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EXHIBIT 3.01
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EROOM TECHNOLOGY, INC.
* * * * * *
1. The name of the corporation is eRoom Technology, Inc. The name under
which the corporation was originally incorporated was Instinctive Technology,
Inc. The date of filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was June 17, 1996. A Certificate of
Amendment to the Certificate of Incorporation was filed on July 26, 1996. The
Amended and Restated Certificate of Incorporation was filed on May 8, 1997. The
Second Amended and Restated Certificate of Incorporation was filed on August 8,
1997. The Third Amended and Restated Certificate of Incorporation was filed on
August 13, 1998. The Fourth Amended and Restated Certificate of Incorporation
was filed on September 1, 1999. A Certificate of Amendment to the Fourth Amended
and Restated Certificate of Incorporation was filed on March 30, 2000.
2. This Fifth Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Certificate of Incorporation of
said corporation as heretofore amended and has been duly adopted in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware, with stockholder approval given by written consent in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
3. The text of the Certificate of Incorporation is hereby amended and
restated to read as herein set forth in full:
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FIRST. The name of the corporation is eRoom Technology, Inc. (the
"Corporation").
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is sixty million (60,000,000) shares
of Common Stock, $0.01 par value per share ("Common Stock") eleven million eight
hundred fifty-nine thousand nine hundred twenty-one (11,859,921) shares of
Preferred Stock (the "Preferred Stock"), $0.01 par value per share, of which (i)
three million five hundred sixty-five thousand (3,565,000) shares shall be
designated Series A Convertible Preferred Stock ("Series A Preferred Stock"),
(ii) two million eight hundred and fifty-one thousand sixty-five (2,851,065)
shares shall be designated Series B Convertible Preferred Stock ("Series B
Preferred Stock"), (iii) one million two hundred and fifty thousand (1,250,000)
shares shall be designated Series B-1 Convertible Preferred Stock ("Series B-1
Preferred Stock"), (iv) three million two hundred thirty six thousand nine
hundred eighteen (3,236,918) shares shall be designated Series C Convertible
Preferred Stock ("Series C Preferred Stock") and (v) nine hundred fifty-six
thousand nine hundred thirty-eight (956,938) shares shall be designated Series D
Convertible Preferred Stock (the "Series D Preferred Stock").
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The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock (the "Common Stockholders") are subject to and qualified by
the rights of the holders of the Preferred Stock of any series as may be
designated by the Board of Directors.
2. Voting. The Common Stockholders are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting. Notwithstanding the provisions
of Section 242(b)(2) of the General Corporation Law of the State of Delaware,
the Common Stockholders shall vote together with the Preferred Stockholders as a
single class with respect to any proposed amendment hereto that would increase
the number of authorized shares of Common Stock, and the Common Stockholders
shall not be entitled to a separate class vote with respect thereto.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock. No dividends may be declared on the Common Stock
unless dividends are at the same time declared on the Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, Common Stockholders will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders (the "Liquidation Assets"), subject to any preferential rights of
any then outstanding Preferred Stock.
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B. PREFERRED STOCK.
1. Dividends. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock (collectively, the "Preferred Stockholders") shall be entitled
to receive, out of funds legally available therefor, dividends at the same rate
as dividends (other than dividends paid in additional shares of Common Stock)
are declared and paid with respect to the Common Stock (the "Preferred
Dividends") (treating each share of Preferred Stock as being equal to the number
of shares of Common Stock into which each such share of Preferred Stock could be
converted pursuant to the provisions of Section 4 hereof with such number
determined as of the record date for the determination of the Common
Stockholders entitled to receive such dividends).
The Preferred Dividends shall be payable if, when and as declared by
the Board of Directors, but in any event shall be payable upon (i) redemption of
the Mandatory Redemption Preferred Stock as provided in Section B.6(a) hereof
but only payable with respect to such Mandatory Redemption Preferred Stock, (ii)
liquidation, dissolution or winding up as provided in Section B.2 hereof, or
(iii) any merger, sale of all or substantially all of the assets or capital
stock, or other form of acquisition or business combination involving the
Corporation where the Corporation is the target of such acquisition and where a
change in control occurs such that a new person or entity receives the power to
elect a majority of the Board of Directors. Any dividends so declared shall be
paid in full to the Preferred Stockholders prior to any payment of dividends to
the Common Stockholders. All dividends declared upon the Preferred Stock shall
be declared pro rata per share to holders of Preferred Stock entitled to such
dividends.
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2. Liquidation, Dissolution or Winding Up; Certain Mergers,
Consolidations and Asset Sales.
(a) Series A Liquidation Payments. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series A Preferred Stock (the "Series A
Stockholders") shall be entitled to be paid out of the Liquidation Assets,
before any payment shall be made to the holders of Common Stock by reason of
their ownership thereof, an amount equal to the greater of (i) $1.00 per share
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus any dividends declared but unpaid on such shares, and (ii) such amount per
share as would have been payable pursuant to Section A.4 had each such share
been converted into Common Stock pursuant to Section B.4 immediately prior to
such liquidation, dissolution or winding up (the "Series A Liquidation
Payment").
(b) Series B Liquidation Payments. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series B Preferred Stock (the "Series B
Stockholders") shall be entitled to be paid out of the Liquidation Assets (as
defined above), before any payment shall be made to the holders of Common Stock
by reason of their ownership thereof, an amount equal to the greater of (i)
$2.35 per share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid on such shares, and (ii)
such amount per share as would have been payable pursuant to Section A.4 had
each such share been converted into Common Stock pursuant to Section B.4
immediately prior to such liquidation, dissolution or winding up (the "Series B
Liquidation Payment").
(c) Series B-1 Liquidation Payments. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series B-1 Preferred Stock (the "Series
B-1 Stockholders") shall be
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entitled to be paid out of the Liquidation Assets (as defined above), before any
payment shall be made to the holders of Common Stock by reason of their
ownership thereof, an amount equal to the greater of (i) $2.80 per share
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus any dividends declared but unpaid on such shares, and (ii) such amount per
share as would have been payable pursuant to Section A.4 had each such share
been converted into Common Stock pursuant to Section B.4 immediately prior to
such liquidation, dissolution or winding up (the "Series B-1 Liquidation
Payment").
(d) Series C Liquidation Payments. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series C Preferred Stock (the "Series C
Stockholders") shall be entitled to be paid out of the Liquidation Assets (as
defined above), before any payment shall be made to the holders of Common Stock
by reason of their ownership thereof, an amount equal to the greater of (i)
$4.80 per share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid on such shares, and (ii)
such amount per share as would have been payable pursuant to Section A.4 had
each such share been converted into Common Stock pursuant to Section B.4
immediately prior to such liquidation, dissolution or winding up (the "Series C
Liquidation Payment").
(e) Series D Liquidation Payments. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series D Preferred Stock (the "Series D
Stockholders") shall be entitled to be paid out of the Liquidation Assets (as
defined above), before any payment shall be made to the holders of Common Stock
by reason of their ownership thereof, an amount equal to the greater of (i)
$10.45 per share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid on such shares, and (ii)
such amount per share as would have been payable pursuant to Section A.4 had
each
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such share been converted into Common Stock pursuant to Section B.4 immediately
prior to such liquidation, dissolution or winding up (the "Series D Liquidation
Payment").
(f) Distribution of Liquidation Assets. If upon any such
liquidation, dissolution or winding up of the Corporation the Liquidation Assets
shall be insufficient to pay the Preferred Stockholders the full amounts to
which they are entitled, the Preferred Stockholders shall share ratably the
Liquidation Assets on a pari passu basis in proportion to their respective
Liquidation Payments. After payment of all preferential amounts required to be
paid to the Preferred Stockholders, the remaining Liquidation Assets shall be
distributed among the Common Stockholders, pro rata, based on the number of
shares of Common Stock held by each.
(g) Mergers. In the event of any merger or consolidation of
the Corporation into or with another corporation (except one in which the shares
of the Corporation held by holders of capital stock of the Corporation
immediately prior to such merger or consolidation continue to represent at least
80% by voting power of the capital stock of the surviving or resulting
corporation), or the sale of all or substantially all the assets of the
Corporation, unless the holders of at least 55% of the then outstanding shares
of Preferred Stock, voting together as a single class on an as-if-converted
basis, elect that such merger, consolidation or asset sale not be deemed to be a
liquidation of the Corporation by giving written notice thereof to the
Corporation at least three days before the effective date of such event, then
such merger, consolidation or asset sale shall be deemed to be a liquidation of
the Corporation, and all consideration payable to the stockholders of the
Corporation (in the case of a merger or consolidation), or all consideration
payable to the Corporation, together with all other available assets of the
Corporation (in the case of an asset sale), shall be distributed to the holders
of capital stock of the Corporation in accordance with Subsections 2(a)-(e)
above. The Corporation shall promptly provide to the Preferred Stockholders such
information concerning the terms of such merger, consolidation or asset sale and
the value of the assets of the Corporation as may reasonably be requested by the
Preferred Stockholders in order to
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assist them in determining whether to make such an election. If the Preferred
Stockholders do not make such an election, the Corporation shall use its best
efforts to amend the agreement or plan of merger or consolidation to adjust the
rate at which the shares of capital stock of the Corporation are converted into
or exchanged for cash, new securities or other property to give effect to the
terms hereof. The amount deemed distributed to the Preferred Stockholders upon
any such merger or consolidation shall be the cash or the value of the property,
rights or securities distributed to such holders by the acquiring person, firm
or other entity. The value of such property, rights or securities that are not
publicly-traded shall be determined in good faith by the Board of Directors of
the Corporation. The fair value of publicly-traded securities shall be
determined as follows:
(i) If traded on a securities exchange or through the
Nasdaq National Market, the fair value shall be deemed to be the
average of the closing prices of the securities on such exchange over
the twenty-day period ending three (3) days prior to the closing of
such merger or consolidation; and
(ii) If traded over-the-counter, the fair value shall
be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the twenty-day period ending three (3)
days prior to the closing of such merger or consolidation.
If notice of the election permitted by this Subsection (g) is given,
the provisions of Subsection 4(i) shall apply.
(h) The Corporation may not liquidate, dissolve or wind up if
the Liquidation Assets shall be insufficient to pay the Preferred Stockholders
the full amounts to which they shall be entitled upon such liquidation,
dissolution or winding up under this Section 2, unless the Corporation receives
the prior written approval of the holders of 55% of the Preferred Stock, voting
together as a single class on an as-if-converted basis.
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3. Voting.
(a) Each Preferred Stockholder shall be entitled to the number
of votes equal to the number of whole shares of Common Stock into which the
shares of Preferred Stock held by such holder are then convertible (as adjusted
from time to time pursuant to Section 4 hereof), at each meeting of stockholders
of the Corporation (and written actions of stockholders in lieu of meetings)
with respect to any and all matters presented to the stockholders of the
Corporation for their action or consideration. Except as provided by law or by
the provisions of Subsection 3(b), 3(c) or 3(d) below, the Preferred
Stockholders shall vote together with the Common Stockholders as a single class.
(b) Any provision of the By-Laws of the Corporation to the
contrary notwithstanding, the number of directors constituting the entire Board
of Directors of the Corporation shall be fixed at eight (8), and may not be
increased without the prior written consent of a majority of the members of the
Board of Directors designated by the Preferred Stockholders (the "Preferred
Directors"). The Board of Directors shall not delegate any of its powers or
duties to any committee of the Board of Directors without the consent of at
least fifty percent (50%) of the Preferred Directors then in office. So long as
at least 625,000 shares of Series C Preferred are outstanding, the holders of
Series C Preferred, voting as a separate series, shall have the right to elect
one (1) director.
(c) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of any series of Preferred Stock so
as to affect adversely such series of Preferred Stock (A) disproportionately to
the other series of Preferred Stock, without the written consent or affirmative
vote of the holders of (1) 60% of the then outstanding shares of the Series A
Preferred Stock voting separately as a class, in the event such amendment,
alteration or repeal would disproportionately affect the holders of the Series A
Preferred Stock, (2) 55% of the then outstanding shares of Series B Preferred
Stock and Series B-1 Preferred Stock voting together as a single class, in the
event such
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amendment, alteration or repeal would disproportionately affect the holders of
the Series B Preferred Stock or the Series B-1 Preferred Stock, (3) 60% of the
then outstanding shares of the Series C Preferred Stock voting separately as a
class, in the event such amendment, alteration or repeal would
disproportionately affect the holders of the Series C Preferred Stock, and (4)
at least a majority of the then outstanding shares of the Series D Preferred
Stock voting separately as a class, in the event such amendment, alteration or
repeal would disproportionately affect the holders of the Series D Preferred
Stock and (B) in a similar manner to all other series of Preferred Stock,
without the written consent or affirmative vote of the holders of 55% of all
then outstanding shares of Preferred Stock, consenting or voting (as the case
may be) together as a single class on an as-if-converted basis, in each case
such consent or vote to be given in writing or by vote at a meeting. For
purposes of this Section 3(c), without limiting the generality of the foregoing,
the authorization of any shares of capital stock with preference or priority
over, or the authorization of any shares of capital stock on a parity with, any
series of Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely such series of Preferred Stock. In addition,
if any proposed amendment to this Certificate of Incorporation would alter or
change the powers, preferences, or special rights of any one or more series of
Preferred Stock so as to affect them adversely, but shall not so affect the
entire class of Preferred Stock, then the shares of the series of Preferred
Stock so affected by the amendment shall be entitled to vote as a separate class
for the purposes of Section 242(b)(2) of the General Corporation Law of the
State of Delaware. The number of authorized shares of any series of Preferred
Stock may be increased or decreased (but not below the number of shares then
outstanding) by the directors of the Corporation pursuant to Section 151 of the
General Corporation Law of Delaware or by the affirmative vote of the holders of
a majority of the then outstanding shares of the Common Stock, the Preferred
Stock and all other classes or series of stock of the Corporation entitled to
vote thereon, voting as a single class, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of Delaware.
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(d) In addition to any other rights provided by law or this
Certificate of Incorporation, so long as the outstanding shares of the Preferred
Stock represent at least 25% of the outstanding shares of Common Stock, after
giving effect to the conversion into Common Stock of all outstanding convertible
securities (including the Preferred Stock), the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of not
less than 55% of all then outstanding shares of Preferred Stock consenting or
voting (as the case may be) together as a single class on an as-if-converted
basis:
(i) Amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or By-Laws, each as
may be amended or restated from time to time;
(ii) Authorize or issue any new or existing class or
classes or series of capital stock having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of any series of Preferred Stock, or authorize or issue shares of stock
of any class or any bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having rights to purchase, any shares of stock of
the Corporation having any preference or priority as to dividends or assets
superior to or on a parity with any such preference or priority of any series of
Preferred Stock;
(iii) Reclassify any Common Stock into shares having
any preference or priority as to payments of dividends or the distribution of
assets superior to or on a parity with any such preference or priority of any
series of Preferred Stock;
(iv) Pay or declare any dividend or distribution on
any shares of its capital stock (except dividends payable solely in shares of
Common Stock), or apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through subsidiaries or
otherwise, of any shares of its capital stock (other than
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the repurchase of unvested shares from employees at a price not exceeding the
purchase price thereof);
(v) Merge or consolidate into or with any other
corporation or other entity or sell all or any substantial portion of the
Corporation's assets;
(vi) Voluntarily dissolve, liquidate or wind-up or
carry out any partial liquidation or distribution; or
(vii) Make any borrowings, issue any debt securities
(whether or not convertible) or guarantee (directly or indirectly) any
indebtedness in excess of an aggregate amount outstanding at any time of
$500,000.
4. Optional Conversion. The Preferred Stockholders shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Series A Preferred Stock. Each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $1.00 by the
Series A Conversion Price in effect at the time of conversion. The Series A
Conversion Price shall initially be $1.00, subject to adjustment as set forth in
Section 4(d)(iv) hereof.
(ii) Series B Preferred Stock. Each share of Series B
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined
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by dividing $2.35 by the Series B Conversion Price in effect at the time of
conversion. The Series B Conversion Price shall initially be $2.35, subject to
adjustment as set forth in Section 4(d)(iv) hereof.
(iii) Series B-1 Preferred Stock. Each share of
Series B-1 Preferred Stock shall be convertible, at the option of the holder
thereof, at any time and from time to time, and without the payment of
additional consideration by the holder thereof, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $2.80 by
the Series B-1 Conversion Price in effect at the time of conversion. The Series
B-1 Conversion Price shall initially be $2.80, subject to adjustment as set
forth in Section 4(d)(iv) hereof.
(iv) Series C Preferred Stock. Each share of Series C
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $4.80 by the
Series C Conversion Price in effect at the time of conversion. The Series C
Conversion Price shall initially be $4.80, subject to adjustment as set forth in
Section 4(d)(iv) hereof.
(v) Series D Preferred Stock. Each share of Series D
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $10.45 by the
Series D Conversion Price in effect at the time of conversion. The Series D
Conversion Price shall initially be $10.45, subject to adjustment as set forth
in Section 4(d)(iv) hereof.
(vi) Termination of Conversion Rights. In the event
of a liquidation of the Corporation, the conversion rights of the Preferred
Stockholders shall
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terminate at the close of business on the first full day preceding the date
fixed for the payment of any amounts distributable on liquidation to the
Preferred Stockholders.
(b) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series A Conversion Price or Series B Conversion Price or Series B-1
Conversion Price or Series C Conversion Price or Series D Conversion Price, as
applicable. The term "Applicable Conversion Price" shall mean the Series A
Conversion Price and/or the Series B Conversion Price and/or the Series B-1
Conversion Price and/or Series C Conversion Price and/or the Series D Conversion
Price, as the case may be, and as the context requires.
(c) Mechanics of Conversion.
(i) In order for a holder of Preferred Stock to
convert such shares into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Preferred Stock, at the office of
the transfer agent for the Preferred Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of Preferred Stock represented by such certificate or certificates. Such
notice shall state such holder's name or the name(s) of the nominee(s) in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or the duly authorized attorney of such holder in
writing. The date of receipt of such certificate(s) and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The Corporation shall,
as soon as practicable after the Conversion Date, issue and deliver at
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such office to such holder, or to the nominee(s) of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when any
shares of Preferred Stock shall be outstanding, reserve and keep available out
of its authorized but unissued stock, for the purpose of effecting the
conversion of such shares of Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Preferred Stock. Before taking any
action which would cause an adjustment reducing the Applicable Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock, as applicable,
the Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Applicable Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Applicable Conversion Price shall be made for any declared but unpaid dividends
on any series of Preferred Stock surrendered for conversion or on the Common
Stock delivered upon conversion.
(iv) All shares of Preferred Stock which have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the applicable Conversion Date, except only the right of the holders thereof to
receive shares of Common Stock in exchange therefor and payment of any dividends
declared but unpaid thereon. Any shares of Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Corporation (without the
need for stockholder action) may from time to time take
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such appropriate action as may be necessary to reduce the authorized shares of
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of Preferred Stock pursuant to this
Section 4. The Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of shares of Common Stock in a name other than that in which the shares of
Preferred Stock so converted were registered, and no such issuance or delivery
shall be made unless and until the person or entity requesting such issuance has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this
Subsection 4(d), the following definitions shall apply:
(A) "Option" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in subsection 4(d)(i)(D)(IV)
and warrants or similar derivative securities described in Subsection
4(d)(i)(D)(V) below.
(B) "Original Issue Date" shall mean, with
respect to the Series A Preferred Stock, the date on which a share of Series A
Preferred Stock was first issued, and shall mean, with respect to the Series B
Preferred Stock, the date on which a share of Series B Preferred Stock was first
issued, and shall mean, with respect to the Series B-1 Preferred Stock, the date
on which a share of Series B-1 Preferred Stock was first issued, and shall mean,
with respect to the Series C Preferred Stock, the date on which a share of
Series C Preferred Stock was first issued and shall mean, with respect to
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the Series D Preferred Stock, the date on which a share of Series D Preferred
Stock was first issued.
(C) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities, including the Series A
Preferred Stock and Series B Preferred Stock and Series B-1 Preferred Stock and
Series C Preferred Stock and Series D Preferred Stock, directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued, or deemed to be issued pursuant to
Subsection 4(d)(iii) below, by the Corporation after the Original Issue Date,
other than shares of Common Stock issued or issuable:
(I) upon conversion of any
Convertible Securities outstanding on the Original Issue Date or upon exercise
of any Options outstanding on the Original Issue Date;
(II) as a dividend or distribution
on the Preferred Stock;
(III) by reason of a dividend, stock
split, split-up or other distribution on shares of Common Stock that is covered
by Subsection 4(e) or 4(f) below;
(IV) to employees or directors of,
or consultants to, the Corporation pursuant to a plan adopted by the Board of
Directors of the Corporation; provided, however, that the aggregate number of
such shares issued or issuable pursuant to this Section 4(d)(i)(D)(IV) shall not
exceed 5,284,302 shares or such greater number as is unanimously approved by the
Board of Directors (subject to
<PAGE> 18
18
appropriate adjustment for any stock dividend, stock split, combination or
recapitalization affecting such shares); or
(V) upon exercise or conversion of
any warrants or similar derivative securities issued in connection with a bank
financing or equipment leasing transaction approved by the Board of Directors of
the Company.
(ii) No Adjustment of Conversion Price. No adjustment
in the number of shares of Common Stock into which any series of Preferred Stock
is convertible shall be made, by adjustment in the Applicable Conversion Price
thereof: (a) unless the consideration per share (determined pursuant to
Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed to
be issued by the Corporation is less than the Applicable Conversion Price in
effect on the date of, and immediately prior to, the issue of such Additional
Share(s), or (b) if prior to such issuance, the Corporation receives written
notice from the holders of (i) at least 60% of the then outstanding shares of
the Series A Preferred Stock, in the case of an adjustment to the Series A
Conversion Price, (ii) at least 55% of the then outstanding shares of the Series
B Preferred Stock, in the case of an adjustment to the Series B Conversion
Price, (iii) at least 55% of the then outstanding shares of the Series B-1
Preferred Stock, in the case of an adjustment to the Series B-1 Conversion
Price, (iv) at least 70% of the then outstanding shares of the Series C
Preferred Stock, in the case of an adjustment to the Series C Conversion Price,
or (v) at least a majority of the then outstanding shares of the Series D
Preferred Stock, in the case of an adjustment to the Series D Conversion Price,
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional
Shares of Common Stock. If (i) the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities, and
(ii) the consideration per share, determined pursuant to
<PAGE> 19
19
Section 4(d)(v), paid for such Options or Convertible Securities shall be less
than the Applicable Conversion Price in effect for any particular series of
Preferred Stock on the date of and immediately prior to such issue, or such
record date, as the case may be, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock with respect to each
class of Preferred Stock which has an Applicable Conversion Price greater than
the consideration per share received for such Options or Convertible Securities.
Such Additional Shares of Common Stock shall be deemed to have been issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date. Furthermore, whenever Additional
Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Applicable
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Applicable Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase in consideration becoming effective, be recomputed to reflect such
increase insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
<PAGE> 20
20
(C) Upon the expiration or termination of
any unexercised Option, the Applicable Conversion Price shall not be readjusted,
but the Additional Shares of Common Stock deemed issued as the result of the
original issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Applicable Conversion Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Applicable Conversion
Price then in effect shall forthwith be readjusted to such Applicable Conversion
Price as would have obtained had the adjustment which was made upon the issuance
of such Option or Convertible Security not exercised or converted prior to such
change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing the Applicable Conversion Price
to an amount which exceeds the lower of (i) the Applicable Conversion Price on
the original adjustment date, or (ii) the Applicable Conversion Price that would
have resulted from any issuances of Additional Shares of Common Stock between
the original adjustment date and such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
<PAGE> 21
21
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock.
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the Applicable
Conversion Price for any particular series of Preferred Stock in effect on the
date of and immediately prior to such issue, then and in such event, such
conversion price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying the Applicable
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Applicable Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) the number of shares
of Common Stock deemed issuable upon exercise or conversion of such outstanding
Options and Convertible Securities shall not give effect to any adjustments to
the conversion price or conversion rate of such Options or Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that
is the subject of this calculation.
<PAGE> 22
22
(v) Determination of Consideration. For purposes of
this Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration
shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest;
(II) insofar as it consists of
property other than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (I) and (II)
above, allocable to Additional Shares of Common Stock as determined in good
faith by the Board of Directors.
(B) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(I) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation
<PAGE> 23
23
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(II) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Multiple Closing Dates. In the event the
Corporation shall issue on more than one date Additional Shares of Common Stock
which are comprised of shares of the same series or class of stock, and such
issuance dates occur within a period of no more than 120 days, then the
Applicable Conversion Price shall be adjusted only once on account of such
issuances, with such adjustment to occur upon the final such issuance and to
give effect to all such issuances as if they occurred on the date of the final
such issuance.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series A Conversion
Price, the Series B Conversion Price, the Series B-1 Conversion Price, the
Series C Conversion Price and the Series D Conversion Price in effect
immediately before such subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Series A Conversion Price,
the Series B Conversion Price, the Series B-1 Conversion Price, the Series C
Conversion Price and the Series D Conversion Price in effect immediately before
such combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
<PAGE> 24
24
(f) Adjustment for Certain Dividends and Distributions. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series A
Conversion Price, the Series B Conversion Price, the Series B-1 Conversion
Price, the Series C Conversion Price and the Series D Conversion Price then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date shall have been fixed, as of the close of business on such record
date, by multiplying the Applicable Conversion Price then in effect by a
fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Applicable Conversion Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Applicable
Conversion Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made to the conversion price of any
series of Preferred Stock which has simultaneously received a dividend or other
distribution of shares of Common Stock in a number equal to the number of shares
of Common Stock as they would have received if all outstanding shares
<PAGE> 25
25
of such series of Preferred Stock had been converted into Common Stock on the
date of such event.
(g) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then, and in
each such event, provision shall be made so that the Preferred Stockholders
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Corporation
they would have received, had the Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this
paragraph with respect to the rights of the Preferred Stockholders; and provided
further, however, that no such adjustment shall be made if the Preferred
Stockholders simultaneously receive a dividend or other distribution of such
securities in an amount equal to the amount of such securities as they would
have received if all outstanding shares of Preferred Stock had been converted
into Common Stock on the date of such event.
(h) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of any series of
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each such share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the
<PAGE> 26
26
number of shares of Common Stock into which such shares of Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of
any consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or sale which is covered
by Subsection 2(g)), each share of Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the Preferred Stockholders, to the end
that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Applicable Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Preferred
Stockholders against impairment.
<PAGE> 27
27
(k) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Applicable Conversion Price in effect for any
particular series of Preferred Stock pursuant to this Section 4, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each Preferred Stockholder so
affected, a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any Preferred
Stockholder, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Applicable Conversion Price then in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which then would be
received upon the conversion of shares of Preferred Stock held by such Preferred
Stockholder.
(l) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of
the Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution thereon), or of
any consolidation or merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
<PAGE> 28
28
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Preferred Stock, and shall cause to be
mailed to the Preferred Stockholders at their last addresses as shown on the
records of the Corporation or such transfer agent, at least ten days prior to
the date specified in (A) below or twenty days before the date specified in (B)
below, a notice stating:
(A) the record date of such dividend,
distribution, subdivision or combination, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
5. Mandatory Conversion.
(a) Upon the closing of the sale of shares of Common Stock, at
a price to the public of at least $9.60 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a firm commitment, underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $20.0 million of
proceeds to the Corporation net of all underwriting discounts and commissions
(the "Primary Mandatory Conversion Date"), (i) all outstanding shares of Series
A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and
Series C Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective
<PAGE> 29
29
conversion rate and (ii) the number of authorized shares of such Preferred Stock
shall be automatically reduced to zero, and all provisions included under the
caption and all references to such Preferred Stock, shall be deleted and shall
be of no further force or effect. Upon the closing of the sale of shares of
Common Stock, at a price to the public of at least $10.45 per share (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
similar recapitalizations affecting such shares), in a firm commitment,
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, resulting in at least $20.0
million of proceeds to the Corporation net of all underwriting discounts and
commissions (the "Secondary Mandatory Conversion Date"; each of the Primary
Mandatory Conversion Date and Secondary Mandatory Conversion Date hereinafter
referred to as a "Mandatory Conversion Date"), (i) all outstanding shares of
Series D Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate and (ii) the number of authorized
shares of such Series D Preferred Stock shall be automatically reduced to zero,
and all provisions included under the caption and all references to such Series
D Preferred Stock, shall be deleted and shall be of no further force or effect.
(b) All holders of record of shares of Preferred Stock shall
be given written notice of any Mandatory Conversion Date applicable to them and
the place designated for mandatory conversion of all shares of Preferred Stock
automatically converting pursuant to this Section 5. Such notice need not be
given in advance of the occurrence of the applicable Mandatory Conversion Date.
Such notice shall be sent by first class or registered mail, postage prepaid, to
each such record holder of Preferred Stock at such holder's address last shown
on the records of the transfer agent for the Preferred Stock (or the records of
the Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each such Preferred Stockholder shall surrender his or its certificate
or certificates for all such shares to the Corporation at the place designated
in such notice, and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled pursuant to this Section
5. On a Mandatory
<PAGE> 30
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Conversion Date, all rights with respect to the applicable Preferred Stock so
converted, including the rights, if any, to receive notices and vote (other than
as a holder of Common Stock) will terminate, except only the rights of the
holders thereof, upon surrender of their certificate or certificates therefor,
to receive certificates for the number of shares of Common Stock into which such
shares of Preferred Stock have been converted, and payment of any declared but
unpaid dividends thereon. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his or its attorney duly authorized
in writing. As soon as practicable after a Mandatory Conversion Date and the
surrender of the certificate or certificates for Preferred Stock, the
Corporation shall cause to be issued and delivered to such holder, or on his or
its written order, a certificate or certificates for the number of full shares
of Common Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in Subsection 4(b) in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the applicable Mandatory Conversion
Date, be deemed to have been retired and canceled and the shares of Preferred
Stock represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Preferred Stock accordingly.
6. Mandatory Redemption
(a) At the request of the holders of 55% of all outstanding
shares of the Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock and Series C Preferred Stock (for purposes of this Section 6
collectively the "Mandatory
<PAGE> 31
31
Redemption Preferred Stock"), voting together as a single class on an
as-if-converted basis, the Corporation will, subject to the conditions set forth
in Subsection 6(b) below, on September 13, 2004 and on each of the first and
second anniversaries thereof (each such date being referred to hereinafter as a
"Mandatory Redemption Date"), redeem from each holder of shares of Mandatory
Redemption Preferred Stock, at a price equal to (i) $1.00 per share, plus any
dividends declared but unpaid thereon, with respect to the Series A
Stockholders, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares (the "Series A Mandatory Redemption Price"), (ii) $2.35 per share,
plus any dividends declared but unpaid thereon, with respect to the Series B
Stockholders, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares (the "Series B Mandatory Redemption Price"), (iii) $2.80 per share,
plus any dividends declared but unpaid thereon, with respect to the Series B-1
Stockholders, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares (the "Series B-1 Mandatory Redemption Price"), or (iv) $4.80 per
share, plus any dividends declared but unpaid thereon, with respect to the
Series C Stockholders, subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization
affecting such shares (the "Series C Mandatory Redemption Price"), the following
respective portions of the number of shares of Mandatory Redemption Preferred
Stock held by such holder on the applicable Mandatory Redemption Date:
<TABLE>
<CAPTION>
Portion of Then-Outstanding
Shares of Mandatory Redemption
Redemption Date Preferred Stock To Be Redeemed
--------------- ------------------------------
<S> <C>
September 13, 2004 33.33%
September 13, 2005 66.67%
September 13, 2006 All outstanding shares of Mandatory
Redemption Preferred Stock
</TABLE>
<PAGE> 32
32
(b) The Corporation shall not, on any Mandatory Redemption
Date, be required to pay more than 100% of its consolidated net income, before
taxes, for the immediately preceding fiscal year to redeem shares of the
Mandatory Redemption Preferred Stock pursuant to Subsection 6(a) above. If the
Corporation cannot by application of this Subsection (b) redeem all of the
shares subject to mandatory redemption on a particular Mandatory Redemption
Date, it shall redeem the maximum possible number of whole shares of Mandatory
Redemption Preferred Stock ratably and pari passu on the basis of the number of
shares of Mandatory Redemption Preferred Stock which would be redeemed on such
date if the Corporation were not prevented by this Subsection 6(b) from
redeeming any shares.
(c) If the funds of the Corporation legally available for
redemption of Mandatory Redemption Preferred Stock on any Mandatory Redemption
Date are insufficient to redeem the number of shares of Mandatory Redemption
Preferred Stock required under this Section 6 to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares of Mandatory Redemption Preferred Stock ratably and pari
passu on the basis of the number of shares of Mandatory Redemption Preferred
Stock which would be redeemed on such date if the funds of the Corporation
legally available therefor had been sufficient to redeem all shares of Mandatory
Redemption Preferred Stock required to be redeemed on such date. At any time
thereafter when additional funds of the Corporation become legally available for
the redemption of Mandatory Redemption Preferred Stock, such funds will be used,
at the end of the next succeeding fiscal quarter, to redeem the balance of the
shares which the Corporation was theretofore obligated to redeem, ratably and
pari passu on the basis set forth in the preceding sentence.
(d) The Corporation shall be entitled, at its option, to
credit against the number of shares of Mandatory Redemption Preferred Stock
required to be redeemed from any holder on any Mandatory Redemption Date any
shares of Mandatory
<PAGE> 33
33
Redemption Preferred Stock previously converted by such holder into Common Stock
pursuant to Section 4 and not previously so credited.
(e) The Corporation shall provide notice of any redemption of
the Mandatory Redemption Preferred Stock pursuant to this Section 6 specifying
the time and place of redemption and the Mandatory Redemption Price in effect
with respect to each series of Mandatory Redemption Preferred Stock, by first
class or registered mail, postage prepaid, to each holder of record of Mandatory
Redemption Preferred Stock, at the address for such holder last shown on the
records of the transfer agent therefor (or the records of the Corporation, if it
serves as its own transfer agent), not more than 60 nor less than 30 days prior
to the date on which such redemption is to be made. If less than all Mandatory
Redemption Preferred Stock owned by such holder is then to be redeemed, the
notice will also specify the number of shares which are to be redeemed. Upon
mailing any such notice of redemption, the Corporation will become obligated to
redeem at the time of redemption specified therein all Mandatory Redemption
Preferred Stock specified therein (other than such shares of Mandatory
Redemption Preferred Stock as are duly converted pursuant to Section 4 prior to
the close of business on the fifth full day preceding the Mandatory Redemption
Date). In case less than all Mandatory Redemption Preferred Stock represented by
any certificate is redeemed in any redemption pursuant to this Section 6, a new
certificate will be issued representing the unredeemed Mandatory Redemption
Preferred Stock without cost to the holder thereof.
(f) Unless there shall have been a default in payment of the
Mandatory Redemption Price with respect to any series of Mandatory Redemption
Preferred Stock, no share of Mandatory Redemption Preferred Stock shall be
entitled to any dividends declared after its Mandatory Redemption Date, and on
such Mandatory Redemption Date all rights of the holder of such share as a
stockholder of the Corporation by reason of the ownership of such share will
cease, except the right to receive the Mandatory Redemption Price in effect with
respect to such share, without interest, upon presentation and
<PAGE> 34
34
surrender of the certificate representing such share, and such share will not
from and after such Mandatory Redemption Date be deemed to be outstanding.
(g) Any Mandatory Redemption Preferred Stock redeemed pursuant
to this Section 6 will be canceled and will not under any circumstances be
reissued, sold or transferred and the Corporation may from time to time take
such appropriate action as may be necessary to reduce the authorized Mandatory
Redemption Preferred Stock accordingly.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation.
B. Elections of directors need not be by written ballot unless
the By-Laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place
within or without the State of Delaware as the By-Laws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
SEVENTH. The Corporation eliminates the personal liability of each
member of its Board of Directors to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided, however,
that, to the extent provided by applicable law, the foregoing shall not
eliminate the liability of a director (i) for any breach of such director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of Title 8 of the Delaware Code or (iv) for any
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability
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or alleged liability of any director for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
EIGHTH. The Corporation reserves the right to amend or repeal any
provision contained in this Fifth Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon a stockholder herein are granted subject to this
reservation.
NINTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
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IN WITNESS WHEREOF, the Corporation has caused this Fifth
Amended and Restated Certificate of Incorporation to be signed by its President
this 20th day of April, 2000.
EROOM TECHNOLOGY, INC.
/s/ Jeffrey R. Beir
By: _________________________
Jeffrey R. Beir
President
