other requirements
imposed by Delaware law, and all other voting rights granted under the
Corporation's Restated Certificate of Incorporation, the affirmative vote of
two-thirds in interest of the Corporation's outstanding Series B Preferred shall
be necessary for (i) any amendment, modification or repeal of Section 3.3 of
this Restated Certificate of Incorporation (whether by merger, consolidation or
otherwise) or for any merger, reclassification, consolidation or reorganization,
or (ii) any amendment to the Restated 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 Series B Preferred, provided, however, that
holders of Series B Preferred (other than the Investor under the Purchase
Agreement and their affiliates) who are affiliates of the Corporation (and the
Corporation itself) shall not participate in such vote and the Series B
Preferred of such holders shall be disregarded and deemed not to be outstanding
for purposes of such vote.
3.3.7 NOTICES. The Corporation shall distribute to the holders
of Series B Preferred 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.
3.3.8 REPLACEMENT CERTIFICATES. The certificate(s)
representing the Series B Preferred held by any holder of Series B Preferred 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 Series B
Preferred, as reasonably requested by such holder, upon surrendering the same.
No service charge will be made for such registration or transfer or exchange.
Upon receipt by the Corporation of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of any stock certificate representing the
Series B Preferred and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or upon surrender and cancellation of such stock
certificate if mutilated, the Corporation will make and deliver a new stock
certificate of like tenor and dated as of such cancellation at no charge to the
holder.
3.3.9 ATTORNEYS' FEES. In connection with enforcement by a
holder of Series B Preferred of any obligation of the Corporation hereunder, the
prevailing party shall be entitled to recovery of reasonable attorneys' fees and
expenses incurred.
3.3.10 NO REISSUANCE. No Series B Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
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3.3.11 SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Series B Preferred set forth in this Restated Certificate of
Incorporation (as this Restated Certificate of Incorporation 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 Restated Certificate of Incorporation, 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.
3.3.12 LIMITATIONS. Except as may otherwise be required by law
and as are set forth in the Purchase Agreement and the Registration Rights
Agreement, the Series B Preferred shall not have any powers, preference or
relative participating, optional or other special rights other than those
specifically set forth in this Restated Certificate of Incorporation (as may be
amended from time to time).
IV
4.1 LIMITATION OF DIRECTORS' LIABILITY. A director shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided that this Article IV shall
not eliminate or limit the liability of a director (i) for any breach of his
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware, or (iv) for any transaction from which the director
derives an improper personal benefit.
4.2 INDEMNIFICATION OF CORPORATE AGENTS.
4.2.1 The Corporation shall, to the broadest and maximum
extent permitted by Delaware law, as the same exists from time to time indemnify
each person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding.
4.2.2 In addition, the Corporation shall, to the broadest and
maximum extent permitted by Delaware law, as the same may exist from time to
time, pay to such person any and all expenses (including attorneys' fees)
incurred in defending or settling any such action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer, to repay such amount if
it shall ultimately be determined by a final judgment or other final
adjudication that he is not entitled to be indemnified by the Corporation as
authorized in this Article.
4.2.3 Sections 4.2.1 and 4.2.2 to the contrary
notwithstanding, the Corporation shall not indemnify any such person with
respect to any of the following matters: (i) remuneration paid to such person if
it shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law; or (ii) any accounting of profits made
from the purchase or sale by such person of the Corporation's securities within
the meaning of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law; or (iii) actions brought about or contributed to by the
dishonesty of such person, if a final judgment or other final adjudication
adverse to such person establishes that acts of active and deliberate dishonesty
were committed or attempted by such person with actual dishonest purpose and
intent and were material to the adjudication; or (iv) actions based on or
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attributable to such person having gained any personal profit or advantage to
which he was not entitled, in the event that a final judgment or other final
adjudication adverse to such person establishes that such person in fact gained
such personal profit or other advantage to which he was not entitled; or (v) any
matter in respect of which a final decision by a court with competent
jurisdiction shall determine that indemnification is unlawful.
4.2.4 The rights to indemnification and to the advancement of
expenses conferred in this Article IV shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this Restated
Certificate of Incorporation, the Bylaws of the Corporation, by agreement, vote
of stockholders, or disinterested directors or otherwise.
4.3 REPEAL OR MODIFICATION. Any repeal or modification of the foregoing
provisions of this Article IV by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed by the undersigned duly authorized officer of the Corporation on April
__, 2000.
NETGURU, INC.
By: /S/ Jyoti Chatterjee
----------------------------------
Jyoti Chatterjee, President
By: /S/ Wayne Blair
----------------------------------
Wayne Blair, Secretary
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EXHIBIT B
NETGURU, INC.
2000 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of this 2000 Stock Option Plan (the
"Plan") of netGuru, Inc., a Delaware corporation (the "Company"), is to provide
the Company with a means of attracting and retaining the services of highly
motivated and qualified directors and key personnel. The Plan is intended to
advance the interests of the Company by affording to directors and key
employees, upon whose skill, judgment, initiative and efforts the Company is
largely dependent for the successful conduct of its business, an opportunity for
investment in the Company and the incentives inherent in stock ownership in the
Company. In addition, the Plan contemplates the opportunity for investment in
the Company by employees of companies that do business with the Company. For
purposes of this Plan, the term Company shall include subsidiaries, if any, of
the Company.
2. LEGAL COMPLIANCE. It is the intent of the Plan that all options
granted under it ("Options") shall be either "Incentive Stock Options" ("ISOs"),
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), or non-qualified stock options ("NQOs"); provided, however,
ISOs shall be granted only to employees of the Company. An Option shall be
identified as an ISO or an NQO in writing in the document or documents
evidencing the grant of the Option. All Options that are not so identified as
ISOs are intended to be NQOs. In addition, the Plan provides for the grant of
NQOs to employees of companies that do business with the Company. It is the
further intent of the Plan that it conform in all respects with the requirements
of Rule 16b-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"). To the extent that any aspect
of the Plan or its administration shall at any time be viewed as inconsistent
with the requirements of Rule 16b-3 or, in connection with ISOs, the Code, such
aspect shall be deemed to be modified, deleted or otherwise changed as necessary
to ensure continued compliance with such provisions.
3. ADMINISTRATION OF THE PLAN.
3.1 PLAN COMMITTEE. The Plan shall be administered by a
committee ("Committee"). The members of the Committee shall be appointed from
time to time by the Board of Directors of the Company ("Board") and shall
consist of not less than two nor more than five persons. Such persons shall be
directors of the Company.
3.2 GRANTS OF OPTIONS BY THE COMMITTEE. In accordance with the
provisions of the Plan, the Committee, by resolution, shall select those
eligible persons to whom Options shall be granted ("Optionees"); shall determine
the time or times at which each Option shall be granted, whether an Option is an
ISO or an NQO and the number of shares to be subject to each Option; and shall
fix the time and manner in which the Option may be exercised, the Option
exercise price, and the Option period. The Committee shall determine the form of
option agreement to evidence the foregoing terms and conditions of each Option,
which need not be identical, in the form provided for in SECTION 7. Such option
agreement may include such other provisions as the Committee may deem necessary
or desirable consistent with the Plan, the Code and Rule 16b-3.
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3.3 COMMITTEE PROCEDURES. The Committee from time to time may
adopt such rules and regulations for carrying out the purposes of the Plan as it
may deem proper and in the best interests of the Company. The Committee shall
keep minutes of its meetings and records of its actions. A majority of the
members of the Committee shall constitute a quorum for the transaction of any
business by the Committee. The Committee may act at any time by an affirmative
vote of a majority of those members voting. Such vote may be taken at a meeting
(which may be conducted in person or by any telecommunication medium) or by
written consent of Committee members without a meeting.
3.4 FINALITY OF COMMITTEE ACTION. The Committee shall resolve
all questions arising under the Plan and option agreements entered into pursuant
to the Plan. Each determination, interpretation, or other action made or taken
by the Committee shall be final and conclusive and binding on all persons,
including, without limitation, the Company, its shareholders, the Committee and
each of the members of the Committee, and the directors, officers and employees
of the Company, including Optionees and their respective successors in interest.
3.5 NON-LIABILITY OF COMMITTEE MEMBERS. No Committee member
shall be liable for any action or determination made by him or her in good faith
with respect to the Plan or any Option granted under it.
4. BOARD POWER TO AMEND, SUSPEND, OR TERMINATE THE PLAN. The Board may,
from time to time, make such changes in or additions to the Plan as it may deem
proper and in the best interests of the Company and its shareholders. The Board
may also suspend or terminate the Plan at any time, without notice, and in its
sole discretion. Notwithstanding the foregoing, no such change, addition,
suspension, or termination by the Board shall (i) materially impair any option
previously granted under the Plan without the express written consent of the
optionee; or (ii) materially increase the number of shares subject to the Plan,
materially increase the benefits accruing to optionees under the Plan,
materially modify the requirements as to eligibility to participate in the Plan
or alter the method of determining the option exercise price described in
SECTION 8, without shareholder approval.
5. SHARES SUBJECT TO THE PLAN. For purposes of the Plan, the Committee
is authorized to grant Options for up to 1,000,000 shares of the Company's
common stock ("Common Stock"), or the number and kind of shares of stock or
other securities which, in accordance with SECTION 13, shall be substituted for
such shares of Common Stock or to which such shares shall be adjusted. The
Committee is authorized to grant Options under the Plan with respect to such
shares. Any or all unsold shares subject to an Option which for any reason
expires or otherwise terminates (excluding shares returned to the Company in
payment of the exercise price for additional shares) may again be made subject
to grant under the Plan.
6. OPTIONEES. Options shall be granted only to officers, directors or
key employees of the Company or employees of companies that do business with the
Company designated by the Committee from time to time as Optionees. Any Optionee
may hold more than one option to purchase Common Stock, whether such option is
an Option held pursuant to the Plan or otherwise. An Optionee who is an employee
of the Company ("Employee Optionee") and who holds an Option must remain a
continuous full or part-time employee of the Company from the time of grant of
the Option to him until the time of its exercise, except as provided in SECTION
10.3.
7. GRANTS OF OPTIONS. The Committee shall have the sole discretion to
grant Options under the Plan and to determine whether any Option shall be an ISO
or an NQO. The terms and conditions of Options granted under the Plan may differ
from one another as the Committee, in its absolute discretion, shall determine
as long as all Options granted under the Plan satisfy the requirements of the
Plan. Upon determination by the Committee that an Option is to be granted to an
Optionee, a written option agreement evidencing such Option shall be given to
the Optionee, specifying the number of shares subject to the Option, the Option
exercise price, whether the Option is an ISO or an NQO, and the other individual
terms and conditions of such Option. Such option agreement may incorporate
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generally applicable provisions from the Plan, a copy of which shall be provided
to all Optionees at the time of their initial grants under the Plan. The Option
shall be deemed granted as of the date specified in the grant resolution of the
Committee, and the option agreement shall be dated as of the date of such
resolution. Notwithstanding the foregoing, unless the Committee consists solely
of non-employee directors, any Option granted to an executive officer, director
or 10% beneficial owner for purposes of Section 16 of the Securities Exchange
Act of 1934, as amended ("Section 16 of the 1934 Act"), shall either be (a)
conditioned upon the Optionee's agreement not to sell the shares of Common Stock
underlying the Option for at least six months after the date of grant or (b)
approved by the entire Board or by the shareholders of the Company.
8. OPTION EXERCISE PRICE. The price per share to be paid by the
Optionee at the time an ISO is exercised shall not be less than 100% of the Fair
Market Value (as hereinafter defined) of one share of the optioned Common Stock
on the date on which the Option is granted. No ISO may be granted under the Plan
to any person who, at the time of such grant, owns (within the meaning of
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any parent thereof,
unless the exercise price of such ISO is at least equal to 110% of Fair Market
Value on the date of grant. The price per share to be paid by the Optionee at
the time an NQO is exercised shall not be less than 85% of the Fair Market Value
on the date on which the NQO is granted, as determined by the Committee. For
purposes of the Plan, the "Fair Market Value" of a share of the Company's Common
Stock as of a given date shall be: (i) the closing price of a share of the
Company's Common Stock on the principal exchange on which shares of the
Company's Common Stock are then trading, if any, on the day immediately
preceding such date, or, if shares were not traded on such date, then on the
next preceding trading day during which a sale occurred; or (ii) if the
Company's Common Stock is not traded on an exchange but is quoted on Nasdaq or a
successor quotation system, (1) the last sales price (if the Common Stock is
then listed as a National Market Issue under the Nasdaq National Market System)
or (2) the closing representative bid price (in all other cases) for the Common
Stock on the day immediately preceding such date as reported by Nasdaq or such
successor quotation system; or (iii) if the Company's Common Stock is not
publicly traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the closing bid price for the Common Stock on such date as determined in
good faith by the Committee; or (iv) if the Company's Common Stock is not
publicly traded, the fair market value established by the Committee acting in
good faith. In addition, with respect to any ISO, the Fair Market Value on any
given date shall be determined in a manner consistent with any regulations
issued by the Secretary of the Treasury for the purpose of determining fair
market value of securities subject to an ISO plan under the Code.
9. CEILING OF ISO GRANTS. The aggregate Fair Market Value (determined
at the time any ISO is granted) of the Common Stock with respect to which an
Optionee's ISOs, together with incentive stock options granted under any other
plan of the Company and any parent, are exercisable for the first time by such
Optionee during any calendar year shall not exceed $100,000. If an Optionee
holds such incentive stock options that become first exercisable (including as a
result of acceleration of exercisability under the Plan) in any one year for
shares having a Fair Market Value at the date of grant in excess of $100,000,
then the most recently granted of such ISOs, to the extent that they are
exercisable for shares having an aggregate Fair Market Value in excess of such
limit, shall be deemed to be NQOs.
10. DURATION, EXERCISABILITY, AND TERMINATION OF OPTIONS.
10.1 OPTION PERIOD. The option period shall be determined by
the Committee with respect to each Option granted. In no event, however, may the
option period exceed ten years from the date on which the Option is granted, or
five years in the case of a grant of an ISO to an Optionee who is a 10%
shareholder at the date on which the Option is granted as described in SECTION
8.
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10.2 EXERCISABILITY OF OPTIONS. Each Option shall be
exercisable in whole or in consecutive installments, cumulative or otherwise,
during its term as determined in the discretion of the Committee.
10.3 TERMINATION OF OPTIONS DUE TO TERMINATION OF EMPLOYMENT,
DISABILITY, OR DEATH OF OPTIONEE; TERMINATION FOR "CAUSE," OR RESIGNATION IN
VIOLATION OF AN EMPLOYMENT AGREEMENT. All Options granted under the Plan to any
Employee Optionee shall terminate and may no longer be exercised if the Employee
Optionee ceases, at any time during the period between the grant of the Option
and its exercise, to be an employee of the Company; provided, however, that the
Committee may alter the termination date of the Option if the Optionee transfers
to an affiliate of the Company. Notwithstanding the foregoing, (i) if the
Employee Optionee's employment with the Company shall have terminated for any
reason (other than involuntary dismissal for "cause" or voluntary resignation in
violation of any agreement to remain in the employ of the Company, including,
without limitation, any such agreement pursuant to SECTION 15), he may, at any
time before the expiration of three months after such termination or before
expiration of the Option, whichever shall first occur, exercise the Option (to
the extent that the Option was exercisable by him on the date of the termination
of his employment); (ii) if the Employee Optionee's employment shall have
terminated due to disability (as defined in Section 22(e)(3) of the Code and
subject to such proof of disability as the Committee may require), such Option
may be exercised by the Employee Optionee (or by his guardian(s), or
conservator(s), or other legal representative(s)) before the expiration of
twelve months after such termination or before expiration of the Option,
whichever shall first occur (to the extent that the Option was exercisable by
him on the date of the termination of his employment); (iii) in the event of the
death of the Employee Optionee, an Option exercisable by him at the date of his
death shall be exercisable by his legal representative(s), legatee(s), or
heir(s), or by his beneficiary or beneficiaries so designated by him, as the
case may be, within twelve months after his death or before the expiration of
the Option, whichever shall first occur (to the extent that the Option was
exercisable by him on the date of his death); and (iv) if the Employee
Optionee's employment is terminated for "cause" or in violation of any agreement
to remain in the employ of the Company, including, without limitation, any such
agreement pursuant to SECTION 14, his Option shall terminate immediately upon
termination of employment, and such Option shall be deemed to have been
forfeited by the Optionee. For purposes of the Plan, "cause" may include,
without limitation, any illegal or improper conduct (1) which injures or impairs
the reputation, goodwill, or business of the Company; (2) which involves the
misappropriation of funds of the Company, or the misuse of data, information, or
documents acquired in connection with employment by the Company; or (3) which
violates any other directive or policy promulgated by the Company. A termination
for "cause" may also include any resignation in anticipation of discharge for
"cause" or resignation accepted by the Company in lieu of a formal discharge for
"cause."
11. MANNER OF OPTION EXERCISE; RIGHTS AND OBLIGATIONS OF OPTIONEES.
11.1 WRITTEN NOTICE OF EXERCISE. An Optionee may elect to
exercise an Option in whole or in part, from time to time, subject to the terms
and conditions contained in the Plan and in the agreement evidencing such
Option, by giving written notice of exercise to the Company at its principal
executive office.
11.2 CASH PAYMENT FOR OPTIONED SHARES. If an Option is
exercised for cash, such notice shall be accompanied by a cashier's or personal
check, or money order, made payable to the Company for the full exercise price
of the shares purchased.
11.3 STOCK SWAP FEATURE. At the time of the Option exercise,
and subject to the discretion of the Committee to accept payment in cash only,
the Optionee may determine whether the total purchase price of the shares to be
purchased shall be paid solely in cash or by transfer from the Optionee to the
Company of previously acquired shares of Common Stock, or by a combination
thereof. If the Optionee elects to pay the total purchase price in whole or in
part with previously acquired shares of Common Stock, the value of such shares
shall be equal to their Fair Market Value on the date of exercise, determined by
the Committee in the same manner used for determining Fair Market Value at the
time of grant for purposes of SECTION 8.
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11.4 INVESTMENT REPRESENTATION FOR NON-REGISTERED SHARES AND
LEGALITY OF ISSUANCE. The receipt of shares of Common Stock upon the exercise of
an Option shall be conditioned upon the Optionee (or any other person who
exercises the Option on his or her behalf as permitted by SECTION 10.3)
providing to the Committee a written representation that, at the time of such
exercise, it is the intent of such person(s) to acquire the shares for
investment only and not with a view toward distribution. The certificate for
unregistered shares issued for investment shall be restricted by the Company as
to transfer unless the Company receives an opinion of counsel satisfactory to
the Company to the effect that such restriction is not necessary under then
pertaining law. The providing of such representation and such restrictions on
transfer shall not, however, be required upon any person's receipt of shares of
Common Stock under the Plan in the event that, at the time of grant of the
Option relating to such receipt or upon such receipt, whichever is the
appropriate measure under applicable federal or state securities laws, the
shares subject to the Option shall be (i) covered by an effective and current
registration statement under the Securities Act of 1933, as amended, and (ii)
either qualified or exempt from qualification under applicable state securities
laws. The Company shall, however, under no circumstances be required to sell or
issue any shares under the Plan if, in the opinion of the Committee, (i) the
issuance of such shares would constitute a violation by the Optionee or the
Company of any applicable law or regulation of any governmental authority, or
(ii) the consent or approval of any governmental body is necessary or desirable
as a condition of, or in connection with, the issuance of such shares.
11.5 SHAREHOLDER RIGHTS OF OPTIONEE. Upon exercise, the
Optionee (or any other person who exercises the Option on his behalf as
permitted by SECTION 10.3) shall be recorded on the books of the Company as the
owner of the shares, and the Company shall deliver to such record owner one or
more duly issued stock certificates evidencing such ownership. No person shall
have any rights as a shareholder with respect to any shares of Common Stock
covered by an Option granted pursuant to the Plan until such person shall have
become the holder of record of such shares. Except as provided in SECTION 13, no
adjustments shall be made for cash dividends or other distributions or other
rights as to which there is a record date preceding the date such person becomes
the holder of record of such shares.
11.6 HOLDING PERIODS FOR TAX PURPOSES. The Plan does not
provide that an Optionee must hold shares of Common Stock acquired under the
Plan for any minimum period of time. Optionees are urged to consult with their
own tax advisors with respect to the tax consequences to them of their
individual participation in the Plan.
12. SUCCESSIVE GRANTS. Successive grants of Options may be made to any
Optionee under the Plan.
13. ADJUSTMENTS.
(a) If the outstanding Common Stock shall be hereafter
increased or decreased, or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a recapitalization, reclassification, reorganization, merger,
consolidation, share exchange, or other business combination in which the
Company is the surviving parent corporation, stock split-up, combination of
shares, or dividend or other distribution payable in capital stock or rights to
acquire capital stock, appropriate adjustment shall be made by the Committee in
the number and kind of shares for which options may be granted under the Plan.
In addition, the Committee shall make appropriate adjustment in the number and
kind of shares as to which outstanding and unexercised options shall be
exercisable, to the end that the proportionate interest of the holder of the
option shall, to the extent practicable, be maintained as before the occurrence
of such event. Such adjustment in outstanding options shall be made without
change in the total price applicable to the unexercised portion of the option
but with a corresponding adjustment in the exercise price per share.
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(b) In the event of the dissolution or liquidation of the
Company, any outstanding and unexercised options shall terminate as of a future
date to be fixed by the Committee.
(c) In the event of a Reorganization (as hereinafter defined),
then,
(i) If there is no plan or agreement with respect to
the Reorganization ("Reorganization Agreement"), or if the Reorganization
Agreement does not specifically provide for the adjustment, change, conversion,
or exchange of the outstanding and unexercised options for cash or other
property or securities of another corporation, then any outstanding and
unexercised options shall terminate as of a future date to be fixed by the
Committee; or
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the adjustment, change,
conversion, or exchange of the outstanding and unexercised options for cash or
other property or securities of another corporation, then the Committee shall
adjust the shares under such outstanding and unexercised options, and shall
adjust the shares remaining under the Plan which are then available for the
issuance of options under the Plan if the Reorganization Agreement makes
specific provisions therefor, in a manner not inconsistent with the provisions
of the Reorganization Agreement for the adjustment, change, conversion, or
exchange of such options and shares.
(d) The term "reorganization" as used in this SECTION 13 shall
mean any reorganization, merger, consolidation, share exchange, or other
business combination pursuant to which the Company is not the surviving parent
corporation after the effective date of the Reorganization, or any sale or lease
of all or substantially all of the assets of the Company. Nothing herein shall
require the Company to adopt a Reorganization Agreement, or to make provision
for the adjustment, change, conversion, or exchange of any options, or the
shares subject thereto, in any Reorganization Agreement which it does adopt.
(e) The Committee shall provide to each optionee then holding
an outstanding and unexercised option not less than 30 calendar days' advanced
written notice of any date fixed by the Committee pursuant to this SECTION 13
and of the terms of any Reorganization Agreement providing for the adjustment,
change, conversion, or exchange of outstanding and unexercised options. Except
as the Committee may otherwise provide, each optionee shall have the right
during such period to exercise his option only to the extent that the option was
exercisable on the date such notice was provided to the optionee.
Any adjustment to any outstanding ISO pursuant to this SECTION
13, if made by reason of a transaction described in Section 424(a) of the Code,
shall be made so as to conform to the requirements of that Section and the
regulations thereunder. If any other transaction described in Section 424(a) of
the Code affects the Common Stock subject to any unexercised ISO theretofore
granted under the Plan (hereinafter for purposes of this SECTION 13 referred to
as the "old option"), the Board of Directors of the Company or of any surviving
or acquiring corporation may take such action as it deems appropriate, in
conformity with the requirements of that Code Section and the regulations
thereunder, to substitute a new option for the old option, in order to make the
new option, as nearly as may be practicable, equivalent to the old option, or to
assume the old option.
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(f) No modification, extension, renewal, or other change in
any option granted under the Plan may be made, after the grant of such option,
without the optionee's consent, unless the same is permitted by the provisions
of the Plan and the option agreement. In the case of an ISO, optionees are
hereby advised that certain changes may disqualify the ISO from being considered
as such under Section 422 of the Code, or constitute a modification, extension,
or renewal of the ISO under Section 424(h) of the Code.
(g) All adjustments and determinations under this SECTION 13
shall be made by the Committee in good faith in its sole discretion.
14. CONTINUED EMPLOYMENT. As determined in the sole discretion of the
Committee at the time of grant and if so stated in a writing signed by the
Company, each Option may have as a condition the requirement of an Employee
Optionee to remain in the employ of the Company, or of its affiliates, and to
render to it his or her exclusive service, at such compensation as may be
determined from time to time by it, for a period not to exceed the term of the
Option, except for earlier termination of employment by or with the express
written consent of the Company or on account of disability or death. The failure
of any Employee Optionee to abide by such agreement as to any Option under the
Plan may result in the termination of all of his or her then outstanding Options
granted pursuant to the Plan. Neither the creation of the Plan nor the granting
of Option(s) under it shall be deemed to create a right in an Employee Optionee
to continued employment with the Company, and each such Employee Optionee shall
be and shall remain subject to discharge by the Company as though the Plan had
never come into existence. Except as specifically provided by the Committee in
any particular case, the loss of existing or potential profit in options granted
under this Plan shall not constitute an element of damages in the event of
termination of the employment of an employee even if the termination is in
violation of an obligation of the Company to the employee by contract or
otherwise.
15. TAX WITHHOLDING. The exercise of any Option granted under the Plan
is subject to the condition that if at any time the Company shall determine, in
its discretion, that the satisfaction of withholding tax or other withholding
liabilities under any federal, state or local law is necessary or desirable as a
condition of, or in connection with, such exercise or a later lapsing of time or
restrictions on or disposition of the shares of Common Stock received upon such
exercise, then in such event, the exercise of the Option shall not be effective
unless such withholding shall have been effected or obtained in a manner
acceptable to the Company. When an Optionee is required to pay to the Company an
amount required to be withheld under applicable income tax laws in connection
with the exercise of any Option, the Optionee may, subject to the approval of
the Committee, which approval shall not have been disapproved at any time after
the election is made, satisfy the obligation, in whole or in part, by electing
to have the Company withhold shares of Common Stock having a value equal to the
amount required to be withheld. The value of the Common Stock withheld pursuant
to the election shall be determined by the Committee, in accordance with the
criteria set forth in SECTION 8, with reference to the date the amount of tax to
be withheld is determined. The Optionee shall pay to the Company in cash any
amount required to be withheld that would otherwise result in the withholding of
a fractional share. The election by an Optionee who is an officer of the Company
within the meaning of Section 16 of the 1934 Act, to be effective, must meet all
of the requirements of Section 16 of the 1934 Act.
16. TERM OF PLAN.
16.1 EFFECTIVE DATE. Subject to shareholder approval, the Plan
shall become effective as of March 15, 2000.
16.2 TERMINATION DATE. Except as to options granted and
outstanding under the Plan prior to such time, the Plan shall terminate at
midnight on January 3, 2010, and no Option shall be granted after that time.
Options then outstanding may continue to be exercised in accordance with their
terms. The Plan may be suspended or terminated at any earlier time by the Board
within the limitations set forth in SECTION 4.
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17. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify, or rescind any previously approved compensation
plans, programs or options entered into by the Company. This Plan shall be
construed to be in addition to and independent of any and all such other
arrangements. Neither the adoption of the Plan by the Board nor the submission
of the Plan to the shareholders of the Company for approval shall be construed
as creating any limitations on the power or authority of the Board to adopt,
with or without shareholder approval, such additional or other compensation
arrangements as the Board may from time to time deem desirable.
18. GOVERNING LAW. The Plan and all rights and obligations under it
shall be construed and enforced in accordance with the laws of the State of
California.
19. INFORMATION TO OPTIONEES. Optionees under the Plan who do not
otherwise have access to financial statements of the Company will receive the
Company's financial statements at least annually.
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