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EXHIBIT 3.1
FUTURELINK CORP.
CERTIFICATE OF INCORPORATION OF FUTURELINK CORP.
ARTICLE I
The name of this corporation is FutureLink Corp. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 E. North Street, Dover, Delaware 19901, County of Kent. The
name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated, respectively, preferred stock, no par value ("Preferred Stock"),
and shares of common stock, par value $0.0001 per share ("Common Stock"). The
total number of shares of Common Stock that the Corporation shall have
authority to issue is 300,000,000. The total number of shares of Preferred
Stock that the Corporation shall have authority to issue is 20,000,000. The
Preferred Stock may be issued from time to time in one or more series.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of Common Stock remaining unissued and available for issuance
shall not be sufficient to permit conversion of the Preferred.
The Board of Directors is hereby authorized, subject to limitations
prescribed by law and the provisions of this Article IV, by resolution to
provide for the issuance of the shares of Preferred Stock in one or more
series, and to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, privileges,
preferences, and relative participating, optional or other rights, if any, of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
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A. The number of shares constituting that series (including an increase
or decrease in the number of shares of any such series (but not below the
number of shares in any such series then outstanding)) and the distinctive
designation of that series;
B. The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
C. Whether that series shall have the voting rights (including multiple
or fractional votes per share) in addition to the voting rights provided by
law, and, if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such privileges, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
E. Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption rates;
F. Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and the amount of such
sinking funds;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
H. Any other relative rights, preferences and limitations of that series.
No holders of shares of the Corporation of any class, now or hereafter
authorized, shall have any preferential or preemptive rights to subscribe for,
purchase or receive any shares of the Corporation of any class, now or
hereafter authorized, or any options or warrants for such shares, or any rights
to subscribe for, purchase or receive any securities convertible to or
exchangeable for such shares, which may at any time be issued, sold or offered
for sale by the Corporation, except in the case of any shares of Preferred
Stock to which such rights are specifically granted by any resolution or
resolutions of the Board of Directors adopted pursuant to this Article IV.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its
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stockholders or any class thereof, as the case may be, it is further provided
that:
A . The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
of this Corporation shall be as set forth in the Bylaws of the Corporation.
B. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
to make, alter, amend, or repeal the Bylaws of the Corporation.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws of the Corporation so provide.
D. Advance notice of stockholder nomination for the election of directors
and of any other business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in
the Bylaws of the Corporation.
E. No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws and no action shall be taken by the stockholders by written consent.
ARTICLE VII
At the election of directors of the Corporation, no holder of stock of any
class or series shall be entitled to cumulative voting rights as to the
directors to be elected.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
ARTICLE IX
A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
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C. Neither any amendment nor repeal of this Article IX, nor the adoption
of any statute (unless such statute so requires) or provision of the
Corporation's Certificate of Incorporation inconsistent with this Article IX,
shall eliminate or reduce the effect of this Article IX, with respect of any
matter occurring, or any action or proceeding accruing or arising or that, but
for this Article IX, would accrue or arise, prior to such amendment, repeal, or
adoption of any inconsistent provision.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the
Corporation.
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CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
FOR
FUTURELINK CORP.
FUTURELINK CORP., a Delaware corporation (the "Corporation"), pursuant
to the provisions of Section 151 of the General Corporation Law of the State of
Delaware, does hereby make this Certificate of Designation and does hereby state
and certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following resolutions,
which resolutions remain in full force and effect as of the date hereof.
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional, and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
2,571,428 shares, without par value, to be designated "Series A Convertible
Preferred Stock" (the "Series A Stock").
RESOLVED, that each share of the Series A Stock shall rank equally in
all aspects and shall be subject to the following terms and provisions:
1. PREFERENCE ON LIQUIDATION.
(a) SERIES A PREFERENTIAL AMOUNT. In the event of any
voluntary or involuntary liquidation, distribution of assets (other than the
payment of dividends), dissolution or winding-up of the Corporation, before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of shares of Common
Stock, the holders of shares of Series A Stock shall be entitled to receive
payment of the greater of (i) $7.00 per share of Series A Stock plus any accrued
but unpaid dividends (the "Series A Preferential Amount") held by or for them
(as appropriately adjusted for any accrued but unpaid stock dividend, stock
split, recapitalization or combination of Series A Stock) or (ii) their pro rata
share of the total value of the assets and funds of the Corporation to be
distributed, assuming the conversion of Series A Stock to Common Stock.
(b) INSUFFICIENT PROCEEDS. If, upon any liquidation,
distribution of assets, dissolution or winding-up of the Corporation, the assets
of the Corporation, or proceeds thereof, after distribution to any class or
series of stock ranking senior to the Series A Stock with respect to liquidation
rights ("Senior Stock"), distributable among the holders of shares of Series A
Stock and holders of shares of any other outstanding class or series of stock
ranking on a parity with the Series A Stock with respect to liquidation rights
("Parity Stock") shall be insufficient to pay in full the respective
preferential amounts on the shares of Series A Stock and Parity Stock, then such
assets, or the proceeds thereof, shall be distributed among such holders ratably
in accordance with the respective amounts which would be payable on such shares
if all amounts payable thereon were paid in full.
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(c) SALE OF THE CORPORATION. At the election of the holders of
a majority of the Series A Stock, the merger or consolidation of the Corporation
into or with another Corporation, or the effectuation of a statutory exchange of
shares, or the sale, lease or transfer of all or substantially all of the assets
of the Corporation (a "Sale of the Corporation"), where, in any such case, the
valuation of the Corporation in connection with such transaction is less than
$520 million (a "Liquidating Sale"), shall be regarded as a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
1 and shall not be subject to the provisions of Section 4(h); provided, however,
that the merger or consolidation of the Corporation into or with another
Corporation, or the effectuation of a statutory exchange of shares, in which the
shareholders of the Corporation immediately prior to such transaction hold a
majority of the outstanding voting power of the surviving or acquiring entity
(or a parent Corporation thereof) immediately after such transaction by virtue
of their ownership of the Corporation's equity securities shall not be regarded
as a liquidation, dissolution or winding-up of the Corporation within the
meaning of this Section 1. In the case of a Liquidating Sale, the valuation of
the Corporation, and the amount of any liquidation preference to which the
holders of Senior Stock, Series A Stock and Parity Stock shall be entitled,
shall be computed in the same manner as if the Corporation's available assets
(valued at the value being given for the Corporation's shares or assets in such
transactions) were actually being distributed to all shareholders in connection
with such transaction.
2. VOTING.
(a) GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Stock shall be voted equally with the shares of
the Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of shareholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series A Stock shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series A Stock are
convertible immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
(b) ACTIONS REQUIRING SEPARATE VOTES OF SERIES A STOCK.
(i) For so long as shares of Series A Stock remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least two-thirds of the
outstanding Series A Stock voting as a class shall be necessary for effecting or
validating the following actions:
(A) Any amendment, alteration, or repeal of
any provision of the Articles of Incorporation or Bylaws of the Corporation or
any other action that materially and adversely alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series A Stock; or
(B) Any increase in the authorized number of
shares of Series A Stock.
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3. DIVIDENDS.
The Series A Stock shall be paid an annual dividend of $.56 per share
payable out of the funds or assets legally available therefor before any
dividend is paid on the Common Stock. If the funds or assets legally available
for payment of dividends are insufficient to pay such dividend, either in whole
or in part, then any unpaid portion of the dividend will become a charge against
the funds and assets of the Corporation, and will be paid in full by the
Corporation in subsequent years before any dividends are paid out on the Common
Stock in those years. The dividends payable on the Series A Stock shall be
payable in cash or, at the Corporation's option, in Common Stock of the
Corporation. In the event such dividends are paid in Common Stock a holder of
Series A Stock shall receive a number of shares of Common Stock equal to the
cash dividend otherwise payable divided by the average closing price of the
Common Stock on the Nasdaq National Market over the last 10 trading days ending
prior to the dividend payment date.
4. CONVERSION.
The holders of the Series A Stock shall have the following rights with
respect to the conversion of the Series A Stock into shares of Common Stock (the
"Conversion Rights"):
(a) VOLUNTARY CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Series A Stock may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Stock shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Stock Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Stock being converted.
(b) SERIES A STOCK CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A Stock (the "Series A Stock
Conversion Rate") shall be the quotient obtained by dividing $7.00 by the
"Series A Conversion Price," calculated as provided in Section 4(c).
(c) CONVERSION PRICE. The Series A Conversion Price shall
initially be $7.00. The initial Series A Conversion Price shall be adjusted from
time to time in accordance with this Section 4. All references to the Series A
Conversion Price herein shall mean such price as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Series A Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series A Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series A Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
based on the average trading price of the Common Stock on the Nasdaq National
Market
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over the last 10 trading days prior to the date of such conversion), any unpaid
dividends on the shares of Series A Stock being converted. Such conversion shall
be deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Series A Stock to be
converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the original issue date
of the Series A Stock ("Original Issue Date") effect a subdivision of the
outstanding Common Stock without a corresponding subdivision of the Series A
Stock, the Series A Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Series A Stock, the Series A Conversion Price
in effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.
If the Corporation at any time or from time to time after the Original Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Series A Conversion
Price that is then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Series A Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series A
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the
actual payment of such dividend or distribution.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series A Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
Liquidating Sale or a transaction provided for elsewhere in this Section 4), in
any such event each holder of Series A Stock shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series A Stock could have been converted immediately prior to such
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recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than a Liquidating Sale
or a transaction provided for elsewhere in this Section 4), as a part of such
capital reorganization, provision shall be made so that the holders of the
Series A Stock shall thereafter be entitled to receive upon conversion of the
Series A Stock the number of shares of stock or other securities or property of
the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series A Stock after the capital reorganization to the end that
the provisions of this Section 4 (including adjustment of the Series A
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Stock) shall be applicable after that event and be as
nearly equivalent as practicable.
(i) SALE OF SHARES BELOW SERIES A CONVERSION PRICE.
(i) If at any time or from time to time after the
Original Issue Date, the Corporation issues or sells, or is deemed by the
express provisions of this subsection (i) to have issued or sold, Additional
Shares of Common Stock (as defined in subsection (i)(iv) below), other than as a
dividend or other distribution on any class of stock as provided in Section 4(f)
above, and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in subsection
(i)(iv) below) less than the then effective Series A Conversion Price then and
in each such case the then existing Series A Conversion Price shall be reduced,
as of the opening of business on the date of such issue or sale, to a price
determined by multiplying the Series A Conversion Price by a weighted average,
consisting of a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
aggregate consideration received (as defined in subsection (i)(ii)) by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at such Series A Conversion Price, and (ii) the denominator of
which shall be the number of shares of Common Stock deemed outstanding (as
defined below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed to be outstanding as of a
given date shall be the sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into which the then
outstanding shares of Series A Stock could be converted if fully converted on
the day immediately preceding the given date, and (C) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities exercisable on the day
immediately preceding the given date.
(ii) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Corporation
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the amount of cash received by the Corporation before deduction
of any underwriting or similar commissions, compensation or
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concessions paid or allowed by the Corporation in connection with such issue or
sale and without deduction of any expenses payable by the Corporation, (B) to
the extent it consists of property other than cash, be computed at the fair
value of that property as determined in good faith by the Board of Directors,
and (C) if Additional Shares of Common Stock, Convertible Securities (as defined
in subsection (i)(iii) below) or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Corporation for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment required
under this Section 4(i), if the Corporation issues or sells any (i) stock or
other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") or (ii) rights or options for the purchase of Additional Shares of
Common Stock or Convertible Securities and if the Effective Price of such
Additional Shares of Common Stock is less than the Series A Conversion Price in
each case the Corporation shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or Convertible
Securities, plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Corporation upon the exercise of such
rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
the Corporation shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall again be recalculated at
that time using the figure to which such minimum amount of consideration is
reduced; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of such rights, options or
Convertible Securities is subsequently increased, the Effective Price shall be
again recalculated at that time using the increased minimum amount of
consideration payable to the Corporation upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series A
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A Conversion
Price as adjusted upon the issuance of such rights, options or Convertible
Securities shall be readjusted to the Series A Conversion Price which would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any,
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actually issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and such Additional Shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if any, actually
received by the Corporation for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities; provided that such readjustment shall not apply to
prior conversions of Series A Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed to be issued
pursuant to this Section 4(i), whether or not subsequently reacquired or retired
by the Corporation other than the following: (A) shares of Common Stock issued
upon conversion of the Series A Stock; (B) options and the Common Stock issued
pursuant to such options (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) after the Original Issue Date to
employees, officers or directors of, or consultants or advisors to the
Corporation or any subsidiary pursuant to stock option purchase or stock option
plans; or (C) shares of Common Stock issued pursuant to the exercise of options,
warrants or convertible securities outstanding as of the Original Issue Date.
The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Corporation
under this Section 4(i), into the aggregate consideration received, or deemed to
have been received by the Corporation for such issue under this Section 4(i),
for such Additional Shares of Common Stock.
(j) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the Series A Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series A Stock
if the Series A Stock is then convertible pursuant to this Section 4, the
Corporation, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Stock at the
holder's address as shown in the Corporation's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series A Conversion Price at that time in effect, (iii) the
number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series A Stock.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record 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, or (ii) any Sale of the Corporation, capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series A Stock at least twenty (20) days prior to the
record date specified therein a notice specifying (A) the date
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on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such Sale of the Corporation, reorganization, reclassification,
recapitalization, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Sale of the Corporation, reorganization,
reclassification, recapitalization, dissolution, liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Series A Stock may be converted at
the discretion of the Corporation into shares of Common Stock, based on the
then-effective Series A Conversion Price at any time where the average closing
price of the Common Stock on the Nasdaq National Market over the last 20 trading
days equals or exceeds $25.50 per share following fifteen days' written notice
from the Corporation to the holders of Series A Stock, which notice shall
include a certification that the conditions necessary for such Conversion have
occurred. Upon such conversion, any unpaid dividends shall be paid in accordance
with the provisions of Section 4(d); provided, however, if such conversion
occurs prior to July 5, 2001, the Corporation shall pay the holders of Series A
Stock dividends on the Series A Stock as if such shares had been outstanding for
at least twelve months. Upon such conversion, any warrants to purchase Series A
Stock which remain outstanding shall be converted automatically into warrants to
acquire Common Stock without any action by the holders of such warrants or the
Corporation.
(ii) Upon the termination of the notice period
specified in paragraph (i) above, the outstanding shares of Series A Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Series A Stock are either delivered to the Corporation
or its transfer agent as provided below, or the holder notifies the Corporation
or its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Upon the occurrence of such automatic conversion of the Series A Stock, the
holders of Series A Stock shall surrender the certificates representing such
shares at the office of the Corporation or any transfer agent for the Series A
Stock. Thereupon, there shall be issued and delivered to such holder promptly at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series A Stock surrendered were convertible on
the date on which such automatic conversion occurred, and any unpaid dividends
shall be paid in accordance with the provisions of Section 4(d).
(m) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series A Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Stock by a holder thereof
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shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of any fractional
share, the Corporation shall, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by the Common Stock's fair
market value (as determined by the Board of Directors) on the date of
conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series A Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(o) NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) three (3) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
(p) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holder of the Series A Stock against impairment.
5. REDEMPTION.
(a) if the Corporation fails to obtain additional equity
funding of at least $20,000,000 from one or more sources on or after June 28,
2000 and before December 28, 2000 at the election of the holders of a majority
of the Series A Stock, the Corporation shall be required to redeem all
outstanding shares of Series A Stock, at the Applicable Redemption Price. For
purposes of this Section 5, the Applicable Redemption Price shall be $7.00 per
share plus all unpaid dividends.
(b) On June 28, 2004, at the election of a majority of the
holders of the Series A Stock, the Corporation shall be required to redeem all
outstanding shares of Series A Stock at the Applicable Redemption Price.
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(c) With respect to any redemption under Section 5(a), the
Applicable Redemption Price will be paid in cash. With respect to any redemption
under Section 5(b), the Corporation may elect to pay the Applicable Redemption
Price either in (i) cash, or (ii) in shares of Common Stock based upon the
average closing price of the Common Stock on the Nasdaq National Market over the
last 10 trading days prior to the Redemption Date. For purposes of clause (ii)
in the preceding sentence, in no event will the average closing price be deemed
to be less than $5.50 a Share.
(d) At least twenty (20) days prior to the date specified for
redemption in such notice (the "Redemption Date"), (i) notice of any redemption
pursuant to Section 5 shall be sent by or on behalf of the holders of the Series
A Stock to the Corporation at its corporate offices, provided, however, that
failure to give such notice or any defect therein or in the mailing thereof
shall not affect the validity of the proceedings for the redemption of any
shares of Series A Stock. Such notice shall state: (i) the Redemption Date; (ii)
the Applicable Redemption Price; and (iii) the number of shares of Series A
Stock to be redeemed and, if less than all shares held by such holder are to be
redeemed, the number of such shares to be redeemed. Upon the mailing of any such
notice of redemption, the Company shall become obligated to redeem at the time
of redemption specified thereon all shares called for redemption.
(e) Upon surrender, in accordance with said notice, of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require), such shares shall be redeemed by
the Corporation at the Applicable Redemption Price. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares without cost to
the holder thereof.
(f) All shares of Series A Stock redeemed pursuant to this
Section 5 shall be restored to the status of authorized and unissued shares of
Series A Stock, without designation as to series and may thereafter be reissued
as shares of any series of preferred stock other than shares of Series A Stock.
6. RESTRICTION ON SALE. The holders of Common Stock issued upon
conversion of the Series A Stock shall not sell such shares of Common Stock for
at least forty-five (45) days following such conversion.
7. GENERAL PROVISIONS.
(a) The term "Person" as used herein means any Corporation,
partnership, trust, organization, association, other entity or individual.
(b) The term "outstanding," when used with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation or
a subsidiary.
(c) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with generally
accepted accounting principles.
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(d) The headings of the sections, subsections, clauses and
subclauses herein are for convenience of reference only and shall not define,
limit or affect any of the provisions hereof.
Dated: July 3, 2000
FUTURELINK CORP.
By: /s/ PHILIP R. LADOUCEUR
-----------------------------------
Philip R. Ladouceur
Its: Chairman & CEO
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