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Exhibit 3.1(a)
CERTIFICATE OF INCORPORATION
OF THERASENSE, INC.
ARTICLE I
The name of this corporation is TheraSense, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Zip Code 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 70,609,647
shares, of which 50,000,000 shares shall be Common Stock, par value $0.001 per
share, and 20,609,647 shares shall be Preferred Stock, par value $0.001 per
share. Of the authorized shares of Preferred Stock, 4,500,123 shares shall be
designated as Series A Preferred Stock, 7,609,524 shares shall be designated as
Series B Preferred Stock and 8,500,000 shares shall be designated as Series C
Preferred Stock.
ARTICLE V
The relative powers, preferences special rights, qualifications,
limitations and restrictions granted to or imposed on the respective classes of
the shares of capital stock or the holders thereof are as follows:
(1) Dividends.
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(a) Preference Dividends. The holders of shares of Series A Preferred
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Stock, Series B Preferred Stock and Series C Preferred Stock shall be entitled
to receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock of this corporation, at the rate
of $0.10, $0.16 and $0.40 per share per annum for the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, respectively, or, if
greater (as determined on a per annum basis and on an as converted basis
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for the Preferred Stock), an amount equal to that paid on any other outstanding
shares of this corporation.
(b) Dividends Noncumulative. Dividends on shares of Common Stock and
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Preferred Stock under this Section 1 shall be payable when, as and if declared
by the Board of Directors of the corporation, and shall not be cumulative, and
no right shall accrue to holders of Common Stock or Preferred Stock under this
Section 1 by reason of the fact that dividends on said shares are not declared
in any prior period.
(2) Liquidation Preference. In the event of any liquidation, dissolution,
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or winding up of the corporation, either voluntary or involuntary, distributions
to the shareholders of the corporation shad be made in the following manner:
(a) Preferred Stock Preference. The holders of Series A Preferred
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Stock, Series B Preferred Stock and the Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the corporation to the holders of Common Stock of the
corporation, an amount equal to $1.254, $2.10 and $5.00 for each outstanding
share of Series A Preferred Stock, Series B Preferred Stock and the Series C
Preferred Stock, respectively, plus a further amount equal to any dividends
declared but unpaid on such shares. (The foregoing preferential amount payable
to the holders of Preferred Stock shall be referred to as the "Preferred Stock
Preference.") If upon such liquidation, dissolution or winding up of the
corporation, the assets of the corporation are insufficient to provide for the
cash payment described above to the holders of Preferred Stock, such assets as
arc available shall be paid to the holders of Preferred Stock in proportion to
the full preferential amount each such holder is otherwise entitled to receive.
(b) Remaining Assets. After payment or setting apart of payment of
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the-Preferred Stock Preference, the holders of Common Stock shall be entitled to
receive the remaining assets of the corporation pro rata based upon the number
of shares of Common Stock held.
(c) Reorganization or Merger. A merger or reorganization of the
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corporation with or into any other corporation or corporations or a sale,
transfer or other conveyance of all or substantially all of the assets of the
corporation, in which transaction the corporation's shareholders immediately
prior to such transaction own immediately after such transaction less than 50%
of the equity securities of the surviving corporation or its parent, shall be
deemed to be a liquidation within the meaning of this Section 2.
(d) Any securities to be delivered to the holders of the Preferred
Stock and/or Common Stock pursuant to Section 2(c) above shall be valued as
follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(A) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the 30-day period ending three
(3) days prior to the closing;
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(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) days prior to the closing; and
(C) If there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board of
Directors of this corporation.
(ii) The method of valuation of securities subject to investment
letter of other restrictions on free marketability shall be to make an
appropriate discount from the market value determined as above in (i)(A), (B) or
(C) to reflect the approximate fair market value thereof, as determined in good
faith by the Board of Directors of this corporation.
(e) In the event the requirements of subsection 2(c) are not complied
with, the corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the
requirements of this Section 2(c) have been complied with, or
(ii) cancel such transaction, in which event the rights
preferences, privileges and restrictions of the holders of the Preferred Stock
shall revert to and be the same as such rights, preferences, privileges and
restrictions existing immediately prior to the date of the first notice referred
to in Section 2(f) hereof.
(f) The corporation shall give each holder of record Preferred Stock
written notice of such a Section 2(c) transaction not later than twenty (20)
days prior to the shareholders' meeting called to approve such transaction, or
twenty (20) days prior to the closing of such transaction, whichever is earlier,
and shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of Section 2(c), and
the corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the corporation has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the written
consent of the holders of a majority of the shares of Preferred Stock then
outstanding.
(3) Voting Rights.
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(a) Generally. Except as otherwise required by law and provided in
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Section 3(b), the bolder of each share of Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
each share of Preferred Stock could be converted on the record date for the vote
or consent of shareholders written consent and shall have voting rights and
powers equal to the voting rights and powers of the Common Stock. The holder of
each share of Preferred Stock shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the corporation and upon any other
matter submitted to a vote of shareholders, except those matters required by law
to be submitted to a class vote. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all
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shares of Common Stock into which shares of Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
rounded upward to one).
(b) Election of Directors. The holders of the then outstanding shares
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of Series C Preferred Stock, voting as a separate class, shall be entitled to
elect two (2) members of the corporation's Board of Directors. The holders of
the then outstanding shares of Series B Preferred Stock, voting as a separate
class, shall be entitled to elect two (2) members of the corporation's Board of
Directors. The holders of the then outstanding shares of Series A Preferred
Stock, voting as a separate class, shall be entitled to elect two (2) members of
the corporation's Board of Directors. The holders of the then outstanding shares
of Common Stock, voting as a separate class, shall be entitled to elect two (2)
members of the corporation's Board of Directors. The holders of the then
outstanding shares of Preferred Stock and Common Stock, voting together as a
separate class, shall be entitled to elect the remaining directors of the
corporation's Board of Directors.
(c) Cumulative Voting. No person entitled to vote at an election for
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directors may cumulate votes to which such person is entitled, unless, at the
time of such election, the corporation is subject to Section 2115 of the
California General Corporation Law ("CGCL"). During such time or times that the
corporation is subject to Section 2115 of the CGCL, every stockholder entitled
to vote at an election for directors may cumulate such stockholder's votes and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which such stockholder's shares are
otherwise entitled or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder desires. No stockholder, however,
shall be entitled to so cumulate such stockholder's votes unless (i) the names
of such candidate or candidates have been placed in nomination prior to the
voting and (ii) the stockholder has given notice at the meeting, prior to the
voting, of such stockholder's intention to cumulate such stockholder's votes. If
any stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
(d) Removal of Directors. The Board of Directors or any individual
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director may be removed from office at any time without cause by the affirmative
vote of the holders of at least a majority of the outstanding shares entitled to
vote on such removal; provided, however, that unless the entire Board is
removed, no individual director may be removed when the votes cast against such
director's removal, or not consenting in writing to such removal, would be
sufficient to elect that director if voted cumulatively at an election which the
same total number of votes were cast (or, if such action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of such director's most recent election were
then being elected. During such time or times that the corporation is subject to
Section 2115 of the CGCL, the provisions of this subsection (d) shall be subject
to Sections 302 and 303 of the CGCL.
(4) Conversion. The holders of the Preferred Stock have conversion rights
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as follows (the "Conversion Rights'):
(a) Right to Convert. Each share of Preferred Stock shall be
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convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the
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corporation or any transfer agent for the Preferred Stock, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
the applicable Issuance Price by the applicable Conversion Price, determined as
hereinafter provided, in effect at the time of the conversion. The Issuance
Price per share for the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be $1.254, $2.10 and $5.00, respectively. The
initial Conversion Price per share for the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be $1.254, $2.10 and $5.00,
respectively. The initial Conversion Price of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be subject to
adjustment as hereinafter provided. The number of shares of Common Stock into
which a share of Series A Preferred, Series B Preferred Stock and Series C
Preferred Stock is convertible is hereinafter referred to as the "Conversion
Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock shall
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automatically be converted into shares of Common Stock at the then effective
Conversion Rate (i) immediately prior to the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the corporation to the public in which the
public offering price exceeds (prior to underwriter's discounts or commissions
and offering expenses) $10.00 per share (adjusted for any subsequent stock
splits, stock dividends, reclassifications or recapitalization) and the
aggregate gross proceeds raised exceeds $15,000,000 or (ii) on the date upon
which the corporation obtains the consent of the holders of (x) at least a
majority of the Series A Preferred and Series B Preferred Stock then
outstanding, voting together as a single class, and (y) a majority of the Series
C Preferred Stock then outstanding, voting as a separate class. In the event of
the automatic conversion of the Preferred Stock upon a public offering as
aforesaid, the person(s) entitled to receive the Common Stock issuable upon such
conversion of Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(c) Mechanics of Conversion. Before any holder of Preferred Stock
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shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
corporation at such office that such holder elects to convert the same; provided
however, that in the event of an automatic conversion pursuant to Section 4(b),
the outstanding shares of Preferred Stock shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation or its
transfer agent, and provided further that the corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of Preferred
Stock are either delivered to the corporation or its transfer agent as provided
above, 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. The corporation shall, as
soon as practicable after such delivery, or such agreement and indemnification
in the case of a lost certificate, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid and a
check payable to the bolder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Such
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conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, or in the cast of automatic conversion on the date of closing of the
offering and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933 (other than an automatic
conversion pursuant to Article IV, Section 4(b)(i)) or in connection with the
sale of the corporation by merger, sale of all or substantially all of the
assets or otherwise, the conversion may, at the option of any holder tendering
Preferred Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering or the closing
of such sale of the corporation as the case may be, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities or the closing of such sale of
the corporation as the case may be.
(d) Fractional Shares. In lieu of any fractional shares to which the
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holder of Preferred Stock would otherwise be entitled, the corporation may pay
cash equal to such fraction multiplied by the then effective Conversion Price
for the applicable Series of Preferred Stock or round such fractional share up
to a whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock
of each holder at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Price of Preferred
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Stock shall be subject to adjustment from time to time as follows:
(i) If the corporation shall issue (or, pursuant to Section
4(e)(i)(C)(z) hereof, shall be deemed to have issued) any Common Stock other
than "Excluded Stock" (as defined below) for a consideration per share less than
the Conversion Price for any Series of Preferred Stock in effect immediately
prior to the issuance of such Common Stock (excluding stock dividends,
subdivisions, split-ups, combinations, dividends or recapitalizations which are
covered by Sections 4(c) (iii), (iv), (v) and (vi)), the Conversion Price for
such series of Preferred Stock in effect immediately after each such issuance
shall forthwith (except as provided in this Section 4(e)) be adjusted to a price
equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
outstanding of Preferred Stock, issuable upon exercise of outstanding options or
deemed to have been issued pursuant to subdivision (C)(z) of this clause
4(e)(i)) immediately prior to such issuance multiplied by the Conversion Price
for such Series of Preferred Stock in effect immediately prior to such issuance,
plus
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(y) the aggregate consideration received by the
corporation upon such issuance, by
(B) the total number of shares of Common Stock outstanding
immediately prior to such issuance of Common Stock (including any shares of
Common Stock issuable upon conversion of outstanding Preferred Stock, issuable
upon exercise of outstanding options or deemed to have been issued pursuant to
subdivision (C)(z) of this clause (4)(e)(i)) plus the number of shares of Common
Stock issued in the transaction which resulted in the adjustment pursuant to
this Section 4(e)(i).
(C) For the purposes of any adjustment of the Conversion
Price for any Series of Preferred Stock pursuant to this clause (i), the
following provisions shall be applicable:
(x) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the corporation
in connection with the issuance and sale thereof.
(y) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as reasonably determined in
good faith by the Board of Directors of the corporation, in accordance with
generally accepted accounting treatment; provided, however, that if, at the time
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of such determination, the corporation's Common Stock is traded in the over-the-
counter market or on a national or regional securities exchange, such fair
market value as determined by the Board of Directors of the corporation shall
not exceed the aggregate "Current Market Price" (as defined below) of the shares
of Common Stock being issued.
(z) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock, (ii) securities by their terms
convertible into or exchangeable for Common Stock, or (iii) options to purchase
or rights to subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (x) and (y) above), if any,
received by the corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued
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dividends), plus the additional minimum consideration, if any, to be received by
the corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (x) and (y) above);
(3) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or conversion of
or exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change or (y) the options or rights related to such
securities not converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change; and
(4) on the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price shall forthwith be readjusted to such Conversion Price as
would have obtained had the adjustment made upon the issuance of such options,
rights, convertible or exchangeable securities or options or rights relate to
such convertible or exchangeable securities, as the case may be, been made upon
the basis of the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such convertible or exchangeable securities or upon the exercise of
the options or rights related to such convertible or exchangeable securities, as
the case may be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued and outstanding on
the date this certificate is filed with the Secretary of State of the State of
Delaware;
(B) all shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock issued and outstanding on the date
this certificate is filed with the Secretary of State of the State of Delaware
and the Common Stock into which the shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock are convertible;
(C) all warrants to purchase shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock issued and
outstanding on the date this certificate is filed with the Secretary of State of
the State of Delaware, the shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock issued upon the exercise of such
warrants and the Common Stock into which the shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock are convertible;
(D) all shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to employees, officers,
directors, scientific advisors and
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consultants of the corporation pursuant to any plan or arrangement approved by
the Board of Directors; and
(E) all securities issued in connection with bona fide
arms length equipment leasing, equipment financing or other loan arrangements
approved by the Board of Directors of the corporation.
All outstanding shares of Excluded Stock (including shares issuable upon
conversion of the Preferred Stock) shall be deemed to be outstanding for all
purposes of the computations of Section 4(e)(i) above.
(iii) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Conversion Price
of the Preferred Stock shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of any shares of Preferred Stock
shall be increased in proportion to such increase of outstanding shares.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of the Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of any shares of
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(v) In case the corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Preferred Stock shall, concurrent with the distribution to holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which such Preferred Stock is then convertible.
(vi) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the corporation with or into another
person (other than a consolidation or merger in which the corporation is the
continuing entity and which does not result in any change in the Common Stock of
a consolidation or merger where Section 2 applies), the shares of Preferred
Stock shall, after such reorganization, reclassification, consolidation, merger,
sale or other disposition, be convertible into the kind and number of shares of
stock or other securities or property of the corporation or otherwise to which
such holder would have been entitled if immediately prior to such
reorganization, reclassification, consolidation, merger, sale or other
disposition such holder had converted its shares of Preferred
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Stock into Common Stock. The provisions of this clause (vi) shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales or other dispositions.
(vii) All calculations under this Section 4 shall be made to the
nearest cent or to the nearest one-hundredth (1 /100) of a share, as the case
may be.
(viii) For the purpose of any computation pursuant to this
Section 4(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
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manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the corporation, but if challenged by the
holders of more than 50% of the outstanding Preferred Stock, then as determined
by an independent appraiser selected by the Board of Directors of the
corporation, the cost of such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price for
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any Series of Preferred Stock need be made if such adjustment would result in a
change in the Conversion Price of less than $0.01. Any adjustment of less than
$0.01 which is not made shall be carried forward and shall be made at the time
of and together with any subsequent adjustment which, on a cumulative basis,
amounts to an adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The corporation will not through any
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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 holders of Preferred Stock against impairment This
provision shall not restrict the corporation's right to amend its Articles of
Incorporation with the requisite shareholder consent.
(h) Certificate as to Adjustments. Upon the occurrence of each
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adjustment or readjustment of the Conversion Rate for any series of Preferred
Stock pursuant to this Section 4, the corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The corporation
shall, upon written request at any time of any holder of any series of Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) all such adjustments and readjustments, (ii) the Conversion
Rate at the time in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Preferred Stock.
(i) Notices of Record Date and Proposed Liquidation Distribution. In
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the event of any taking by the corporation of a record of the holders of any
class of securities for the purpose
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of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, 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 mail
to each holder of Preferred Stock at least twenty (20) days prior to such record
date, a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution or right, and the amount and
character of such dividend, distribution or right. In the event of a liquidation
distribution pursuant to Section 2 hereof, the corporation shall mail to each
holder of Preferred Stock at least twenty (20) days prior to the date of such
distribution a notice (i) certifying as to (x) the anticipated aggregate
proceeds available for distribution to holders of Preferred Stock and Common
Stock, (y) the amount expected to be distributed pursuant to Section 2 in
respect of each share of each outstanding series of Preferred Stock and each
share of Common Stock and (z) the amount expected to be distributed pursuant to
Section 2 in respect of each share of each outstanding Series of Preferred Stock
if the holder of each such share of Preferred Stock converted such share of
Preferred Stock into Common Stock immediately prior to the liquidation
distribution and (ii) stating that in connection with such liquidation
distribution the holders of shares of each series of Preferred Stork may prior
to such liquidation distribution convert their shares of such series of
Preferred Stock into Common Stock at the applicable Conversion Rate for such
series.
(j) Notices. Any notice required by the provisions of Us Section 4 to
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be given to the holders of shares of the Preferred Stock shall be domed given
upon personal delivery, upon delivery by nationally recognized courier or three
business days after deposit in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appear on the
corporation's books.
(k) 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 Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Preferred 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.
(l) Reissuance of Converted Shares. No shares of Preferred Stock
------------------------------
which have been converted into Common Stock after the original issuance thereof
shall ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of the corporation.
(5) General Covenants.
-----------------
(a) Protective Provisions. In addition to any other rights provided
---------------------
by law, so long as at least 3,250,000 shares of Preferred Stock shall be
outstanding (adjusted for any subsequent stock splits, stock dividends,
reclassifications or recapitalizations), this corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of not
less than a sixty-six and
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two thirds percent (66 2/3%) of the outstanding shares of the Preferred Stock,
voting together as a single class:
(i) adversely alter or change the rights, preferences or
privileges of the Preferred Stock;
(ii) create by amendment of the Articles of Incorporation,
reclassification, certificate of designation or otherwise) or issue any new
class or series of shares or securities exercisable for or convertible into
shares having rights, preferences or privileges senior to or on a parity with
the Preferred Stock;
(iii) increase or decrease the authorized number of shares of
Preferred Stock;
(iv) consummate a merger, corporate reorganization, or any
transaction in which all or substantially all of the assets of the corporation
are sold, or in which transaction the corporation's shareholders immediately
prior to such transaction and immediately after such transaction less than 50%
of the equity securities of the surviving corporation or its parent;
(v) redeem or repurchase any shares of Common Stock (except
for the repurchase of shares of Common Stock from service providers pursuant to
the terms of restricted stock purchase agreements, provided that such
repurchases shall not exceed $50,000 in any twelve-month period);
(vi) declare or pay dividends on or make any distribution on
account of the Common Stock;
(vii) permit a subsidiary of the corporation to sell securities
to a third party;
(viii) amend the corporation's bylaws to change the variable
range for the number of the corporation's directors;
(ix) incur any indebtedness which has equity participation
rights or is issued in conjunction with any equity securities, including any
security exercisable or convertible into an equity security, representing in
excess of five percent (5%) of the Company's outstanding capital stock; or
(x) liquidate or dissolve the corporation.
(6) Common Stock. The following is applicable to the Common Stock:
------------
(a) Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
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<PAGE>
(b) Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Article V hereof.
(c) Redemption. The Common Stock is not redeemable.
----------
(d) Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law. The
right to vote for directors shall be subject to Section 3 of Article V hereof.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
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.
ARTICLE VIII
The election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide, provided, however, that any election for
directors must be by ballot if demanded by any stockholder at the meeting and
before the voting has begun.
ARTICLE IX
The Corporation shall indemnify to the fullest extent permitted by the
Delaware General Corporation Law, or any other applicable law, as the same
exists or may hereafter be amended, any person made or threatened to be made a
party to an action or proceeding, whether criminal, civil, administrative or
investigate, by reason of the fact that he or she or his testator or intestate
is or was a director or officer of the corporation or any predecessor of the
corporation or serves or served any other enterprise as a director, officer,
employee or agent at the request of the corporation or any predecessor to the
corporation.
Neither any amendment nor repeal of this Article, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article,
shall eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim accruing or arising or that,
but for this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
If at any time this corporation is subject to Section 2115 of the CGCL, the
corporation is authorized to provide indemnification of agents (as defined in
Section 317 of the CGCL) for breach of duty to the corporation and its
stockholders through bylaw provisions or through agreements with the agents, or
through stockholders resolutions, or otherwise, in excess of the indemnification
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<PAGE>
otherwise permitted by Section 317 of the CGCL, subject to the limits on such
excess indemnification set forth in Section 204 of the CGCL.
ARTICLE XI
The name and mailing address of the incorporator are:
Charlie Liamos
1360 South Loop Road
Alameda, CA 94502
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
Stale of Delaware, do make this certificate, hereby declaring and certifying,
under penalties of perjury, that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 1st day of
---
September, 2000.
/s/ Charlie Liamos
--------------------------------------
Charlie Liamos, Incorporator
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