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INCU.BATOR CAPITAL, INC.
CERTIFICATE OF DESIGNATION,
PREFERENCE AND RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK
We, Jason W. Galanis and Michael Bodnar, being the President and the Secretary,
respectively, of Incu.bator Capital, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DO HEREBY CERTIFY
that, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation and Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, by unanimous consent duly executed as of July 7, 2000, duly adopted
the following resolution providing for the issuance of a series of preferred
stock:
RESOLVED, that, pursuant to authority conferred upon the Board of
Directors of Incu.bator Capital, Inc. (the "Corporation") by Article 4
of the Amended and Restated Certificate of Incorporation of the
Corporation, a series of Preferred Stock, par value $0.001 per share,
hereby is created; and that the designations, powers, preferences and
relative participating, optional and other special rights and relative
qualifications, limitations, or restrictions of the shares of such
series hereby are fixed as set forth in the "Certificate of
Designations" as follows:
1. Designation and Number. Of the 25 million authorized shares of
$0.001 par value Preferred Stock (the "Authorized Preferred Stock") of
the Corporation, 1 million shares shall be issued in and as a series,
the distinctive designation of which shall be "Series B Convertible
Preferred Stock" (such series being hereafter called the "Series B").
The number of Series B shares may not be increased.
2. Rank. The Series B Preferred Stock shall be senior in right and of
senior right and priority with all other Authorized Preferred Stock
issued by the Corporation except as provided in Sections 8 and 15
below. All shares of the Authorized Preferred Stock shall be senior in
right to all shares of the Corporation's Common Stock (the "Common
Stock") and to all other shares of stock of the Corporation.
3. Dividends.
(a) Payment of Dividends. The holders of the Series B
Preferred Stock (the "Holders") shall be entitled to receive an annual
dividend rate of 8% on the liquidation preference amount as set forth
in Section 8 below, which dividend shall accrue day to day from July 7,
2000, whether or not earned or declared, and shall be payable, in
arrears, quarterly commencing October 7, 2000. Such dividends shall be
cumulative so that , if such dividends in respect of any previous or
current quarterly period shall not have been paid at the annual rate
specified above, the deficiency shall first be fully paid before any
dividend or other distribution shall be paid on or declared and set
apart for the shares of Common Stock . Any accumulation of dividends on
the Series B Preferred Stock shall not bear interest. Cumulative
dividends with respect to shares of Series B Preferred Stock which are
accrued, payable and/or in arrears, shall, upon conversion of such
shares of Series B Preferred Stock to Common Stock, be paid to the
extent that assets are legally available therefor and any amounts for
which assets are not legally available shall be paid promptly as assets
become legally available. Any partial payment pursuant to the preceding
sentence shall be made pro rata among the Holders; provided, however,
that the Corporation may pay all or any portion of any outstanding
dividend by issuing additional shares of Series B Preferred Stock in an
aggregate amount equal to such payment divided by the Current Market
Price per share of Common Stock (as defined in Section 5 (e) below) of
the number of shares of Common Stock into which such Series B Preferred
Stock shall be convertible at the time of such payment.
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(b) Restrictions in the Event Dividends are not paid. Unless
full dividends on the Series B Preferred Stock for all past dividend
periods and the the-current dividend period shall have been paid or
declared and a sum sufficient for the payment thereof set apart: (i) no
dividend whatsoever shall be paid or declared, and no distribution
shall be made, on any shares of Common Stock; and (ii) no shares of
Common Stock shall be purchased, redeemed or acquired by the
Corporation and no funds shall be paid into or set aside or made
available for a sinking fund for the purchase, redemption or
acquisition thereof; provided, however, that this restriction shall not
apply to the purchase of Common Stock held by employees, officers,
directors, consultants or other persons performing services for the
Corporation or any wholly-owned subsidiary that are subject to
restrictive stock purchase agreements under which the Corporation has
the option to repurchase such Common Stock at "cost" (as defined in
such agreements) upon the occurrence of certain events, such as the
termination of employment.
4. No Redemption by Holders. The Holders shall have no right to
require the Corporation to redeem the Series B Preferred Stock. The
Corporation shall have the right to redeem all or any portion of the
Series B Preferred Stock on no less than 30 day's notice to the
Holders. In the event the Corporation shall redeem less than all of the
then outstanding shares of Series B Preferred Stock, such redemption
shall be made on a pro rata basis among all of the Holders.
5. Right to Convert Shares of Series B Preferred Stock.
(a) Grant of Conversion Right. The Holders shall have the
right, commencing on the date of issuance of a share of Series B
Preferred Stock and continuing for so long as any shares of Series B
Preferred Stock shall be outstanding, to convert all or any part of the
Series B Preferred Stock shares into shares of Common Stock at the rate
of $4.00 per share of Common Stock, adjusted as provided in Section 6
below, (the "Conversion Price") based on the $1.00 per share
liquidation preference of the Series B Preferred Stock as provided in
Section 8 so that initially upon the conversion of four shares of
Series B Preferred Stock one share of Common Stock (the "Conversion
Stock") shall be issued.
(b) Manner of Conversion. A Holder who converts his Series B
Preferred Stock (a "Converting Holder") shall effect such conversion,
in whole or in part, by giving written notice thereof to the
Corporation, accompanied by the certificates representing the shares of
Series B Preferred Stock to be converted. As soon as practicable after
the receipt of such written notice and receipt of such certificates,
the Corporation shall issue the number of shares of Conversion Stock
issuable upon such conversion, which shall be duly issued, fully paid
and non-assessable, and shall deliver to the Converting Holder a
certificate or certificates therefor, registered in such Converting
Holder's name, representing such Conversion Stock.
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(c) Investment Representation. If reasonably required by the
Corporation counsel to comply with any applicable federal or state laws
or regulations, a Converting Holder shall represent that the Conversion
Stock to be issued upon conversion of his shares of Series B Preferred
Stock will be acquired by him for investment only and not for resale or
with a view to the distribution thereof, and shall agree that any
certificates representing the Conversion Stock as to which such
representation applies may bear such legend, conspicuously noting such
restriction, as the Corporation shall deem reasonably necessary or
desirable to enable the Corporation to comply with any applicable
federal or state laws or regulations.
(d) Covenants of Corporation. 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 shares of Series B Preferred Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series B Preferred Stock. If at any time the number
of authorized but unissued Common Stock shall not be sufficient to
effect the conversion of all of the then outstanding shares of Series B
Preferred Stock, in addition to such other remedies as shall be
available to the Holders, the Corporation shall take such corporate
action as may, in the opinion of its counsel, be necessary to increase
the authorized but unissued shares of Common Stock to such number as
shall be sufficient for such purpose.
6. Adjustment of Conversion Price.
The Conversion Price and the number of shares of Conversion Stock
issuable upon conversion of the Series B Preferred Stock as provided
herein shall be subject to adjustment with respect to events after May
30, 2000 as follows:
(a) Adjustment for Change in Capital Stock. Except as provided
in Paragraph 5 (l) below, if the Corporation shall (i) declare a
dividend on its outstanding Common Stock in shares of its capital
stock, (ii) subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares, or (iv) issue
any shares of its capital stock by reclassification of its Common Stock
(including any such reclassification in connection with a consolidation
or merger in which the Corporation is the continuing corporation), then
in each such case the Conversion Price in effect immediately prior to
such action shall be adjusted so that if the shares of Series B
Preferred Stock are thereafter converted, the Converting Holder may
receive the number and kind of shares which he would have owned
immediately following such action if he had converted the shares of
Series B Preferred Stock immediately prior to such action. Such
adjustment shall be made successively whenever such an event shall
occur. The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification. If after an adjustment the Converting Holder upon
conversion of the shares of Series B Preferred Stock may receive shares
of two or more classes of capital stock of the Corporation, the
Corporation's Board of Directors shall determine the allocation of the
adjusted Conversion Price between the classes of capital stock. After
such allocation, the Conversion Price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 5.
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(b) Adjustment for Certain Issuances of Common Stock. If the
Corporation shall at any time or from time to time issue any shares of
Common Stock (other than shares issued as a dividend or distribution as
provided in Section 5 (a) above) for a consideration per share less
than the lower of the Conversion Price in effect on the date of such
issue or the Current Market Price per share of Common Stock (as defined
in Section 5 (e) below), then, forthwith upon such issue, the
Conversion Price in effect immediately prior to such action (the
"Existing Conversion Price") shall be reduced by dividing the number of
shares so issued by the total number of shares outstanding after such
issuance, multiplying the quotient by the amount, if any, by which the
Existing Conversion Price exceeds the price of the shares so issued and
subtracting the result from the Existing Conversion Price. In the case
of an issue of additional shares of Common Stock for cash, the
consideration received by the Corporation therefor shall be deemed to
be the net cash proceeds received for such shares, excluding cash
received on account of accrued interest or accrued dividends and after
deducting therefrom any and all commissions and expenses paid or
incurred by the Corporation for any underwriting of, or otherwise in
connection with, the issue of such shares. The term "issue" shall be
deemed to include the sale or other disposition of shares held in the
Corporation's treasury. The number of shares outstanding at any given
time shall not include shares in the Corporation's treasury.
(c) Subscription Offerings. In case the Corporation shall
issue rights, options, or warrants entitling the holders thereof to
subscribe for or purchase Common Stock (or securities convertible into
or exchangeable for Common Stock) at a price per share (or having a
conversion price per share, in the case of a security convertible into
or exchangeable for Common Stock) less than the lower of the then
Conversion Price or the Current Market Price per share (as defined in
Paragraph 5 (e) below) on the record date for the determination of
stockholders entitled to receive such rights, then in each such case
the Conversion Price shall be adjusted by multiplying the Conversion
Price in effect immediately prior to such record or granting date by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on such record or granting date plus the
number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so to be offered (or the
aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Conversion Price or Current Market
Price, as the case may be, and of which the denominator shall be the
number of shares of Common Stock outstanding on such record or granting
date plus the number of additional shares of Common Stock to be offered
for subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially convertible or
exchangeable). Such adjustment shall become effective at the close of
business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) are not delivered, the
Conversion Price shall be readjusted after the expiration of such
rights, options, or warrants (but only to the extent that the shares of
Series B Preferred Stock are not converted after such expiration), to
the Conversion Price which would then be in effect had the adjustments
made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or
securities convertible into or exchangeable for shares of Common Stock)
actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by
the Corporation's Board of Directors. Shares of Common Stock owned by
or held for the account of the Corporation or any majority-owned
subsidiary shall not be deemed outstanding for the purpose of any such
computation.
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(d) Other Rights to Acquire Common Stock. In case the
Corporation shall distribute to all holders of its Common Stock
evidences of its indebtedness or assets (excluding cash dividends or
distributions paid from retained earnings of the Corporation) or rights
or warrants to subscribe or purchase (excluding those referred to in
Paragraph (c) above), then in each such case the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of such distribution by a fraction of which the numerator shall be
the Current Market Price per share (as defined in Paragraph 5 (e)
below) of the Common Stock on the Record Date mentioned below less the
then fair market value (as determined by the Board of Directors of the
Corporation) of the portion of the assets or evidences of indebtedness
so distributed or of such rights or warrants applicable to one share of
Common Stock, and the denominator shall be the Current Market Price per
share of the Common Stock. Such adjustment shall become effective
immediately after the Record Date for the determination of shareholders
entitled to receive such distribution.
(e) Current Market Price. For the purpose of any computation
under Paragraphs (b) through (d) of this Section 5, the Current Market
Price per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices for the 30 consecutive trading days
commencing 45 trading days before such date. The closing price for each
day shall be the last reported sales price regular way or, in case no
such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or,
if the Common Stock is not listed or admitted to trading on any
national securities exchange, the highest reported bid price as
furnished by the National Association of Securities Dealers, Inc.
through NASDAQ or similar organization if NASDAQ is no longer reporting
such information, or by the National Daily Quotation Bureau or similar
organization if the Common Stock is not then quoted on an inter-dealer
quotation system. If on any such date the Common Stock is not quoted by
any such organization, the fair value of the Common Stock on such date,
as determined by the Corporation's Board of Directors, shall be used.
(f) Action to Permit Valid Issuance of Common Stock. Before
taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of the shares of Series B
Preferred Stock, the Corporation will take all corporate action which
may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue shares of such Common Stock
at such adjusted Conversion Price.
(g) Minimum Adjustment. No adjustment in the Conversion Price
shall be required if such adjustment is less than $0.01; provided,
however, that any adjustments, which by reason of this Paragraph (g)
are not required to be made, shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything to the contrary
notwithstanding, the Corporation shall be entitled to make such
reductions in the conversion price, in addition to those required by
this Paragraph 5 (g), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or distribution
of securities convertible into or exchangeable for stock hereafter made
by the Corporation to its stockholders shall not be taxable.
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(h) Referral of Adjustment. In any case in which this Section
5 shall require that an adjustment in the Conversion Price be made
effective as of a record date for a specified event, if the shares of
Series B Preferred Stock shall have been converted after such record
date the Corporation may elect to defer until the occurrence of such
event issuing to the Converting Holder the shares, if any, issuable
upon such conversion over and above the shares, if any, issuable upon
such conversion on the basis of the Conversion Price in effect prior to
such adjustment; provided, however, that the Corporation shall deliver
to the Converting Holder a due bill or other appropriate instrument
evidencing the Converting Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(i) Number of Shares. Upon each adjustment of the Conversion
Price as a result of the calculations made in Paragraphs (a) through
(d) of this Section 5, the shares of Series B Preferred Stock shall
thereafter evidence the right to convert, at the adjusted Conversion
Price, into that number of shares (calculated to the nearest
thousandth) obtained by dividing (i) the product obtained by
multiplying the number of shares to be acquired upon conversion of the
shares of Series B Preferred Stock prior to adjustment of the number of
shares by the Conversion Price in effect prior to adjustment of the
Conversion Price by (ii) the Conversion Price in effect after such
adjustment of the Conversion Price.
(j) Transactions Not Requiring Adjustments. No adjustment need
be made for a transaction referred to in Paragraphs (a) through (d) of
this Section 5 if the Holder is permitted to participate in the
transaction on a basis no less favorable than any other party and at a
level which would preserve such Holder's percentage equity
participation in the Common Stock upon conversion of the shares of
Series B Preferred Stock. No adjustment need be made for sales of
Common Stock pursuant to a Corporation plan for reinvestment of
dividends or interest, the granting of options and/or the exercise of
options outstanding under any of the Corporation's currently existing
stock option plans, the exercise of currently existing incentive stock
options or incentive stock options which may be granted in the future,
or the exercise of any other of the Corporation's currently outstanding
options. No adjustment need be made for a change in the par value or no
par value of the Common Stock. If the shares of Series B Preferred
Stock become exercisable solely into cash, no adjustment need be made
thereafter. Interest will not accrue on the cash.
(k) Notice of Adjustments. Whenever the Conversion Price is
adjusted, the Corporation shall promptly mail to the Holder a notice of
the adjustment together with a certificate from the Corporation's Chief
Financial Officer briefly stating (i) the facts requiring the
adjustment, (ii) the adjusted Conversion Price and the manner of
computing it; and (iii) the date on which such adjustment becomes
effective. The certificate shall be prima facia evidence that the
adjustment is correct, absent manifest error.
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(l) Reorganization of Corporation. If the Corporation and/or
the holders of Common Stock are parties to a merger, consolidation or a
transaction in which (i) the Corporation transfers or leases
substantially all of its assets; (ii) the Corporation reclassifies or
changes its outstanding Common Stock; or (iii) the Common Stock is
exchanged for securities, cash or other assets; the person who is the
transferee or lessee of such assets or is obligated to deliver such
securities, cash or other assets shall assume the terms of the Series B
Preferred Stock. If the issuer of securities deliverable upon
conversion of the Series B Preferred Stock is an affiliate of the
surviving, transferee or lessee corporation, that issuer shall join in
such assumption. The assumption agreement shall provide that the Holder
may convert the Series B Preferred Stock into the kind and amount of
securities, cash or other assets which he would have owned immediately
after the consolidation, merger, transfer, lease or exchange if he had
converted the B Warrants immediately before the effective date of the
transaction. The assumption agreement shall provide for adjustments
that shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 5. The successor company shall
mail to the Holder a notice briefly describing the assumption
agreement. If this Paragraph applies, Paragraph 5 (a) above does not
apply.
(m) Voluntary Reduction. 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 days and if the reduction is irrevocable during
the period. Whenever the Conversion Price is reduced, the Corporation
shall mail to the Holder a notice of the reduction. The Corporation
shall mail 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 Paragraphs 5 (a) through (d) above.
(n) Fractional Shares. If the number of shares of Common Stock issuable
upon the conversion of the Series B Preferred Stock is adjusted
pursuant to Section 5 hereof, the Corporation shall nevertheless not be
required to issue fractions of shares upon conversion of the shares of
Series B Preferred Stock or otherwise, or to distribute certificates
that evidence fractional shares. Instead the Corporation will round any
fractional share to the nearest share so that if the fraction is less
than 0.5 no share shall be issued and if the fraction is 0.5 or higher
the Corporation shall issue one full share.
(o) Notices. If (i) the Corporation takes any action that
would require an adjustment in the Conversion Price pursuant to this
Section 5; or (ii) there is a liquidation or dissolution of the
Corporation, the Corporation shall mail to the Holder a notice stating
the proposed record date for a distribution or effective date of a
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporation shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall
not affect the validity of the transaction.
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(p) Determination by Corporation Conclusive. Any determination
that the Corporation or its Board of Directors must make pursuant to
this Section 5 shall be conclusive, absent manifest error.
(q) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued stock,
for the purpose of effecting the issuance of stock upon conversion of
the shares of Series D Preferred Stock, such number of shares as shall
from time to time be sufficient to effect the issuance of shares of
Common Stock upon such conversion.
7. Right to Registration.
(a) "Piggy Back" Registration Rights. If at any time prior to
December 31, 2002, the Corporation proposes to file a registration
statement ("Registration Statement") with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933 (the
"Act") with respect to any of its securities (except one relating to
employee benefit plans or a merger or similar transaction) (a "Public
Offering"), the Corporation shall give notice of its intention to
effect such filing to all Holders at least 30 days prior to filing such
Registration Statement. A Holder who desires to include his Conversion
Stock in the Registration Statement shall notify the Corporation in
writing within 15 days after receipt of such notice from the
Corporation, in which event the Corporation shall include the
Conversion Stock of such Holder in the Registration Statement. Any
Holder who elects to include his Conversion Stock in the Registration
Statement as set forth herein, shall, in a timely fashion, provide the
Corporation and its counsel with such information and execute such
documents as its counsel may reasonably require to prepare and process
the Registration Statement.
(b) Copies of Registration Statements and Prospectuses. The
Corporation will provide each Holder who requests registration with a
copy of the Registration Statement and any amendment thereto, and
copies of the final prospectus included therein in such quantities as
may reasonably be required to permit such Holder to sell its Conversion
Stock after the Registration Statement is declared effective by the
Commission.
(c) The Corporation's Obligation to Bear Expenses of
Registration. The Corporation will bear all expenses (except
underwriting discounts and commission, if any, and the legal fees and
expenses, if any, of counsel to a Holder) necessary and incidental to
the performance of its obligations under this Section 7.
(d) Indemnification. The Corporation and any Holder whose
Conversion Stock is included in a Registration Statement pursuant to
this Section 7 shall provide appropriate cross indemnities to each
other covering the information supplied by the indemnifying party for
inclusion in the Registration Statement.
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(e) Restriction on Sale of Conversion Stock. Any Holder whose
Conversion Stock is included in a Registration Statement pursuant to
this Section 7 agrees that as a condition therefor, in the event that
the Registration Statement in which the Conversion Stock is included
relates to a Public Offering to be effected through or with the
assistance of an underwriter, he will consent to restrict the sale of
the Conversion Stock or reduce the number of shares of Conversion Stock
that may be included in such registration in accordance with the
reasonable requirements of such underwriter.
(f) Cancellation of Registration Rights. Anything to the
contrary not withstanding, the Corporation shall not be required to
register any Conversion Stock which, in the reasonable opinion of the
Company's counsel, may be sold pursuant to the exemption from
registration provided by Section (k) of Rule 144 promulgated under the
Act.
8. Preference on Liquidation.
(a) Preferences. The Authorized Preferred Stock shall be
preferred with respect to both the earnings and the assets of the
Corporation. In the event of any liquidation, dissolution or winding up
of the corporation, either voluntary or involuntary, the Holders shall
be entitled to receive, before any payment or distribution of the
assets of the Corporation shall be made or set apart to the holders of
the Common Stock or any other stock of the Corporation including the
Authorized Preferred Stock except as provided below, an amount per
share of Series B Preferred Stock equal to the sum of (i) $1.00 for
each outstanding share of Series B Preferred Stock (the "Original Issue
Price") and (ii) an amount equal to declared but unpaid dividends on
such Series B Preferred Stock (the "Premium"), after the holders of the
shares of Series A Preferred Stock outstanding at the time of such
liquidation dissolution or winding-up of the Corporation shall have
received cash for their Stock in accordance with the terms of the
Series A Preferred Stock. If, upon the occurrence of the liquidation,
dissolution or winding up of the corporation, the assets and funds
thereof distributed to the Holders of the Series B Preferred Stock
shall be insufficient to permit the payment to such Holders in full of
the Original Issue Price and the Premium, then the entire assets and
funds of the corporation legally available for distribution shall be
distributed ratably among the Holders in proportion to the amount of
Series B Preferred Stock held by each.
(b) Definitions. For purposes of the Section 8, a liquidation,
dissolution or winding up of the corporation shall be deemed to be
occasioned by, or to include the acquisition of the corporation or the
sale of its assets, unless the corporation's shareholders of record as
constituted immediately prior to such acquisition or sale will
immediately thereafter hold at least fifty percent of the voting power
of the surviving or acquiring entity. For purposes of this subsection
(b), (i) "acquisition" shall mean the acquisition of the Corporation by
any other entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger
or consolidation but excluding any merger effected exclusively for the
purpose of changing the domicile of the corporation); and (ii) "sale of
assets" shall mean a sale of all or substantially all of the assets of
the Corporation.
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(c) Valuation of Certain Assets. In the event of liquidation
as described above, all non-cash assets of the Corporation shall be
valued as follows:
(i) Securities not subject to legend, investment
letter or other similar restrictions on marketability shall be
valued at their Current Market Price as defined in Section 5
(e) above;
(ii) Securities subject to legend, investment letter
or other similar restrictions shall be valued at an
appropriate discount from the current market price, as
mutually determined by the Corporation and the Holders of at
least a majority of the then-outstanding shares of Series B
Preferred Stock.
(iii) In the event that the Corporation and the
Holders of at least a majority of the then-outstanding shares
of Series B Preferred Stock cannot agree on a valuation
pursuant to subsection (ii) above then the dispute shall be
resolved as follows: (A) immediately after written notice of a
valuation dispute, either the Corporation the Holders may
initiate an arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association; (B)
within ten days after notice of the commencement of such
arbitration, the parties shall jointly designate an arbitrator
or, if they cannot agree, each shall designate an arbitrator
and both such arbitrators shall, within ten days, designate a
third arbitrator; (C) within sixty days after the selection of
the arbitrator(s) has been completed, the Arbitrator(s) shall
hold the arbitration hearing; (D) the arbitrator(s) shall
award the costs and expenses of arbitration, including
reasonable attorneys' and expert witness fees tot he
prevailing party; and (E) the arbitration award shall be
final, non-appealable and may be enforced by any court of
competent jurisdiction.
(d) The Corporation shall give each Holder notice of any
transaction of the type described in this Section 8 not later than (i)
twenty days prior to the shareholder's meeting called to approve such
transaction (ii) twenty days prior tot the closing of such transaction
or (iii) the applicable notice period prescribed by law, whichever is
earlier, and shall also notify such Holders in writing of the final
approval of such transaction. The first such notice shall describe the
material terms and conditions of the contemplated transaction and the
effect thereon of the provisions of this Section 8, and the Corporation
shall thereafter give such Holders prompt notice of any material
changes in such terms and conditions. The contemplated transaction
shall in no event take place sooner than twenty days after the
Corporation has given the first notice provided herein; provided,
however, that such period may be shortened upon the written consent of
at least a majority of the Holders of the then-outstanding shares of
Series B Preferred Stock.
9. Voting. The Holders shall have no voting rights except as required
by law.
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10. Transfer of Series B Shares. The shares of Series B Preferred Stock
have not been and will not be registered under the Act and cannot be
sold or offered for sale or otherwise transferred except pursuant to an
effective Registration Statement under the Act or pursuant to an
exemption therefrom, the availability of which is to be established to
the reasonable satisfaction of the Corporation. A legend stating this
restriction shall be placed on each certificate representing shares of
Series B Stock.
11. Identical Rights. Each Series B share shall have the same relative
rights and preferences as, and shall be identical in all respects with,
all other Series B shares.
12. Certificates. So long as any shares of Series B Stock are
outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a statement that the Corporation
shall furnish without charge to each Holder who so requests, a copy of
the document or documents setting forth the powers, preferences and
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences or such rights.
13. Affirmative Covenant of the Corporation. The Corporation covenants
that, so long as any Series B share is outstanding, it shall deliver
copies of all financial statements and reports as it shall file with
the Commission or send to the holders of the Common Stock to each
Holder.
14. Waiver of Covenant. The Corporation may omit in any particular
instance compliance with the covenant set forth in Section 13 of this
Certificate if, before or after the time for such compliance, the
Holders of a majority of the then outstanding Series B shares shall, in
writing, waive compliance with that covenant either in that instance or
generally, but no waiver shall affect the covenant except to the extent
so expressly waived and, until the waiver becomes effective, the
obligations of the Corporation in respect of any such covenant shall
remain in full force and effect.
15. Protective Provisions. So long as any shares of Series B Preferred
Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or by written consent, as provided by
law) of the Holders of no less than a majority of the then outstanding
shares of Series B Preferred Stock (except for the actions referred to
in (ii) or (iii) of this Section 15 which shall require the approval of
all of the Holders of the then outstanding shares of Series B Preferred
Stock): (i) sell, convey or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any transaction or series of related
transactions in which more than 50% of the voting power of the
Corporation is disposed of; (ii) alter or change the rights,
preferences or privileges of the Series B Preferred Stock so as to
adversely affect such Series B Preferred Stock; (iii) increase or
decrease (other than by redemption or conversion) the total number of
authorized shares of Series B Preferred Stock; (iv) authorize or issue,
or obligate itself to issue, any other equity security, including any
other security convertible into or exercisable for any equity security
(A) having preference over, or being on a parity with, the Series B
Preferred Stock with respect to dividends or upon liquidation, or (B)
having rights similar to any of the rights of the series B Preferred
Stock under this Section 15; (v) redeem, purchase or otherwise acquire
(or pay into or set aside for a sinking fund for such purpose) any
Authorized Preferred Stock (except for Series A Preferred Stock in
accordance with its terms or Series b Preferred Stock as provided in
Section 4 above) or any Common Stock; provided, however, that this
restriction shall not apply to the purchase of Common Stock held by
employees, officers, directors, consultants or other persons performing
services for the Corporation or any wholly-owned subsidiary that are
subject to restrictive stock purchase agreements under which the
Corporation has the option to repurchase such Common Stock at "cost"
(as defined in such agreements) upon the occurrence of certain events,
such as the termination of employment; (vi) amend the Corporation's
Certificate of Incorporation or bylaws; or (vii) change the authorized
number of directors of the Corporation.
<PAGE>
15. Notices. Any notice required by the provisions hereof to be given
to the Holders shall be in writing and shall be deemed given in the
second day after mailing, postage prepaid, and addressed to each Holder
of record at such Holder's address appearing on the books of the
Corporation.
IN WITNESS WHEREOF, we have hereunto set our hands and seals as President and
Secretary of the Corporation this 11th day of July, 2000 and we hereby affirm
that the foregoing Certificate is our act and deed and the act and deed of the
Corporation and that the facts stated therein are true.
/s/ Jason W. Galanis
---------------------------
Jason W. Galanis, President
/s/ Michael Bodnar
---------------------------
Michael Bodnar, Secretary
