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Exhibit 4.1
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAIL.COM, INC.
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Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
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Mail.com, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
FIRST: The name of the Corporation is
MAIL.COM, INC.
SECOND: The Certificate of Incorporation of the Corporation was
originally filed in the Office of the Secretary of State of the State of
Delaware on August 1, 1994 under the name of "GlobeComm, Inc."
THIRD: An Amended and Restated Certificate of Incorporation was
filed in the Office of the Secretary of State of the State of Delaware on July
31, 1998.
FOURTH: This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law, the Board of Directors having duly adopted
resolutions setting forth and declaring advisable this Amended and Restated
Certificate of Incorporation and, in lieu of a vote of stockholders, written
consent to this Amended and Restated Certificate of Incorporation having been
given by holders having not less than the minimum number of votes necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, with prompt notice of the taking of such action
having been given to those holders who have not consented in writing, all in
accordance with Section 228 of the Delaware General Corporation Law.
FIFTH: This Amended and Restated Certificate of Incorporation is
being filed pursuant to Sections 242 and 245 of the Delaware General Corporation
Law in order to amend and restate the Certificate of Incorporation of the
Corporation, as amended and restated to date.
SIXTH: The Certificate of Incorporation of the Corporation, as
amended and restated to date, is hereby amended and restated in its entirety as
follows:
ARTICLE I
The name of the Corporation shall be: Mail.com, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE III
The Corporation shall have perpetual duration.
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ARTICLE IV
The registered office of this Corporation in Delaware is Corporation
Trust Center, 1209 Orange Street in the City of Wilmington, County of New
Castle, Delaware 19801, and the name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE V
The total number of shares of all classes of capital stock that the
Corporation is authorized to issue is one hundred and ninety million
(190,000,000) of which one hundred and twenty million (120,000,000) shall be
shares of Class A Common Stock, par value one cent ($.01) per share, and ten
million (10,000,000) shall be shares of Class B Common Stock, par value one cent
($.01) per share, and sixty million (60,000,000) shall be shares of Preferred
Stock, par value one cent ($.01) per share. On September 30, 1998, pursuant to a
Certificate of Amendment to the Certificate of Incorporation of the Corporation,
as corrected pursuant to a Certificate of Correction filed on March 5, 1999,
each issued and then outstanding share of each class of capital stock of the
Corporation was thereby and thereupon subdivided and converted into two shares
of such class of capital stock. A statement of the respective classes and series
of stock and a description of the designations, preferences, voting powers,
relative, participating, optional or other special rights and privileges, and
the qualifications, limitations and restrictions of the Class A Common Stock,
the Class B Common Stock and the Preferred Stock are as follows:
The Class A Common Stock and the Class B Common Stock shall have
such powers, preferences and rights, including voting rights, and the
qualifications, limitations and restrictions as set forth in this Article V.
The Preferred Stock, subject to the limitations prescribed by
applicable law and the provisions of this Certificate of Incorporation, may be
issued by the Board of Directors. Such Board of Directors is hereby empowered to
cause the Preferred Stock to be issued from time to time for such consideration
as it may from time to time fix, and to cause such Preferred Stock to be issued
in one or more classes, with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors. Each
such class of Preferred Stock shall be distinctly designated. Except in respect
of the particulars fixed by the Board of Directors for each class as permitted
hereby, all shares of Preferred Stock shall be of equal rank and shall be
identical. All shares of any one class of Preferred Stock so designated by the
Board of Directors shall be alike in every particular, except that shares of any
one class issued at different times may differ as to the dates from which
dividends thereon shall be cumulative. The voting rights, if any, of each such
class and the preferences and relative, participating, optional and other
special rights of each such class and the qualifications, limitations and
restrictions thereof, if any, may differ from those of any and all other classes
at any time outstanding; and the Board of Directors of the Corporation is hereby
expressly granted authority to fix, by resolutions duly adopted prior to the
issuance of any shares of a particular class of Preferred Stock so designated by
the Board of Directors, the voting powers of stock of such class, if any, and
the designations, preferences and relative,
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participating, optional and other special rights and the qualifications,
limitations and restrictions thereof, if any, for such class, including without
limitation the following:
(a) The distinctive designation of and the number of
shares of Preferred Stock which shall constitute such class;
provided that such number may be increased (but not above the total
number of authorized shares of Preferred Stock) or decreased (but
not below the number of shares thereof then outstanding) from time
to time by like action of the Board of Directors;
(b) The rate and time at which, and the terms and
conditions upon which, dividends, if any, on Preferred Stock of such
class shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other class
of Preferred Stock or any other class of stock of the Corporation
and whether such dividends shall be cumulative or noncumulative;
(c) The right, if any, of the holders of Preferred Stock
of such class to convert the same into, or exchange the same for,
shares of any other class of stock or any series of any class of
stock of the Corporation and the terms and conditions of such
conversion or exchange;
(d) Whether or not Preferred Stock of such class shall
be subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions upon which,
Preferred Stock of such class may be redeemed;
(e) The rights, if any, of the holders of Preferred
Stock of such class upon the dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary;
(f) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of
such class; and
(g) The voting powers, if any, of the holders of such
class of Preferred Stock which may, without limiting the generality
of the foregoing, include the right, voting as a class by itself or
together with any other class of the Preferred Stock as a class, (i)
to vote more or less than one vote per share on any or all matters
voted upon by the stockholders and (ii) to elect one or more
directors of the Corporation if there has been a default in the
payment of dividends on any one or more class of the Preferred Stock
or under such other circumstances and upon such other conditions as
the Board of Directors may fix.
There hereby shall be designated a Class A Preferred Stock, and the
number of shares constituting such class shall be twelve million (12,000,000); a
Class C Preferred Stock, and the number of shares constituting such class shall
be twelve million (12,000,000); a Class D Preferred Stock, and the number of
shares constituting such class shall be ten million (10,000,000); and a Class E
Preferred Stock, and the number of shares constituting such class shall be ten
million (10,000,000).
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Such classes of Preferred Stock shall have the designations, powers,
preferences and rights, including voting rights, and the qualifications,
limitations and restrictions as set forth in this Article V.
1. Voting Rights. Each share of Class A Common Stock and Class D
Preferred Stock shall have one (1) vote per share. Each share of Class B Common
Stock shall have ten (10) votes per share. Each share of Class A Preferred
Stock, Class C Preferred Stock and Class E Preferred Stock shall have one vote
for each share of Class A Common Stock into which such stock could then be
converted, and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Class
A Common Stock. In addition to any rights under applicable law or under this
Certificate of Incorporation of any class to vote as a separate class on any
matter, and except as expressly provided under this Certificate of Incorporation
with respect to any class of capital stock, all shares of Class A Common Stock,
Class B Common Stock, Class A Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock and any other class of capital stock
with general voting rights then outstanding shall vote together as a single
class on each matter on which shareholders are entitled to vote.
2. Liquidation. (a) In case of liquidation, dissolution, or winding
up of the affairs of the Corporation, whether voluntary or involuntary, holders
of Class A Preferred Stock, Class C Preferred Stock, Class D Preferred Stock and
Class E Preferred Stock shall be preferred equally with each such class and with
holders of Class B Common Stock over all holders of Class A Common Stock of the
Corporation to the extent set forth herein.
(b) Out of the distributable assets of the Corporation, in an
amount up to the total dollar investment of Class A Preferred Stock, Class B
Common Stock, Class C Preferred Stock, Class D Preferred Stock and Class E
Preferred Stock, holders of Class A Preferred Stock shall receive pro rata among
all such shares of Class A Preferred Stock, in the aggregate for all such shares
outstanding, the total dollar investment of Class A Preferred Stock divided by
the sum of the total dollar investment of Class A Preferred Stock plus Class B
Common Stock plus Class C Preferred Stock plus Class D Preferred Stock plus
Class E Preferred Stock, expressed as a percentage, and holders of Class C
Preferred Stock shall receive pro rata among all such shares of Class C
Preferred Stock, in the aggregate for all such shares outstanding, the total
dollar investment of Class C Preferred Stock divided by the sum of the total
dollar investment of Class A Preferred Stock plus Class B Common Stock plus
Class C Preferred Stock plus Class D Preferred Stock plus Class E Preferred
Stock, expressed as a percentage, and holders of Class B Common Stock shall
receive pro rata among all such shares of Class B Common Stock, in the aggregate
for all such shares outstanding, the total dollar investment of Class B Common
Stock divided by the sum of the total dollar investment of Class A Preferred
Stock plus Class B Common Stock plus Class C Preferred Stock plus Class D
Preferred Stock plus Class E Preferred Stock, expressed as a percentage, and
holders of Class D Preferred Stock shall receive pro rata among all such shares
of Class D Preferred Stock, in the aggregate for all such shares outstanding,
the total dollar investment of Class D Preferred Stock divided by the sum of the
total dollar investment of Class A Preferred Stock plus Class B Common Stock
plus Class C Preferred Stock plus Class D Preferred Stock plus Class E Preferred
Stock, expressed as a percentage, and holders of Class E Preferred Stock shall
receive pro rata among all such shares of Class E Preferred Stock, in the
aggregate for all such shares outstanding, the total dollar
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investment of Class E Preferred Stock divided by the sum of the total dollar
investment of Class A Preferred Stock plus Class B Common Stock plus Class C
Preferred Stock plus Class D Preferred Stock plus Class E Preferred Stock,
expressed as a percentage.
(c) After distributing the assets of the Corporation in the
manner set forth in Section 2(b), the holders of Class A Common Stock shall
receive an amount in the aggregate for all such shares outstanding up to the
total dollar investment of Class A Common Stock, pro rata among all such shares
based on the respective numbers of shares held by such holders. Thereafter, to
the exclusion of the holders of Class C Preferred Stock and the holders of Class
E Preferred Stock, the holders of Class A Common Stock, Class A Preferred Stock,
Class B Common Stock and Class D Preferred Stock, shall receive the remaining
assets of the Corporation, pro rata among such holders based on the respective
numbers of shares of Class A Common Stock held by such holders or issuable upon
conversion of the Class A Preferred Stock, Class B Common Stock and Class D
Preferred Stock held by such holders.
(d) Notwithstanding the foregoing, (i) prior to the distribution
of the assets of the Corporation in accordance with this section, the holders of
Class C Preferred Stock and the holders of Class E Preferred Stock shall be
entitled to receive any accrued but unpaid dividends declared by the board of
directors, and (ii) in the event of any conversion of all shares of Class A
Preferred Stock, Class C Preferred Stock and Class E Preferred Stock, the
liquidation preference applicable to the Class B Common Stock and the Class D
Preferred Stock set forth herein shall terminate automatically and the holders
of Class B Common Stock and the holders of Class D Preferred Stock shall be
entitled, in the event of a liquidation, dissolution or winding up of the
affairs of the Corporation, only to share in the remaining assets of the
Corporation with the Class A Common Stock pro rata among such holders of Class A
Common Stock, Class B Common Stock and Class D Preferred Stock based on the
respective numbers of shares of Class A Common Stock held by such holders or
issuable upon conversion of the Class B Common Stock and Class D Preferred Stock
held by such holders.
(e) The consolidation or merger of the Corporation with or into
any other corporation or corporations or the sale of all or substantially all of
the assets of the Corporation shall be deemed a liquidation, dissolution or
winding up of the Corporation, unless the holders of a majority of the voting
power of the capital stock of the Corporation before the merger, consolidation
or sale continue to own a majority of the voting power of the capital stock of
the surviving entity after the transaction, and the Class C Preferred Stock and
Class E Preferred Stock are continued in the surviving entity on substantially
identical terms (including, without limitation, ranking as to payment,
conversion and rights as to voting on certain matters) as set forth herein.
3. Conversion (a) The holders of the Class A Preferred Stock shall
have conversion rights as follows:
(i) Right to Convert. The holders of the Class A Preferred
Stock shall have the right to convert their shares into Class A
Common Stock upon the affirmative vote of the holders of a majority
of the Class A Preferred Stock. From and after such affirmative
vote, each share of Class A Preferred Stock shall be convertible at
the election of the
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holder thereof into one share of Class A Common Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations).
(ii) Automatic Conversion. Each share of Class A Preferred
Stock shall automatically be converted into one share of Class A
Common Stock (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations) immediately
upon the earlier of (A) an underwritten offering of at or greater
than twenty million dollars ($20,000,000) of Class A Common Stock at
or greater than an offering price of five dollars ($5.00) per share
(adjusted to reflect subsequent stock splits, combinations, stock
dividends and recapitalizations) and (B) the affirmative vote of the
holders of a majority of the Class A Preferred Stock.
(iii) Mechanics of Conversion. Before any holder of Class A
Preferred Stock shall be entitled to convert the same into shares of
Class A Common Stock, it shall surrender the certificate therefor,
duly endorsed, at the office of the Corporation, and shall give
written notice to the Corporation at its principal corporate office,
of the election to convert the same and shall state the name in
which the certificate for shares of Class A Common Stock is to be
issued. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Class A Preferred
Stock a certificate for the number of shares of Class A Common Stock
to which such holder shall be entitled.
(b) The holders of the Class B Common Stock shall have conversion
rights as follows:
(i) Right to Convert. The holders of the Class B Common
Stock shall have the right to convert each share of Class B Common
Stock into one share of Class A Common Stock or one share of Class D
Preferred Stock (in each case adjusted to reflect subsequent stock
splits, combinations, stock dividends and recapitalizations).
(ii) Mechanics of Conversion. Before any holder of Class B
Common Stock shall be entitled to convert the same into shares of
Class A Common Stock or Class D Preferred Stock, it shall surrender
the certificate therefor, duly endorsed, at the office of the
Corporation, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and
shall state the name in which the certificate for shares of Class A
Common Stock or Class D Preferred Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class B Common Stock a
certificate for the number of shares of Class A Common Stock or
Class D Preferred Stock to which such holder shall be entitled.
(c) The holders of the Class C Preferred Stock shall have
conversion rights as follows:
(i) Right to Convert. Each share of Class C Preferred Stock
shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share on or prior to the
fifth day prior to the initial Class C Preferred Redemption
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Date (defined below), at the office of the Corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Class A Common Stock as is determined by
dividing three dollars and fifty cents ($3.50) (as adjusted for
subsequent stock splits, combinations, stock dividends and
recapitalizations, the "Original Class C Share Price") by the Class
C Conversion Price, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion. The initial
Class C Conversion Price per share for shares of Class C Preferred
Stock shall be the Original Class C Share Price; provided, however,
that the Class C Conversion Price for the Class C Preferred Stock
shall be subject to adjustment as set forth in Sections 3(c)(iv) and
3(c)(v).
(ii) Automatic Conversion. Except as provided below in
Section 3(c)(iii), each share of Class C Preferred Stock shall
automatically be converted into shares of Class A Common Stock at
the Class C Conversion Price at the time in effect for such Class C
Preferred Stock immediately upon the earlier of (A) the
Corporation's sale of its Class A Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended, the public offering
price of which was not less than two hundred percent (200%) of the
then applicable Class C Conversion Price and with gross proceeds of
not less than twenty million dollars ($20,000,000) (such a public
offering referred to herein as a "Class C Qualified Offering") and
(B) the affirmative vote of the holders of the majority of the Class
C Preferred Stock.
(iii) Mechanics of Conversion. Before any holder of Class C
Preferred Stock shall be entitled to convert the Class C Preferred
Stock into shares of Class A Common Stock, he shall surrender the
certificates therefor, duly endorsed, at the office of this
Corporation or of any transfer agent for the Class C Preferred
Stock, and shall give written notice to the Corporation at its
principal place of business, of the election to convert the Class C
Preferred Stock and shall state therein the name in which the
certificates for shares of Class A Common Stock are to be issued.
The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class C Preferred Stock, a
certificate for the number of shares of Class A Common Stock to
which such holder shall be entitled, together with a cash payment in
lieu of any fraction of a share of such Class A Common Stock and all
dividends on the shares of Class C Preferred Stock surrendered for
conversion accrued and unpaid up to and including the date
surrendered for conversion. No fraction of a share of Class A Common
Stock shall be issued upon any conversion but, in lieu thereof,
shall be paid upon such conversion an amount in cash equal to the
same fraction of the Conversion Price at the time of conversion. No
payment or adjustment for dividends on any shares of Class A Common
Stock that shall be issuable upon conversion on the Class C
Preferred Stock, accrued and unpaid up to and including the date
surrendered for conversion, shall be made. The Corporation will pay
all issue taxes, if any, incurred upon the issue of Class A Common
Stock upon the conversion of the Class C Preferred Stock. Such
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
Class C Preferred Stock to be converted, and the person entitled to
receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of
such shares of Class A Common Stock as
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of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the
option of any holder tendering Class C Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of
the sale of securities pursuant to such offering, in which event the
person entitled to receive the Class A Common Stock upon conversion
of the Class C Preferred Stock shall not be deemed to have converted
such Class C Preferred Stock until prior to the closing of such sale
of securities.
(iv) Conversion Price Adjustments. The Class C Conversion
Price shall be subject to adjustment from time to time as follows:
(A) Subject to subparagraphs (B) through (J) of
this Section 3(c)(iv), if the Corporation shall issue, after the
date upon which any shares of Class C Preferred Stock were first
issued (the "Class C Preferred Closing Date"), any Additional
Stock (as defined below), other than an Excluded Issuance (as
defined below), without consideration or for a consideration per
share less than the Class C Conversion Price in effect
immediately prior to the issuance of such Additional Stock, the
Class C Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted to a price equal to
the result obtained by multiplying such Class C Conversion Price
by the quotient obtained by dividing the total computed under
clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of (a) the aggregate
number of shares of Class A Common Stock outstanding on a
fully diluted basis (after giving effect to the issuance
of all shares of Class A Common Stock issuable upon
Exercise (as defined below) of all outstanding Derivative
Securities (as defined below) immediately prior to such
issuance) (as used in this Section 3(c), the "Fully
Diluted Shares Outstanding") plus (b) the aggregate
consideration, if any, received by the Corporation for the
issuance of such Additional Stock divided by the Class C
Conversion Price in effect immediately prior to the
issuance of such Additional Stock;
(y) an amount equal to the sum of (a) the aggregate
number of Fully Diluted Shares Outstanding immediately
prior to such issuance, plus (b) the number of such shares
of Additional Stock so issued.
(B) In the case of the issuance of stock for cash,
the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions
or other expenses allowed, paid or incurred by the Corporation
for any underwriting or otherwise in connection with the
issuance and sale thereof.
(C) In the case of the issuance of 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 determined by the board of directors
irrespective of any accounting treatment, unless otherwise
agreed in writing by
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holders of a majority in interest of the outstanding shares of
Class C Preferred Stock.
(D) For purposes of any such adjustment, the
following provisions shall be applicable:
If after the Class C Preferred Closing Date, the
Corporation shall issue any securities convertible into or
exchangeable for shares of Class A Common Stock ("Convertible
Securities") or shall grant any rights or options to subscribe
for, purchase or otherwise acquire shares of Class A Common
Stock or Convertible Securities (as used in this Section 3(c),
the "Options," Options and Convertible Securities being referred
to in this Section 3(c) as "Derivative Securities"), other than
an Excluded Issuance, then in each such case, such issue or
grant shall be deemed to be an issuance of Additional Stock and
the price per share of the stock issuable upon the exercise,
conversion or exchange (as used in this Section 3(c), the
"Exercise") of such Derivative Securities shall be determined by
dividing (x) the total amount, if any, received or receivable by
the Corporation as consideration for the issuance or granting of
such Derivative Securities, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the
Exercise of such Derivative Securities, by (y) the maximum
number of shares of Class A Common Stock issuable upon such
Exercise. If the price per share so determined is less than the
Class C Conversion Price in effect immediately prior to the
issuance or granting of such Derivative Securities, such
issuance or granting shall be deemed to be an issuance or
granting for cash of such maximum number of shares of Class A
Common Stock deliverable upon the Exercise of such Derivative
Securities at such price per share and such maximum number of
shares of Class A Common Stock shall be deemed to be
outstanding, provided that
(1) if such Derivative Securities by their terms
provide, with the passage of time or otherwise, for any
increase in the amount of additional consideration payable
to the Corporation or decrease in the number of shares of
Class A Common Stock issuable upon such Exercise (by
change of rate or otherwise), the Class C Conversion Price
shall, upon each such increase or decrease becoming
effective, be readjusted to reflect such increase or
decrease insofar as it affects rights of Exercise which
have not theretofore expired, and
(2) upon the expiration of such Derivative
Securities, or if any thereof shall not have been
Exercised, the Class C Conversion Price shall, upon such
expiration, be readjusted and shall thereafter be such as
it would have been had it been originally adjusted (or had
the original adjustment not been required, as the case may
be) on the basis that (xx) the only shares of Class A
Common Stock so issued were the shares of Class A Common
Stock, if any, actually issued or granted upon the
Exercise of such Derivative Securities, and (yy) such
shares of Class A Common Stock, if any, were issued or
granted for the consideration
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actually received by the Corporation upon such Exercise
plus the consideration, if any, actually received by the
Corporation for the issuance or granting of all of such
Derivative Securities, whether or not Exercised,
provided, further, that no such readjustment shall have the
effect of increasing the Class C Conversion Price by an amount
in excess of the amount of the adjustment thereof initially made
in respect of the issuance or granting of such Derivative
Securities.
(E) "Additional Stock" for the purposes of this Section
3(c) shall mean any shares of Class A Common Stock issued by the
Corporation after the Class C Preferred Closing Date other than:
(1) up to a maximum aggregate of 70,000 shares of
stock issuable or issued to any person, and up to a
maximum aggregate 1,500,000 shares of stock issuable or
issued (at fair market value) to employees, consultants,
directors or officers of the Corporation directly or
pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of the Corporation and
the Compensation Committee thereof;
(2) shares of stock issued or issuable in a public
offering before or in connection with which all
outstanding shares of Class C Preferred Stock will be
converted to Class A Common Stock or upon exercise of
warrants or rights granted to underwriters in connection
with such a public offering;
(3) shares of stock issued or issuable in
accordance with Section 3(c)(v) below or Section 3(e)(v)
below or up to 3,460,000 shares of Class A Preferred Stock
or shares of Class A Common Stock issued or issuable upon
conversion of such shares (adjusted to reflect subsequent
stock splits, combinations, stock dividends and
recapitalizations) in accordance with Section 10.2 of the
Class A Preferred Stock Purchase Agreement dated May 27,
1997, as amended by the Purchase and Sale Agreement dated
December 17, 1997 and the Purchase and Sale Agreement
dated January 5, 1998, as amended through the date of the
original issuance of shares of Class E Preferred Stock
(collectively, the "Class A Stock Purchase Agreement"); or
(4) shares issuable upon conversion of the Class A
Preferred Stock, Class B Common Stock, Class C Preferred
Stock, Class D Preferred Stock and Class E Preferred Stock
(such shares of capital stock described in clauses (1)
through (4) being referred to in this Section 3(c) as
"Excluded Issuances").
(F) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A
Common Stock, solely for the
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purpose of effecting the conversion of the shares of the Class C
Preferred Stock, such number of its shares of Class A Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Class C Preferred
Stock and the Class E Preferred Stock and if at any time the
number of authorized but unissued shares of Class A Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the Class C Preferred Stock and the Class
E Preferred Stock, in the aggregate, in addition to such other
remedies as shall be available to the holder of such Class C
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 Class A Common Stock to
such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary
amendment to these articles.
(G) Notwithstanding any provision to the contrary in
this Section 3(c)(iv), any and all adjustments of the Class C
Conversion Price under this Section 3(c)(iv) arising out of the
issuance or deemed issuance of Additional Stock between the
Class C Preferred Closing Date and the date upon which the
adjustment to the Class C Conversion Price effected pursuant to
Section 3(c)(v) (as used in this Section 3(c), the "Liquidity
Ratchet Adjustment") is made shall be recalculated immediately
after the Liquidity Ratchet Adjustment is made and shall be so
recalculated as though the initial Class C Conversion Price were
equal to the Class C Conversion Price after giving effect to the
Liquidity Ratchet Adjustment; provided, however, that in the
event that any shares of Class C Preferred Stock have been
converted into shares of Class A Common Stock prior to the
Liquidity Ratchet Adjustment, the holders of the Class A Common
Stock issued upon conversion of such shares of Class C Preferred
Stock shall return to the Corporation any such shares of Class A
Common Stock so issued in excess of the number of shares of
Class A Common Stock that such holders would have been entitled
based on the Class C Conversion Price(s) recalculated as set
forth in this paragraph at the time(s) such shares of Class C
Preferred Stock were converted (it being understood that any
shares of Class A Common Stock resulting from adjustments to the
Class C Conversion Price arising out of issuances or deemed
issuances of Additional Stock at a price equal to or greater
than $2.00 per share (as adjusted to reflect subsequent stock
splits, combinations, stock dividends and recapitalizations) may
not be transferred until after the Liquidity Ratchet Adjustment
and the return to the Corporation of any such excess shares).
(H) If the Corporation shall subdivide or reclassify
the then outstanding shares of its Class A Common Stock into a
greater number of shares of Class A Common Stock or combine or
reclassify the then outstanding shares of its Class A Common
Stock into a smaller number of shares of Class A Common Stock,
the Class C Conversion Price in effect immediately prior to such
subdivision, combination or reclassification, as the case may
be, shall be proportionately adjusted as of the effective date
thereof so that the holder of any Class C Preferred Stock
thereafter surrendered for conversion shall be entitled to
receive the number of shares of Class A Common Stock which he
would have
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<PAGE> 13
owned after the happening of such event had such Class C
Preferred Stock been converted immediately prior to the
happening of such event.
(I) In case of any capital reorganization of the
Corporation, or any consolidation or merger of the Corporation
with or into another corporation, or any sale or conveyance to
another corporation of all or substantially all of the property
of the Corporation, the holder of each share of Class C
Preferred Stock then outstanding (or of the stock or securities
received in lieu of such share) shall have the right thereafter
to convert such share (or such stock or securities) into the
kind and amount of shares of stock and other securities and
property receivable upon such reorganization, consolidation,
merger, sale or conveyance by a holder of the number of shares
of Class A Common Stock of the Corporation into which such share
of the Class C Preferred Stock might have been converted
immediately prior to such reorganization, consolidation, merger,
sale or conveyance, and shall have no conversion rights under
these provisions; and effective provision shall be made in the
Certificate of Incorporation of the resulting or surviving
corporation or otherwise so that the provisions set forth in
this Section 3(c) for the protection of the conversion rights of
the Class C Preferred Stock shall thereafter be applicable, as
nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of
the Class C Preferred Stock remaining outstanding or other
convertible securities received by the holders in place thereof;
and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon the exercise of the
conversion privilege, such shares, securities or property as the
holders of the Class C Preferred Stock, or other convertible
securities received by the holders in place thereof, shall be
entitled to receive pursuant to the provisions hereof, and to
make provisions for the protection of the conversion right as
above provided. In case securities or property other than Class
A Common Stock shall be issuable or deliverable upon conversion
as aforesaid, then all references in this Section 3(c) to Class
A Common Stock shall be deemed to apply, so far as appropriate
and as nearly as may be, to such other securities or property.
(J) Upon each adjustment or readjustment in the Class C
Conversion Price, the Chief Financial Officer of the Corporation
shall compute such adjustment or readjustment in accordance with
the provisions of this Section 3(c) and prepare a certificate
setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is
based, including a statement of (i) the consideration received
or to be received by the Corporation for any additional shares
of Class A Common Stock issued or sold or deemed to have been
issued or sold, (ii) the number of shares of Class A Common
Stock outstanding or deemed to be outstanding, and (iii) the
Class C Conversion Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required) on
account thereof. In the event holders of shares of Class C
Preferred Stock representing a majority in interest of such
class of stock represent to the Corporation in writing that they
dispute the adjustment or readjustment, or any information or
calculations contained in the above-referenced certificate of
the Chief Financial Officer, then the Corporation, at its
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<PAGE> 14
expense, will cause the independent public accountants who
regularly audit the books and accounts of the Corporation or
other independent accountants of recognized standing selected by
the Corporation to compute such adjustment or readjustment in
accordance with the provisions of this Section 3(c) and prepare
a certificate setting forth any necessary revisions to such
adjustment or readjustment and showing in detail the facts upon
which such revisions to the adjustment or readjustment, if any,
are based. With respect to the certificate of the Chief
Financial Officer, and with respect to any certificate of the
independent public accountants, the Corporation shall, forthwith
upon the availability to the Corporation of any such
certificate, file such certificate with its corporate records
and mail a copy to each holder of the Class C Preferred Stock
then outstanding at such holder's address as it appears on the
records of the Corporation. No such determination by the
Corporation's independent public accountants shall bind the
Corporation or the holders of Class C Preferred Stock in
connection with any dispute with respect to such adjustment.
(v) Liquidity Ratchet Adjustment. (A) Subject to subparagraph
(B) of this Section 3(c)(v) below, if the holders of the Class C Stock
Units (as defined below) shall not be offered an opportunity to sell,
transfer or dispose of one hundred percent (100%) of the Class C Stock
Units for an amount equal to or greater than ten dollars fifty cents
($10.50) per Class C Stock Unit in cash or Marketable Securities (as
defined below) within twenty four (24) months from the Class C
Preferred Closing Date, or thirty (30) months from the Class C
Preferred Closing Date if the Corporation has completed a registration
under the Securities Act of 1933, as amended, in connection with a
Class C Qualified Offering within twenty four (24) months of the Class
C Preferred Closing Date, whether or not such holders accept or reject
such offer, the initial Class C Conversion Price shall be reduced (but
not increased) to the greater of (A) two dollars ($2.00) per share (as
adjusted to reflect subsequent stock splits, combinations, stock
dividends or recapitalizations), (B) thirty three and one third percent
(33 1/3%) of the highest price per Class C Stock Unit offered to the
holders of Class C Stock Units in any Class C Qualified Offering or
private sale in which the holders of Class C Stock Units were provided
an opportunity to sell stock, (C) thirty three and one third percent
(33 1/3%) of the price per Class C Stock Unit paid in cash or
Marketable Securities to the holders of Class C Stock Units in the
event of the sale of all or substantially all of the assets or capital
stock of the Corporation or the merger, consolidation or combination of
the Corporation with another entity, if such has occurred, or (D)
thirty-three and one third percent (33 1/3%) of the price per Class C
Stock Unit otherwise offered in cash or Marketable Securities to the
holders of Class C Stock Units; provided, however, that, subject to
Section 3(c)(iv)(G), in the event the shares of Class C Preferred Stock
have been converted to Class A Common Stock, the holders of the Class A
Common Stock issued upon such conversion shall receive additional
shares of Class A Common Stock such that such additional shares,
together with the shares issued upon conversion, shall equal the number
of shares that would have been issued had the Liquidity Ratchet
Adjustment been effective immediately before such conversion.
"Class C Stock Unit" means each share of Class C Preferred
Stock and the shares of Class A Common Stock issued or issuable upon
conversion of such share of
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<PAGE> 15
Class C Preferred Stock (adjusted to reflect stock splits,
combinations, stock dividends and recapitalizations occurring
subsequent to the date of conversion of such share of Class C Preferred
Stock).
"Marketable Securities" as used in this Section 3(c) means:
(i) securities issued or directly and fully guaranteed and insured by
the United States Government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of less than six months
from the date of acquisition; or (ii) short term debt instruments with
a maturity of less than 90 days from the date of issuance of an issuer
rated at least A by Standard & Poors Rating Services or equity
securities of an issuer with a market capitalization of at least
$150,000,000, which equity securities are traded on a major nationally
recognized exchange (other than the NASDAQ small cap index or the
NASDAQ bulletin board).
(B) If the Corporation shall consummate an initial public
offering pursuant to a registration statement filed pursuant to the
Securities Act of 1933, as amended, on or before July 31, 1999 (a
"Timely IPO"), subparagraph (A) of Section 3(c)(v) above shall
terminate and be of no further force and effect. In consideration for
the termination of the rights of the holders of shares of Class C
Preferred Stock under such subparagraph (A), immediately before the
consummation of a Timely IPO (but subject to the consummation of the
Timely IPO), the Class C Conversion Price shall be reduced to $2.80 per
share (subject to adjustment for stock splits, combinations, stock
dividends and recapitalizations).
(vi) Authorization of Additional Class C Preferred Stock. If
at any time the number of authorized but unissued shares of Class C
Preferred Stock shall not be sufficient to effect the obligations of
the Corporation to issue additional shares of Class C Preferred Stock,
the Corporation shall take such corporate action as may be necessary or
advisable to increase the number of authorized but unissued shares of
Class C Preferred Stock to such number of shares as shall be sufficient
for such purpose.
(d) The holders of the Class D Preferred Stock shall have
conversion rights as follows:
(i) Right to Convert. The holders of the Class D Preferred
Stock shall have the right to convert each share of Class D Preferred
Stock into one share of Class A Common Stock (adjusted to reflect
subsequent stock splits, combinations, stock dividends,
recapitalizations).
(ii) Mechanics of Conversion. Before any holder of Class D
Preferred Stock shall be entitled to convert the same into shares of
Class A Common Stock, it shall surrender the certificate therefor, duly
endorsed, at the office of the Corporation, and shall give written
notice to the Corporation at its principal corporate office, of the
election to convert the same and shall state the name in which the
certificate for shares of Class A Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Class D Preferred Stock a
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<PAGE> 16
certificate for the number of shares of Class A Common Stock to which
such holder shall be entitled.
(e) The holders of the Class E Preferred Stock shall have
conversion rights as follows:
(i) Right to Convert. Each share of Class E Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share on or prior to the fifth day
prior to the initial Class E Preferred Redemption Date (defined below),
at the office of the Corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Class A
Common Stock as is determined by dividing five dollars ($5.00) (as
adjusted for subsequent stock splits, combinations, stock dividends or
recapitalizations, the "Original Class E Share Price") by the Class E
Conversion Price, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion. The initial Class E
Conversion Price per share for shares of Class E Preferred Stock shall
be the Original Class E Share Price; provided, however, that the Class
E Conversion Price for the Class E Preferred Stock shall be subject to
adjustment as set forth in Sections 3(e)(iv) and 3(e)(v).
(ii) Automatic Conversion. Except as provided below in
Section 3(e)(iii), each share of Class E Preferred Stock shall
automatically be converted into shares of Class A Common Stock at the
Class E Conversion Price at the time in effect for such Class E
Preferred Stock immediately upon the earlier of (A) the Corporation's
sale of its Class A Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the
Securities Act of 1933, as amended, with gross proceeds of not less
than twenty million dollars ($20,000,000) (such a public offering
referred to herein as a "Class E Qualified Offering") and (B) the
affirmative vote of the holders of the majority of the Class E
Preferred Stock.
(iii) Mechanics of Conversion. Before any holder of Class E
Preferred Stock shall be entitled to convert the Class E Preferred
Stock into shares of Class A Common Stock, he shall surrender the
certificates therefor, duly endorsed, at the office of this Corporation
or of any transfer agent for the Class E Preferred Stock, and shall
give written notice to the Corporation at its principal place of
business, of the election to convert the Class E Preferred Stock and
shall state therein the name in which the certificates for shares of
Class A Common Stock are to be issued. The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such
holder of Class E Preferred Stock, a certificate for the number of
shares of Class A Common Stock to which such holder shall be entitled,
together with a cash payment in lieu of any fraction of a share of such
Class A Common Stock and all dividends on the shares of Class E
Preferred Stock surrendered for conversion accrued and unpaid up to and
including the date surrendered for conversion. No fraction of a share
of Class A Common Stock shall be issued upon any conversion but, in
lieu thereof, shall be paid upon such conversion an amount in cash
equal to the same fraction of the Conversion Price at the time of
conversion. No payment or adjustment for dividends on any shares of
Class A Common Stock that shall be issuable upon conversion on the
Class E Preferred Stock, accrued and unpaid up to and including the
date surrendered for conversion, shall be made. The
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<PAGE> 17
Corporation will pay all issue taxes, if any, incurred upon the issue
of Class A Common Stock upon the conversion of the Class E Preferred
Stock. Such 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 Class E Preferred Stock to be converted, and the person
entitled to receive the shares of Class A Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder
of such shares of Class A Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Class E Preferred
Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in
which event the person entitled to receive the Class A Common Stock
upon conversion of the Class E Preferred Stock shall not be deemed to
have converted such Class E Preferred Stock until prior to the closing
of such sale of securities.
(iv) Conversion Price Adjustments. The Class E Conversion
Price shall be subject to adjustment from time to time as follows:
(A) Subject to subparagraphs (B) through (J) of
this Section 3(e)(iv), if the Corporation shall issue, after the
date upon which any shares of Class E Preferred Stock were first
issued (the "Class E Preferred Closing Date"), any Additional
Stock (as defined below), other than an Excluded Issuance (as
defined below), without consideration or for a consideration per
share less than the Class E Conversion Price in effect immediately
prior to the issuance of such Additional Stock, the Class E
Conversion Price in effect immediately prior to each such issuance
shall forthwith be adjusted to a price equal to the result
obtained by multiplying such Class E Conversion Price by the
quotient obtained by dividing the total computed under clause (x)
below by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of (a) the aggregate
number of shares of Class A Common Stock outstanding on a
fully diluted basis (after giving effect to the issuance of
all shares of Class A Common Stock issuable upon Exercise (as
defined below) of all outstanding Derivative Securities (as
defined below) immediately prior to such issuance) (as used
in this Section 3(e), the "Fully Diluted Shares Outstanding")
plus (b) the aggregate consideration, if any, received by the
Corporation for the issuance of such Additional Stock divided
by the Class E Conversion Price in effect immediately prior
to the issuance of such Additional Stock;
(y) an amount equal to the sum of (a) the aggregate
number of Fully Diluted Shares Outstanding immediately prior
to such issuance, plus (b) the number of such shares of
Additional Stock so issued.
(B) In the case of the issuance of stock for cash,
the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by
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<PAGE> 18
the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(C) In the case of the issuance of 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 determined by the board of directors irrespective of
any accounting treatment, unless otherwise agreed in writing by
holders of a majority in interest of the outstanding shares of
Class E Preferred Stock.
(D) For purposes of any such adjustment, the
following provisions shall be applicable:
If after the Class E Preferred Closing Date, the Corporation
shall issue any securities convertible into or exchangeable for
shares of Class A Common Stock ("Convertible Securities") or shall
grant any rights or options to subscribe for, purchase or
otherwise acquire shares of Class A Common Stock or Convertible
Securities (as used in this Section 3(e), the "Options," Options
and Convertible Securities being referred to in this Section 3(e)
as "Derivative Securities"), other than an Excluded Issuance,
then in each such case, such issue or grant shall be deemed to be
an issuance of Additional Stock and the price per share of the
stock issuable upon the exercise, conversion or exchange (as used
in this Section 3(e) , the "Exercise") of such Derivative
Securities shall be determined by dividing (x) the total amount,
if any, received or receivable by the Corporation as consideration
for the issuance or granting of such Derivative Securities, plus
the minimum aggregate amount of additional consideration payable
to the Corporation upon the Exercise of such Derivative
Securities, by (y) the maximum number of shares of Class A Common
Stock issuable upon such Exercise. If the price per share so
determined is less than the Class E Conversion Price in effect
immediately prior to the issuance or granting of such Derivative
Securities, such issuance or granting shall be deemed to be an
issuance or granting for cash of such maximum number of shares of
Class A Common Stock deliverable upon the Exercise of such
Derivative Securities at such price per share and such maximum
number of shares of Class A Common Stock shall be deemed to be
outstanding, provided that
(1) if such Derivative Securities by their terms
provide, with the passage of time or otherwise, for any
increase in the amount of additional consideration payable to
the Corporation or decrease in the number of shares of Class
A Common Stock issuable upon such Exercise (by change of rate
or otherwise), the Class E Conversion Price shall, upon each
such increase or decrease becoming effective, be readjusted
to reflect such increase or decrease insofar as it affects
rights of Exercise which have not theretofore expired, and
(2) upon the expiration of such Derivative
Securities, or if any thereof shall not have been Exercised,
the Class E Conversion Price
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<PAGE> 19
shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis that (xx) the only
shares of Class A Common Stock so issued were the shares of
Class A Common Stock, if any, actually issued or granted upon
the Exercise of such Derivative Securities, and (yy) such
shares of Class A Common Stock, if any, were issued or
granted for the consideration actually received by the
Corporation upon such Exercise plus the consideration, if
any, actually received by the Corporation for the issuance or
granting of all of such Derivative Securities, whether or not
Exercised,
provided, further, that no such readjustment shall have the effect
of increasing the Class E Conversion Price by an amount in excess
of the amount of the adjustment thereof initially made in respect
of the issuance or granting of such Derivative Securities.
(E) "Additional Stock" for purposes of this Section
3(e) shall mean any shares of Class A Common Stock issued by the
Corporation after the Class E Preferred Closing Date other than:
(1) up to a maximum aggregate of 35,000 shares
of stock issuable or issued to any person, and up to a
maximum aggregate 750,000 shares of stock issuable or issued
(at fair market value) to employees, consultants, directors
or officers of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the
Board of Directors of the Corporation and the Compensation
Committee thereof;
(2) shares of stock issued or issuable in a
public offering before or in connection with which all
outstanding shares of Class E Preferred Stock will be
converted to Class A Common Stock or upon exercise of
warrants or rights granted to underwriters in connection with
such a public offering;
(3) shares of stock issued or issuable in
accordance with Section 3(c)(v) above or Section 3(e)(v)
below or up to 3,460,000 shares of Class A Preferred Stock or
shares of Class A Common Stock issued or issuable upon
conversion of such shares (adjusted to reflect subsequent
stock splits, combinations, stock dividends and
recapitalizations) in accordance with Section 10.2 of the
Class A Preferred Stock Purchase Agreement; or
(4) shares issuable upon conversion of the
Class A Preferred Stock, Class B Common Stock, Class C
Preferred Stock, Class D Preferred Stock and Class E
Preferred Stock (such shares of capital stock described in
clauses (1) through (4) being referred to in this Section
3(e) as "Excluded Issuances").
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(F) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Class
A Common Stock, solely for the purpose of effecting the conversion
of the shares of the Class E Preferred Stock, such number of its
shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of
the Class C Preferred Stock and the Class E Preferred Stock and if
at any time the number of authorized but unissued shares of Class
A Common Stock shall not be sufficient to effect the conversion of
all then outstanding shares of the Class C Preferred Stock and the
Class E Preferred Stock, in the aggregate, in addition to such
other remedies as shall be available to the holder of such Class E
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 Class A Common Stock to such
number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain
the requisite shareholder approval of any necessary amendment to
these articles.
(G) Notwithstanding any provision to the contrary
in this Section 3(e)(iv), any and all adjustments of the Class E
Conversion Price under this Section 3(e)(iv) arising out of the
issuance or deemed issuance of Additional Stock between the Class
E Preferred Closing Date and the date upon which the adjustment to
the Class E Conversion Price effected pursuant to Section 3(e)(v)
(as used in this Section 3(e), the "Liquidity Ratchet Adjustment")
is made shall be recalculated immediately after the Liquidity
Ratchet Adjustment is made and shall be so recalculated as though
the initial Class E Conversion Price were equal to the Class E
Conversion Price after giving effect to the Liquidity Ratchet
Adjustment; provided, however, that in the event that any shares
of Class E Preferred Stock have been converted into shares of
Class A Common Stock prior to the Liquidity Ratchet Adjustment,
the holders of the Class A Common Stock issued upon conversion of
such shares of Class E Preferred Stock shall return to the
Corporation any such shares of Class A Common Stock so issued in
excess of the number of shares of Class A Common Stock that such
holders would have been entitled based on the Class E Conversion
Price(s) recalculated as set forth in this paragraph at the
time(s) such shares of Class E Preferred Stock were converted (it
being understood that any shares of Class A Common Stock resulting
from adjustments to the Class E Conversion Price arising out of
issuances or deemed issuances of Additional Stock at a price equal
to or greater than $3.50 per share (as adjusted to reflect
subsequent stock splits, combinations, stock dividends and
recapitalizations) may not be transferred until after the
Liquidity Ratchet Adjustment and the return to the Corporation of
any such excess shares).
(H) If the Corporation shall subdivide or
reclassify the then outstanding shares of its Class A Common Stock
into a greater number of shares of Class A Common Stock or combine
or reclassify the then outstanding shares of its Class A Common
Stock into a smaller number of shares of Class A Common Stock, the
Class E Conversion Price in effect immediately prior to such
subdivision, combination or reclassification, as the case may be,
shall be proportionately adjusted as of the effective date thereof
so that the holder of any
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<PAGE> 21
Class E Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Class A
Common Stock which he would have owned after the happening of
such event had such Class E Preferred Stock been converted
immediately prior to the happening of such event.
(I) In case of any capital reorganization of the
Corporation, or any consolidation or merger of the Corporation
with or into another corporation, or any sale or conveyance to
another corporation of all or substantially all of the property of
the Corporation, the holder of each share of Class E Preferred
Stock then outstanding (or of the stock or securities received in
lieu of such share) shall have the right thereafter to convert
such share (or such stock or securities) into the kind and amount
of shares of stock and other securities and property receivable
upon such reorganization, consolidation, merger, sale or
conveyance by a holder of the number of shares of Class A Common
Stock of the Corporation into which such share of the Class E
Preferred Stock might have been converted immediately prior to
such reorganization, consolidation, merger, sale or conveyance,
and shall have no conversion rights under these provisions; and
effective provision shall be made in the Certificate of
Incorporation of the resulting or surviving corporation or
otherwise so that the provisions set forth in this Section 3(e)
for the protection of the conversion rights of the Class E
Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other
securities and property deliverable upon conversion of the Class E
Preferred Stock remaining outstanding or other convertible
securities received by the holders in place thereof; and any such
resulting or surviving corporation shall expressly assume the
obligation to deliver, upon the exercise of the conversion
privilege, such shares, securities or property as the holders of
the Class E Preferred Stock, or other convertible securities
received by the holders in place thereof, shall be entitled to
receive pursuant to the provisions hereof, and to make provisions
for the protection of the conversion right as above provided. In
case securities or property other than Class A Common Stock shall
be issuable or deliverable upon conversion as aforesaid, then all
references in this Section 3(e) to Class A Common Stock shall be
deemed to apply, so far as appropriate and as nearly as may be, to
such other securities or property.
(J) Upon each adjustment or readjustment in the
Class E Conversion Price, the Chief Financial Officer of the
Corporation shall compute such adjustment or readjustment in
accordance with the provisions of this Section 3(e) and prepare a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the
consideration received or to be received by the Corporation for
any additional shares of Class A Common Stock issued or sold or
deemed to have been issued or sold, (ii) the number of shares of
Class A Common Stock outstanding or deemed to be outstanding, and
(iii) the Class E Conversion Price in effect immediately prior to
such issue or sale and as adjusted and readjusted (if required) on
account thereof. In the event holders of shares of Class E
Preferred Stock representing a majority in interest of such class
of stock represent to the Corporation in writing that they dispute
the adjustment or
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<PAGE> 22
readjustment, or any information or calculations contained in the
above-referenced certificate of the Chief Financial Officer, then
the Corporation, at its expense, will cause the independent public
accountants who regularly audit the books and accounts of the
Corporation or other independent accountants of recognized
standing selected by the Corporation to compute such adjustment or
readjustment in accordance with the provisions of this Section
3(e) and prepare a certificate setting forth any necessary
revisions to such adjustment or readjustment and showing in detail
the facts upon which such revisions to the adjustment or
readjustment, if any, are based. With respect to the certificate
of the Chief Financial Officer, and with respect to any
certificate of the independent public accountants, the Corporation
shall, forthwith upon the availability to the Corporation of any
such certificate, file such certificate with its corporate records
and mail a copy to each holder of the Class E Preferred Stock then
outstanding at such holder's address as it appears on the records
of the Corporation. No such determination by the Corporation's
independent public accountants shall bind the Corporation or the
holders of Class E Preferred Stock in connection with any dispute
with respect to such adjustment.
(v) Liquidity Ratchet Adjustment. The shares of Class E
Preferred Stock shall be entitled to the following adjustments:
(A) If the Corporation does not satisfy at least
one of the Ratchet Conditions (as defined below), the conversion
price of the Class E Preferred Stock will be reduced ratably to a
floor of $3.50 per share (as adjusted for subsequent stock splits,
combinations, stock dividends and recapitalizations) as described
below. As used herein, "Ratchet Conditions" means (I) the
completion of a Class E Qualified Offering on or before December
31, 1999 at an offering price per share of at least $5.00 per
share (as adjusted for subsequent stock splits, combinations,
stock dividends and recapitalizations) and (II) the holders of the
Class E Preferred Stock shall have had an opportunity to sell on
or before December 31, 1999 all of their Class E Preferred Stock
or shares of Class A Common Stock issuable upon conversion of such
shares at a price of at least $10.00 per share (as adjusted for
subsequent stock splits, combinations, stock dividends and
recapitalizations). If the Corporation completes a Class E
Qualified Offering on or before December 31, 1999 at an offering
price below $5.00 per share (as adjusted for subsequent stock
splits, combinations, stock dividends and recapitalizations), the
Class E Conversion Price shall be reduced to the price at which
shares are offered in such Class E Qualified Offering but not
below $3.50 (as adjusted for subsequent stock splits,
combinations, stock dividends and recapitalizations). If the
holders of Class E Preferred Stock shall have had the opportunity
to sell all of their Class E Preferred Stock or shares of Class A
Common Stock issuable upon conversion thereof (a "Liquidity
Event") at a price below $10.00 per share (as adjusted for
subsequent stock splits, combinations, stock dividends and
recapitalizations), the Class E Conversion Price shall be reduced
proportionately to the price per share equal to the sum of $3.50
(as adjusted for subsequent stock splits, combinations, stock
dividends and recapitalizations) plus an amount equal to the
Applicable Percentage (as defined
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below) multiplied by $1.50 (as adjusted for subsequent stock
splits, combinations, stock dividends and recapitalizations). The
"Applicable Percentage" shall equal the quotient obtained by
dividing the excess, if any, of the offered sales price over $5.00
(as adjusted for subsequent stock splits, combinations, stock
dividends and recapitalizations) by $5.00 (as adjusted for
subsequent stock splits, combinations, stock dividends and
recapitalizations); provided that the Applicable Percentage shall
not exceed 100%. If both a Class E Qualified Offering and a
Liquidity Event occur during 1999, the Class E Conversion Price
shall be reduced to the higher of the prices determined in
accordance with the foregoing.
(B) If the Corporation shall issue additional
shares of stock to the holders of Class A Preferred Stock in
accordance with Section 10.2.2. or Section 10.2.3. of the Class A
Stock Purchase Agreement or shall reduce the Class C Conversion
Price pursuant to Section 3(c)(v)(B) above, the Class E Conversion
Price shall be reduced to the price determined by multiplying the
Class E Conversion Price in effect immediately before such
issuance or such reduction by a fraction the numerator of which is
the total number of Fully Diluted Shares Outstanding immediately
before such issuance or reduction and the denominator of which is
the total number of Fully Diluted Shares Outstanding immediately
after such issuance or reduction.
(C) If the Class E Preferred Stock shall have been
previously converted into Class A Common Stock before the
determination of the adjustments set forth in this Section
3(e)(v), the Corporation shall effect such adjustments by issuing
to the holders additional shares of Class A Common Stock such that
such holders will hold the number of shares they would have held
if such adjustments were made immediately before such conversion.
(vi) Authorization of Additional Class E Preferred Stock.
If at any time the number of authorized but unissued shares of Class E
Preferred Stock shall not be sufficient to effect the obligations of
the Corporation to issue additional shares of Class E Preferred Stock,
the Corporation shall take such corporate action as may be necessary or
advisable to increase the number of authorized but unissued shares of
Class E Preferred Stock to such number of shares as shall be sufficient
for such purpose.
(f) The Corporation shall at all times reserve and keep available
out of its authorized and unissued shares of Class A Common Stock, solely for
the purpose of effecting the conversion of all outstanding shares of capital
stock which are convertible into shares of Class A Common Stock, such number of
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of capital stock which are
convertible into Class A Common Stock.
4. Dividends. The holders of shares of Class A Preferred Stock, Class B
Common Stock, Class C Preferred Stock, Class D Preferred Stock and Class E
Preferred Stock shall be entitled to receive non-cumulative dividends, pari
passu with the holders of Class A Common Stock and in each case on an
as-if-converted basis, out of any assets legally available to the
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Corporation, at a rate determined on a per annum basis, payable quarterly when,
as and if declared by the Board of Directors.
5. Redemption. (a) At the option of each holder of Class C Preferred
Stock, the Corporation shall redeem, on the first day of August of each year
commencing in the year 2003, and continuing thereafter for two (2) consecutive
years (each a "Class C Preferred Redemption Date"), the number of shares of
Class C Preferred Stock held by such holder that is specified in a request for
redemption delivered to the Corporation by the holder on or prior to the thirty
(30) days immediately prior to the applicable Class C Preferred Redemption Date,
by paying in cash, seven dollars ($7.00) per share of Class C Preferred Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends, and
recapitalizations) plus all declared but unpaid dividends on such shares (the
"Class C Preferred Redemption Price"); provided, however, that the Corporation
shall not be required to redeem from any holder (i) in connection with the
initial Class C Preferred Redemption Date upon which such holder's shares of
Class C Preferred Stock are being redeemed, a number of shares of Class C
Preferred Stock greater than 33-1/3% of the aggregate number of shares of Class
C Preferred Stock held by such holder immediately prior to such redemption, and
(ii) in connection with the second Class C Preferred Redemption Date upon which
such holder's shares of Class C Preferred Stock are being redeemed, a number of
shares of Class C Preferred Stock greater than fifty percent (50%) of the
aggregate number of shares of Class C Preferred Stock held by such holder
immediately prior to such redemption. If the funds legally available for
redemption for the Class C Preferred Stock on any Class C Preferred Redemption
Date are insufficient to redeem the total number of shares of Class C Preferred
Stock requested to be redeemed as set forth in all requests for redemption in
connection with such Class C Preferred Redemption Date, those funds which are
legally available will be used to redeem the maximum number of shares so
requested to be redeemed ratably among such requesting holders in proportion to
the respective amounts which would be payable with respect to the full number of
shares so requested to be redeemed by them as if all such shares so requested to
be redeemed were redeemed in full. Any shares requested to be redeemed in
connection with any Class C Preferred Redemption Date shall remain outstanding
and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares so requested to be redeemed, such funds will
immediately be used to redeem the balance of the shares requested to be redeemed
pursuant to this section 5(a) on the Class C Preferred Redemption Date but which
it has not redeemed, on the same terms and conditions as are set forth above.
(b) At the option of each holder of Class E Preferred Stock, the
Corporation shall redeem, on the first day of March of each year commencing in
the year 2004, and continuing thereafter for two (2) consecutive years (each a
"Class E Preferred Redemption Date"), the number of shares of Class E Preferred
Stock held by such holder that is specified in a request for redemption
delivered to the Corporation by the holder on or prior to the thirty (30) days
immediately prior to the applicable Class E Preferred Redemption Date, by paying
in cash, five dollars ($5.00) per share of Class E Preferred Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends, and
recapitalizations) plus all declared but unpaid dividends on such shares (the
"Class E Preferred Redemption Price"); provided, however, that the Corporation
shall not be required to redeem from any holder (i) in connection with the
initial Class E Preferred Redemption Date upon which such holder's shares of
Class E Preferred Stock are
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being redeemed, a number of shares of Class E Preferred Stock greater than
33-1/3% of the aggregate number of shares of Class E Preferred Stock held by
such holder immediately prior to such redemption, and (ii) in connection with
the second Class E Preferred Redemption Date upon which such holder's shares of
Class E Preferred Stock are being redeemed, a number of shares of Class E
Preferred Stock greater than fifty percent (50%) of the aggregate number of
shares of Class E Preferred Stock held by such holder immediately prior to such
redemption. If the funds legally available for redemption for the Class E
Preferred Stock on any Class E Preferred Redemption Date are insufficient to
redeem the total number of shares of Class E Preferred Stock requested to be
redeemed as set forth in all requests for redemption in connection with such
Class E Preferred Redemption Date, those funds which are legally available will
be used to redeem the maximum number of shares so requested to be redeemed
ratably among such requesting holders in proportion to the respective amounts
which would be payable with respect to the full number of shares so requested to
be redeemed by them as if all such shares so requested to be redeemed were
redeemed in full. Any shares requested to be redeemed in connection with any
Class E Preferred Redemption Date shall remain outstanding and entitled to all
the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
such shares so requested to be redeemed, such funds will immediately be used to
redeem the balance of the shares requested to be redeemed pursuant to this
section 5(b) on the Class E Preferred Redemption Date but which it has not
redeemed, on the same terms and conditions as are set forth above.
6. Protective Provisions. (a) So long as any shares of Class A
Preferred Stock are outstanding, without first obtaining the approval of the
holders of a majority of the shares of the Class A Preferred Stock, the
Corporation shall not (i) alter or change the rights, preferences or privileges
of the shares of Class A Preferred Stock, whether by way of amendment to the
Corporation's Certificate of Incorporation or Bylaws, (ii) increase or decrease
the total number of authorized shares of Class A Preferred Stock, (iii) create,
authorize or issue any class or series of any equity security having a
preference over, or being on parity with, the Class A Preferred Stock with
respect to dividends or upon liquidation, or increase the authorized amount of
any class of capital stock of the Corporation ranking prior to or on parity with
the Class A Preferred Stock, or (iv) redeem, repurchase or otherwise acquire for
value any shares of Class A Common Stock, Class B Common Stock, Class C
Preferred Stock, Class D Preferred Stock or Class E Preferred Stock except for
the redemption of Class C Preferred Stock and Class E Preferred Stock pursuant
to Section 5 above or the reacquisition of shares of Class A Common Stock
pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G).
(b) So long as any shares of Class C Preferred Stock are
outstanding, without first obtaining the approval of the holders of a majority
of the shares of the Class C Preferred Stock, the Corporation shall not (i)
alter or change the rights, preferences or privileges of the shares of Class C
Preferred Stock, whether by way of amendment to the Corporation's Certificate of
Incorporation or Bylaws, (ii) increase or decrease the total number of
authorized shares of Class C Preferred Stock, (iii) create, authorize or issue
any class or series of any equity security having a preference over, or being on
parity with, the Class C Preferred Stock with respect to dividends or upon
liquidation, or increase the authorized amount of any class of capital stock of
the Corporation ranking prior to or on parity with the Class C Preferred Stock,
(iv) redeem, repurchase or otherwise acquire for value any shares of Class A
Common Stock, Class
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B Common Stock, Class A Preferred Stock, Class D Preferred Stock or Class E
Preferred Stock except for the reacquisition of shares of Class A Common Stock
pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G), or (v) declare dividends
(other than in shares of Class A Common Stock) on any share of capital stock of
the Corporation.
(c) So long as any shares of Class E Preferred Stock are
outstanding, without first obtaining the approval of the holders of a majority
of the shares of the Class E Preferred Stock, the Corporation shall not (i)
alter or change the rights, preferences or privileges of the shares of Class E
Preferred Stock, whether by way of amendment to the Corporation's Certificate of
Incorporation or Bylaws, (ii) increase or decrease the total number of
authorized shares of Class E Preferred Stock, (iii) create, authorize or issue
any class or series of any equity security having a preference over, or being on
parity with, the Class E Preferred Stock with respect to dividends or upon
liquidation, or increase the authorized amount of any class of capital stock of
the Corporation ranking prior to or on parity with the Class E Preferred Stock,
(iv) redeem, repurchase or otherwise acquire for value any shares of Class A
Common Stock, Class B Common Stock, Class A Preferred Stock, Class C Preferred
Stock or Class D Preferred Stock except for the reacquisition of shares of Class
A Common Stock pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G), or (v)
declare dividends (other than in shares of Class A Common Stock) on any share of
capital stock of the Corporation.
ARTICLE VI
In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, amend, alter,
change, add to or repeal bylaws of this Corporation, without any action on the
part of the stockholders. The bylaws made by the directors may be amended,
altered, changed, added to or repealed by the stockholders. Any specific
provision in the bylaws regarding amendment thereof shall be controlling.
ARTICLE VII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this article shall not eliminate or
limit the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) for the unlawful payment of dividends or unlawful stock repurchases
under Section 174 of the Delaware General Corporation Law; or (d) for any
transaction from which the director derived an improper personal benefit.
ARTICLE VIII
The Corporation shall, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law, as the same may be amended and
supplemented, indemnify each director and officer of the Corporation from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified may be
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entitled under any bylaw, agreement, vote of stockholders, vote of disinterested
directors or otherwise, and shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such persons, and the Corporation may purchase and maintain
insurance on behalf of any director or officer to the extent permitted by
Section 145 of the Delaware General Corporation Law.
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IN WITNESS WHEREOF, this certificate has been subscribed by the
undersigned who affirms that the statements made herein are true under the
penalties of perjury.
Dated: March 10, 1999
New York, New York
MAIL.COM, INC.
By: /s/ Gary Millin
-------------------------
Name: Gary Millin
Title: President
Corporate Seal
