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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TRINAGY, INC.
ARTICLE I
The name of the corporation is Trinagy, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 9 East Loockerman Street, Dover, Delaware, County of Kent. The name of its
registered agent at such address is National Registered Agents, Inc.
ARTICLE III
The nature of the business of the Corporation and the objects or purposes
to be transacted, promoted or carried on by it are as follows: 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 IV
A. The total number of shares of all classes of stock that the
Corporation is authorized to issue is 100,000,000 million shares (100,000,000),
consisting of ninety million, six hundred twenty-seven thousand, four hundred
forty-eight (90,627,448) shares of common stock with a par value of $0.0001 per
share (the "Common Stock") and nine million, three hundred seventy-two thousand,
five hundred fifty-two (9,372,552) shares of preferred stock with a par value of
$0.0001 per share.
B. The preferred stock may be issued from time to time in one or more
series. The first series shall be designated "Series B Preferred Stock" and
shall consist of one million, five hundred twenty-five thousand, four hundred
twenty-four (1,525,424) shares. The second series shall be designated "Series C
Preferred Stock" and shall consist of one million, two hundred forty-four
thousand, four hundred eighty-six (1,244,486) shares, and the third series shall
be designated "Series D Preferred Stock" and shall consist of one million, six
hundred two thousand, six hundred forty-two (1,602,642) shares. The term
"Preferred Stock," when used herein without further designation of series, shall
mean the Series B Preferred Stock, the Series C Preferred Stock, and the Series
D Preferred Stock.
C. Subject to the limitations and restrictions in this Article IV, and
except as to the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock, the Board of Directors, by resolution or resolutions,
is authorized to create or provide for any such
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series, and to fix the designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including, without limitation, the authority to fix or
alter the dividend rights, dividend rates, conversion rights, exchange rights,
voting rights, rights and terms of redemption (including sinking and purchase
fund provisions), the redemption price or prices, the dissolution preferences
and the rights in respect to any distribution of assets of any wholly unissued
series of preferred stock and the number of shares constituting any such series,
and the designation thereof, or any of them and to increase or decrease the
number of shares of any series so created, subsequent to the issue of that
series but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series. There shall be no limitation or restriction on any variation between any
of the different series of preferred stock as to the designations, preferences
and relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof; and the several series of
preferred stock may, except as in this Article IV otherwise expressly provided,
vary in any and all respects as fixed and determined by the resolution or
resolutions of the Board of Directors, providing for the issuance of the various
series; provided, however, that all shares of any one series of preferred stock
shall have the same designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations and
restrictions.
D. The powers, preferences, rights, restrictions, and other matters
relating to the Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are as follows:
1. Dividends. The holders of the Series B Preferred Stock, the
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Series C Preferred Stock and Series D Preferred Stock shall be entitled to
receive, out of any funds legally available therefor, dividends at the rate of
$0.354 per share, $1.217 per share and $1.404 per share per annum, respectively,
payable in preference and priority to any payment of any dividend on Common
Stock, when and as declared by the Board of Directors. Except as otherwise
expressly provided herein, the right to such dividends on the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock shall not
be cumulative, and no right shall accrue to holders of Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock by reason of the fact that
dividends on such shares are not declared or paid in any prior year.
In the event that the Corporation shall have declared but unpaid dividends
and Redemption Dividends (as defined below) outstanding immediately prior to,
and in the event of, a conversion of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (as provided in Section D.3), the
Corporation shall, at the option of each holder, pay in cash to each holder of
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
subject to conversion the full amount of any such dividends or allow such
dividends to be converted into Common Stock in accordance with, and pursuant to
the terms specified in Section D.3.
In the event of a failure by the Corporation to redeem any Series D
Preferred Stock as required hereunder, dividends (the "Redemption Dividends")
shall accrue from the date of such failure, whether or not declared, on each
share of Series D Preferred Stock that remains unredeemed at an initial rate of
16% per annum of the initial Conversion Price (as defined below)
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per share and shall increase by 200 basis points each quarter thereafter until
all such shares which are the subject of such redemption have been redeemed.
2. Liquidation Preference.
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a. In the event of any liquidation, dissolution, or winding up
of the Corporation, either voluntary or involuntary, the holders of Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock
shall be entitled to receive, prior to and in preference to any distribution of
any assets of the Corporation to the holders of the Common Stock by reason of
their ownership thereof an amount equal to $2.36 per share for each share of
Series B Preferred Stock then held by them (the "Series B Per Share Amount"), an
amount equal to $8.11 per share of each share of Series C Preferred Stock then
held by each of them (the "Series C Per Share Amount") and an amount equal to
$9.36 per share of Series D Preferred Stock then held by them, together with any
unpaid Redemption Dividends (the "Series D Per Share Amount"), plus the greater
of either (i) in the case of each share, an amount equal to an accruing annual
dividend of fifteen percent (15%) accruing from the date of issuance per share
of the Series B Per Share Amount or Series C Per Share Amount or Series D Per
Share Amount (as applicable, calculated on a pro rata basis for any partial
year, and not accruing on the Series D Preferred Stock during the period after
the Redemption Date as defined in Section D.8 below), less all dividends
previously declared and paid thereon, or (ii) such amount per share as would be
distributable (after payment of the aggregate Series B, Series C and Series D
Per Share Amounts) ratably among the holders of the Preferred Stock (with each
share of Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into which
such share of Preferred Stock is convertible immediately prior to the close of
business on the business day fixed for such distribution or payment) and the
holders of Common Stock, and the holders of Preferred Stock shall not be
entitled to any further payment, such amount payable with respect to one share
of Preferred Stock being sometimes referred to as the "Liquidation Payment" and
with respect to all shares of Preferred Stock being sometimes referred to as the
"Liquidation Payments." If, upon occurrence of such event, the assets and funds
thus distributed among the holders of the Preferred Stock shall be insufficient
to permit the payment to such holders of the full preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among the holders of the Preferred Stock in proportion to
the relative Liquidation Payment of each such share of Preferred Stock held by
each such holder.
After payment has been made to the holders of the Preferred Stock of the
full amounts to which they shall be entitled as aforesaid, all remaining assets
of the Corporation shall be distributed among all holders of Common Stock in
proportion to the number of shares of Common Stock then held by each such
holder.
b. For purposes of this Section D.2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, the Corporation's sale of all or substantially all of its assets or the
acquisition of the Corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of the
Corporation for securities or consideration issued, or caused to be issued, by
the acquiring corporation or its subsidiary where less than 50% of the successor
corporation's stock, immediately after the transaction, is held by holders of
the Corporation's stock, immediately before the transaction.
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c. Any securities to be delivered to the holders of the
Preferred Stock pursuant to the above Section D.2(b) shall be valued as follows:
(i) Securities not subject to an investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three days prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of each of the then
outstanding shares of Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (each voting as a separate class).
(ii) The method of valuation of securities subject to an
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i)(1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of a majority of each of the
series then outstanding shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock (each voting as a separate class).
3. Conversion. The holders of the Preferred Stock shall have
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conversion rights as follows (the "Conversion Right"):
a. Right to Convert.
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(i) Subject to the last sentence of this clause (i), each
share of Preferred Stock shall be convertible, at the option of the holder
thereof, at any time into such number of fully paid and nonassessable shares of
Common Stock (the "Conversion Rate") as is determined by dividing $2.36, in the
case of Series B Preferred Stock, or $8.11 in the case of Series C Preferred
Stock, or $9.36, in the case of Series D Preferred Stock, by the Conversion
Price, determined as hereinafter provided, in effect at the time of conversion.
The price at which shares of Common Stock shall be deliverable upon conversion
shall initially be $2.36, in the case of Series B Preferred Stock, or $8.11 in
the case of Series C Preferred Stock, of Common Stock or $9.36, in the case of
Series D Preferred Stock (the "Conversion Prices"). Such initial Conversion
Prices shall be subject to adjustment as hereinafter provided.
(ii) Each share of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective applicable Conversion Rate in
the event of, and contingent upon, the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public that meets the following
criteria: (i) the gross
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proceeds to the Corporation shall be at least $45,000,000, before payment of
underwriting discounts and commissions and offering expenses, and (ii) the price
per share of Common Stock to the public shall be no less than (a) $16.38 if the
public offering closes in calendar year 2000, (b) $23.40 if the public offering
closes in calendar year 2001, or (3) $28.08 if the public offering closes any
time thereafter, in each case such prices having been adjusted for stock splits,
reverse splits and the like after the Series D Original Issue Date (a qualified
public offering, or "QPO").
b. Mechanics of Conversion. No fractional shares of Common
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Stock shall be issued upon conversion of Preferred Stock. In lieu of any
fractional share to which a holder would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the fair market value of the
Common Stock as determined by the Board of Directors. Before any holder of
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock, the holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such office
that the holder elects to convert the same. Such notice shall also state whether
the holder elects, pursuant to Section D.1, to receive declared but unpaid
dividends on the Preferred Stock proposed to be converted in cash, or to convert
such dividends into shares of Common Stock at their fair market value as
determined by the Board of Directors. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid and a check payable to
the holder in the amount of any cash amounts payable as the result of a
conversion into a fractional share of Common Stock, and any declared but unpaid
dividends on the converted Preferred Stock that the holder elected to receive in
cash. 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 Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date. If the
conversion is in connection with an underwritten public offering of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
shall be conditioned upon the closing of such public offering, in which event
the person(s) entitled to receive the Common Stock issuable upon such conversion
of the Preferred Stock shall not be deemed to have converted such Preferred
Stock until immediately prior to such closing.
c. Adjustments to Conversion Price for Dilution Issues.
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(i) Special Definitions. For purposes of this Section
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D.3, the following definitions shall apply:
(1) "Original Issue Date" shall mean, with respect to
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the Series B, Series C and Series D Preferred Stock, the date on which the
shares of the respective series are first issued.
(2) "Options" shall mean rights, options or warrants
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to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
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(3) "Convertible Securities" shall mean any evidence
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of indebtedness, shares (other than Common Stock and Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all
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shares of Common Stock issued (or, pursuant to Section D.3(c)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock;
(B) to officers or employees of, or consultants
to, the Corporation pursuant to a stock grant option plan or purchase plan or
other employee stock incentive program approved by the Board of Directors;
(C) as a dividend or distribution on shares of
Preferred Stock;
(D) to leasing entities or financial institutions
in connection with commercial leasing or borrowing transactions, pursuant to
agreements approved by the Board of Directors;
(E) pursuant to the acquisition of another
business entity by the Corporation by merger, purchase of substantially all of
the assets of such entity, or other reorganization whereby the Corporation
acquires not less than a majority of the voting power of such entity;
(F) for which adjustments are made pursuant to
Section D.3(c)(iv); and
(G) by way of dividend or other distribution of
shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (A), (B), (C), (D) and (E) or on shares of
Common Stock so excluded.
(ii) No Adjustment of Conversion Prices. No adjustment
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in the applicable Conversion Price of a particular series of Preferred Stock
shall be made in respect of the issuance of Additional Shares of Common Stock
unless the consideration per share 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 such issue,
for such series of Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common Stock.
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(1) Options and Convertible Securities. In the event
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 or security as entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto) without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
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
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of Common Stock 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,
provided that Additional Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Section
D.3(c)(vi)) of such Additional Shares of Common Stock would be less than the
Conversion Prices in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion
Prices 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, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Prices 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 or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) no readjustment pursuant to clause (B) above
shall have the effect of increasing the Conversion Prices to an amount that
exceeds the lower of (i) the Conversion Prices on the original adjustment date,
or (ii) the Conversion Prices that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date;
(D) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities that
shall not have been exercised, the Conversion Prices 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 such expiration be
recomputed as if:
(i) in the case of Convertible Securities
or Options for Common Stock, the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration actually received by
the Corporation for the issue of such exercised Options plus the consideration
actually received by the Corporation upon such exercise or for the issue of all
such Convertible Securities that were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange; and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually
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received by the Corporation for the issue of such exercised Options, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section D.3(c)(vi)) upon the issue of the Convertible Securities
with respect to which such Options were actually exercised;
(E) in the case of any Options that expire by
their terms not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Prices shall be made until the expiration or exercise of all
such Options issued on the same date, whereupon such adjustment shall be made in
the same manner provided in Section D.3(c)(iv) below; and
(F) if such record date should have been fixed
and such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Prices that became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Conversion Prices shall be adjusted
pursuant to this Section D.3(c)(iii) as of the actual date of their issuance.
(2) Stock Dividends. Subject to the exclusions set
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forth in Section D.3(c)(i)(4), in the event the Corporation, at any time or from
time to time after the Original Issue Date, shall declare or pay any dividend on
the Common Stock payable in Common Stock, then Additional Shares of Common Stock
shall be deemed to have been issued immediately after the close of business on
this record date for the determination of holders of any class of securities
entitled to receive such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of
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Additional Shares of Common Stock. In the event the Corporation shall issue
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Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section D.3(c)(iii)) without consideration or
for a consideration per share less than the applicable Conversion Price 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 such
Conversion Price by a fraction:
(x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate
consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at
such Conversion Price, and
(y) 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, for the purposes of this Section D.3(c)(iv), all shares of Common
Stock issuable upon conversion of all outstanding Preferred Stock and all
outstanding Convertible Securities, and upon exercise of all outstanding
Options, shall be deemed to be outstanding, and immediately after any Additional
Shares of Common Stock are deemed issued pursuant to Section D.3(c)(iii), such
Additional Shares of Common Stock shall be deemed to be outstanding.
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(v) Special Adjustment to Series C and Series D
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Conversion Price. Notwithstanding any other provision for adjustments to the
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Conversion Price of the Series D Preferred Stock, if the Corporation issues any
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section D.3(c)(iii)) prior to December 31, 2000,
for a consideration per share (determined pursuant to Section D.3(c)(vi)) that
is less than the Conversion Price of the Series D Preferred Stock as of the date
of such issuance, then the Conversion Price of the Series D Preferred Stock
shall be reduced to the amount of the consideration per share received by the
Company in such issuance. Notwithstanding any other provision for adjustments to
the Conversion Price of the Series C Preferred Stock, if the Corporation issues
any Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section D.3(c)(iii)) from April 8, 2000
until December 31, 2000, for a consideration per share (determined pursuant to
Section D.3(c)(vi)) that is less than the Conversion Price of the Series C
Preferred Stock as of April 8, 2000, then the Conversion Price of the Series C
Preferred Stock shall be reduced to the amount of the consideration per share
received by the Company in such issuance. During such period no adjustments
shall be made to the Series C and Series D Preferred Stock price other than as
provided in this subsection (v) and as required to adjust for splits, reverse
splits and the like. From and after December 31, 2000, adjustments, if any, to
the Conversion Price of the Series C and Series D Preferred Stock as a result of
issuances of Additional Shares shall be made in accordance with Section
D.3(c)(iv).
(vi) Determination of Consideration. For purposes of this
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Section D.3(c), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
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(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration that covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
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consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section D.3(c)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the
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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 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
(y) 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.
(3) Stock Dividends. Any Additional Shares of Common
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Stock deemed to have been issued relating to stock dividends shall be deemed to
have been issued for no consideration.
(vii) Adjustments for Subdivisions of Combinations of
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Common Stock. In the event the outstanding shares of Common Stock are combined
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or split, by reclassification or otherwise, into a greater or lesser number of
shares without a proportionate and corresponding subdivision or combination of
its outstanding Preferred Stock, the Conversion Prices in effect immediately
prior to such subdivision or combination shall, concurrently with the
effectiveness of such subdivision or combination, be proportionately adjusted.
d. No Impairment. The Corporation will not, by amendment of
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its Certificate of Incorporation or through any reorganization, transfer of
assets, 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
D.3 and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
e. Certificate as to Adjustment. Upon the occurrence of each
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adjustment or readjustment of the Conversion Prices pursuant to this Section
D.3, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon, the written request at anytime of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property that at the time would be
received upon the conversion of Preferred Stock.
f. Notices of Record Date. In the event that the Corporation
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shall propose (or otherwise take action to effect) at any time:
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(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not, a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock shares outstanding involving a change in the Common Stock
shares; or
(iv) to merge with or into any other corporation, or sell,
lease or convey all or substantially all its property or business, to enter into
a transaction resulting in a Change in Control (as defined hereinafter) of the
Corporation, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of the Preferred Stock:
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shares
shall be entitled thereto) or for determining rights to vote in respect of the
matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shares shall be entitled to exchange their Common Stock shares for securities or
other property deliverable upon the occurrence of such event).
Each such written notice shall be given by first class mail, postage prepaid,
addressed to the holders of Preferred Stock at the address for each such holder
as shown on the books of the Corporation.
4. Voting Rights.
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a. Except as otherwise required by law, the holders of the
Preferred Stock and the holders of Common Stock shall be entitled to notice of
any stockholders' meeting and to vote as a single class upon any matter
submitted to the stockholders for a vote, including mergers, dissolution sales
of assets and other material transactions, as follows: (i) each holder of
Preferred Stock shall have one vote for each full share of Common Stock into
which its respective shares of Preferred Stock would be convertible on the
record date for the vote and (ii) each holder of Common Stock shall have one
vote per share of Common Stock.
b. At least 30 days prior to any election of directors of the
Corporation, the holders of the Series B Preferred Stock shall be entitled to
decide whether to elect one director of the Corporation, voting as a separate
series, without a right to vote in accordance with Section D.4(a) above for any
other directors or waive such right and be entitled to the voting rights
pursuant to Section D.4(a) above. If the holders of the Series B Preferred
Stock decide on the former, at any meeting (or in a written consent in lieu
thereof) held for the purpose of electing directors, the presence in person or
by proxy (or the written consent) of the holders of a majority
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of the shares of Series B Preferred Stock then outstanding shall constitute a
quorum of the Series B Preferred Stock for the election of a director to be
elected solely by the holders of the Series B Preferred Stock. A vacancy in any
directorship elected by the holders of the Series B Preferred Stock shall be
filled only by vote or written consent of the holders of the Series B Preferred
Stock.
c. In addition to their voting rights pursuant to Section
D.4(a) above, the holders of the Series C Preferred Stock shall be entitled to
designate one individual (the "Series C Observer") who shall receive notice of
all meetings of the Board of Directors of the Corporation (and of all meetings
of any executive committee of the Board of Directors) and who shall be entitled
to attend and participate in discussions in all such meetings as a non-voting
observer on behalf of the holders of the Series C Preferred Stock. The
Corporation will provide the Series C Observer with the same information
(including reports, financial statements, notices and other information) at the
same time such information is provided to the Board of Directors (or the members
of any executive committee thereof). The right of the Series C Observer to
attend meetings and to receive information shall be subject to reasonable
assurances of confidentiality, including without limitation the execution of
confidentiality agreements in a form reasonably acceptable to the Corporation.
d. In addition to the voting rights held by the holders of the
Series D Preferred Stock pursuant to Section D.4(a) above, at any meeting (or in
a written consent in lieu thereof) held for the purpose of electing directors,
the presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Series D Preferred Stock then outstanding shall
constitute a quorum of the Series D Preferred Stock for the election of a
director to be elected solely by the holders of the Series D Preferred Stock. A
vacancy in any directorship elected by the holders of the Series D Preferred
Stock shall be filled only by vote or written consent of the holders of the
Series D Preferred Stock.
e. As long as any shares of the Series B, C and D Preferred
Stock are outstanding, the holders of the Preferred Stock and Common Stock,
voting as a single class as provided in Section D.4(a), shall elect a seventh
director.
f. Subject to subsection (g) hereof and the requirements of the
next sentence, every stockholder entitled to vote at any election for directors
shall have the right to cumulate such stockholder's votes and give one candidate
a number of votes equal to the number of directors to be elected multiplied by
the number of votes to which such stockholder's shares are normally entitled, or
to distribute votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder shall be entitled to cumulate votes
unless such candidate's name or candidates' names have been placed in nomination
prior to the voting and the stockholder has given notice at the meeting, prior
to the voting, of the stockholder's intention to cumulate such stockholder's
votes. If any one stockholder has given such notice, all stockholders may
cumulate their votes for candidates in nomination.
g. The right to cumulate votes described in subparagraph (f)
hereof shall terminate when the corporation becomes a listed corporation within
the meaning of Section 301.5 of the California Corporations Code.
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5. Protective Provisions.
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a. In addition to any other rights provided by law to
individual stockholders and classes of stockholders, so long as any Preferred
Stock shall be outstanding, the Corporation shall not and shall not permit its
subsidiaries to, without first obtaining the affirmative vote or written consent
of (A) the holders of not less than a majority of such outstanding shares of
Preferred Stock in the case of clauses (i), (v) and (vi) below, and (B) the
holders of not less than a majority of such outstanding shares of Preferred
Stock and the holders of a majority of the outstanding shares of Series D
Preferred Stock in the case of clauses (ii), (iii), (iv) and (vii) through (xiv)
below:
(i) repurchase or redeem or otherwise acquire shares of
Preferred Stock except pursuant to Section D.8 hereof, or pursuant to a purchase
offer made pro rata (on the basis of Liquidation Payment) to all holders of the
shares of Preferred Stock then held by each such holder;
(ii) repurchase or redeem or otherwise acquire shares of
Common Stock, except pursuant to a contract permitting the Corporation to
repurchase such shares at fair market value upon the termination of the
stockholder's employment or consulting relationship with the Corporation in an
amount not in excess of $100,000 in aggregate per year;
(iii) authorize or issue shares of any class of stock
having any preference or priority as to dividends or assets superior to any such
preference or priority of the 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 option rights to purchase, any
shares of stock of the Corporation having any preference or priority as to
dividends or assets superior to any such preference or priority of the Preferred
Stock;
(iv) declare or pay any dividend on the Preferred Stock or
the Common Stock or make any distribution to the holders thereof, except as
permitted otherwise herein;
(v) authorize any subsidiary of the Corporation to issue
voting securities to any person other than the Corporation or to create or own
any entity other than entities directly or indirectly wholly owned by the
Corporation ;
(vi) increase or decrease the aggregate number of
authorized shares of Preferred Stock;
(vii) change the size of the Board of Directors to more
than six directors, except to increase the size of the Board of Directors
pursuant to Section D.4(e);
(viii) amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation if such action
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of the Preferred Stock;
(ix) except for a QPO, authorize or issue shares of any
class or series of stock, or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of capital stock of the Corporation, except for
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(i) issuance of options and underlying Common Stock pursuant to outstanding
options or warrants as of the date hereof, and additional options granted to
employees and bona fide consultants of the Corporation, so long as the Board of
Directors approves the options and the exercise price per share for each such
grant is not less than the fair market value of the Common Stock on the date of
grant and (ii) Common Stock issued upon the conversion of the Preferred Stock;
(x) except for an automatic conversion pursuant to
Section D.3(a)(ii), effect an exchange or reclassification of all or part of the
Preferred Stock into shares of another class; effect an exchange or
reclassification, or create a right of exchange, of all or part of the shares of
another class or series into the Preferred Stock; change the designations,
rights, preferences, or limitations of all or part of the Preferred Stock;
change all or part of the Preferred Stock into a different number of shares of
Preferred Stock; cancel or otherwise affect rights to distributions or dividends
that have accumulated but not yet been declared on all or part of the Preferred
Stock.
(xi) effect any voluntary liquidation, dissolution or
winding up of the Corporation or change in the nature of the Corporations'
business
(xii) So long as any Series B Preferred Stock or Series D
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of the Series B and Series D Preferred
Stock, effect a sale of a portion of the assets of the Corporation or its
subsidiaries that is material to the Corporation taken as a whole, or merge or
consolidate the Corporation with another person or entity. Notwithstanding the
above, no affirmative vote or written consent shall be required pursuant to this
section if the proposed sale, merger or consolidation will result in gross
proceeds per share of Common Stock (determined on a fully diluted basis) in cash
or cash equivalents equal to or greater than the then applicable price per share
in a QPO.
(xiii) incur or assume any indebtedness for borrowed money
(including capital leases) in excess of $7,500,000 in the aggregate;
(xiv) incur or permit any liens to exist, with respect to
the material assets of the Corporation and its subsidiaries other than with
respect to indebtedness permitted by clause (xiii) immediately above, purchase
money liens securing accounts payable that are incurred in the ordinary course
of business and liens incurred in the ordinary course of business not securing
indebtedness.
b. In the event that the original purchasers of the shares of
any class of Preferred Stock hold, in the aggregate, less than 25% of their
originally purchased shares of such class, then clauses (v), (vii), (ix), (xi),
(xiii) and (xiv) of Section D.5(a) shall terminate as to that class.
6. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section D.3 hereof, the shares so converted
or redeemed shall be canceled and shall not be issuable by the Corporation, and
the Certificate of Incorporation shall be
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appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
7. Residual Rights. All rights accruing to the outstanding shares
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of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
8. Redemption.
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a. The Series B and Series D Preferred Stock shall be
redeemable as provided in this Section D.8. The "Redemption Price" with respect
to the Series B Preferred Stock shall be an amount equal to the greater of fair
market value or $2.36 (subject to appropriate adjustment in the event of stock
dividends, stock splits and other recapitalizations of the Corporation) per
share plus, in the case of each share, an amount equal to an accruing annual
dividend of $0.354 per share, computed to the Series B Redemption Date (as
defined in Section D.8(b) below). The "Redemption Price" with respect to the
Series D Preferred Stock shall be an amount equal to the greater of (i) the fair
market value or (ii) $9.36 (subject to appropriate adjustment in the event of
stock dividends, stock splits and other recapitalizations of the Corporation)
per share plus, in the case of each share, an amount equal to an accruing annual
dividend of 15%, compounded annually and computed from the original issuance
date of such Series D Preferred Stock, until the Series D Redemption Date (as
defined in D.8(b) below), plus the amount of any accrued and unpaid Redemption
Dividends on such share. Such payments shall be made in full to the holders
entitled thereto promptly, and in no event later than ten days, after the
delivery to the Corporation of the certificates representing the Redemption
Shares (or the delivery of a lost certificate affidavit in a form reasonably
acceptable to the Corporation in lieu of such certificates). The fair market
value of the Series B Preferred Stock and the Series D Preferred Stock shall be
determined in good faith by the Board of Directors of the Corporation as of each
Series B Redemption Date or Series D Redemption Date, as applicable, after
taking into consideration all factors which it deems appropriate including,
without limitation, valuations of comparable publicly held and privately held
companies, and the liquidation, conversion and other rights and preferences of
the Preferred Stock, but without any discount for minority ownership position or
any other premium or discount based on the relative size of the block of shares.
If the holder of a majority of the shares of Series B Preferred Stock or Series
D Preferred Stock to be redeemed on any applicable Redemption Date disagrees
with the Board of Directors' determination of fair market value, the fair market
value of the Series B Preferred Stock or Series D Preferred Stock, as the case
may be, shall be determined as follows: an investment banking firm of nationally
recognized standing (that is not a holder of any of the relevant shares) chosen
by the holders of a majority of the shares to be redeemed on the applicable
redemption date for such shares and an investment banking firm of nationally
recognized standing chosen by those members of the Corporation's Board of
Directors who are not elected solely by the holders of the Series B Preferred
Stock shall each calculate such value. In the event the difference between such
valuations is less than 20% of the higher valuation, then the fair market value
shall be deemed to be the average of such two valuations. In the event that the
difference between such valuations is greater than 20% of the higher valuation,
the two investment banking firms shall designate a third investment banking firm
which shall select from the two valuations the valuation that such third firm
determines to be closer to its own valuation, and the valuation so selected
shall be considered the fair market value. The fees and expenses of all such
investment banking firms shall be paid by the Corporation.
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b. Commencing at any time on or after the date April 18, 2004
(the "Series B Redemption Date"), at the option and written election of the
holders of a majority of the Series B Preferred Stock, the Corporation shall
redeem any outstanding shares of Series B Preferred Stock, at the Redemption
Price and terms stated above in Section D.8(a). Commencing at any time on or
after the earlier to occur of (x) April 18, 2004 and (y) the occurrence of one
of the Changes in Control described below in Section D.8(c), (the "Series D
Redemption Date), at the option and written election of the holders of a
majority of the Series D Preferred Stock, the Corporation shall redeem all
outstanding shares of Series D Preferred Stock, at the Redemption Price and
terms stated in Section D.8(a); provided, however, that upon any Change in
-----------------
Control that is also a liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the Corporation shall, before
making any redemption, first allocate to each outstanding class of Preferred
Stock the Liquidation Payment to which that class is entitled under Section
D.2(a), and shall not pay any holder an amount in excess of the Liquidation
Payment until the Liquidation Payment of each class of Preferred Stock is fully
paid or fully reserved for payment.
(i) The Corporation shall provide written notice to all
holders of the applicable class of Preferred Stock at least (A) thirty (30) days
in advance of April 18, 2004, or (B) twenty (20) days prior to the effective
date of a transaction constituting a Change in Control. Upon receipt of a
written election by the holders of a majority of the Series B Preferred Stock or
the Series D Preferred Stock, as the case may be (the "Redemption Notice"), the
company shall promptly mail the Redemption Notice, first class postage prepaid
(airmail in cases where the sending and receiving parties are located in
different countries), to each holder of record at the close of business on the
business day next preceding the day on which a notice is given (the "Redemption
Record Date") of the series of shares to be redeemed (the "Redemption Shares"),
at the address last shown on the records of the Corporation for such holder or
given by the holder to the Corporation for the purpose of notice, or, if no such
address appears or is given, at the place where the principal executive office
of the Corporation is located, notifying such holder of the redemption to be
effected, specifying the Series B Redemption Date or the Series D Redemption
Date, as the case may be, the applicable Redemption Price, the place at which
payment may be obtained and the date, if any, on which such holder's Conversion
Rights pursuant to Section D.3(a) as to such shares terminate and calling upon
such holder to exercise his Conversion Rights or surrender to the Corporation,
in the manner and at the place designated, his certificate or certificates
representing the Redemption Shares.
(ii) On or after the Series B Redemption Date, each holder
of Redemption Shares shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the applicable Redemption Price of such
shares shall be payable to the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(iii) Upon receipt of a Redemption Notice given pursuant to
Section D.8(b)(i), each holder of Series D Preferred Stock shall have the right
to accept such offer by tendering such holder's shares to the Corporation for
redemption, in the manner and at the place designated in the Redemption Notice,
and thereupon the applicable Redemption Price
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of such shares shall be payable to the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iv) From and after the Series B Redemption Date, and from
and after the date the majority of the holders of the Series D Preferred Stock
notify the Corporation that they accept the offer made in the Redemption Notice,
unless there shall have been a default in payment of the Redemption Price, all
rights of the subject holders of Redemption Shares as holders of Preferred Stock
(except the right to receive the applicable Redemption Price) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
Preferred Stock on any Series B Redemption Date or any Series D Redemption Date
are insufficient to redeem all outstanding Redemption Shares, those funds that
are legally available will be used to redeem the maximum possible number of
shares ratably among the holders of the Redemption Shares, based on the amount
of the applicable Redemption Price payable to each holder. The shares not
redeemed 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 Preferred Stock, such funds will be
used, at the end of the next succeeding fiscal quarter, to redeem the balance of
the Redemption Shares, or such portion thereof for which funds are then legally
available, on the basis set forth above.
c. A "Change in Control" will be deemed to have taken place
when one of the following occurs:
(i) any person or group of related or affiliated persons
shall have become the beneficial owner or owners of 51% or more of the
outstanding voting stock of the Corporation; or
(ii) there shall have occurred a merger or consolidation
in which the Corporation is not the survivor or in which holders of Common Stock
of the Corporation shall have become entitled to receive cash, securities of the
Corporation other than voting Common Stock or securities of any other person.
ARTICLE V
The Board of Directors is expressly authorized to make, alter or repeal the
Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
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ARTICLE VII
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 a 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.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE IX
To the fullest extent permitted by Delaware statutory or decisional law, as
amended or interpreted, no director of this Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. This Article IX does not affect the availability
of equitable remedies for breach of fiduciary duties.
The name and mailing address of the sole incorporator is as follows:
Name Mailing Address
Charles S. Kaufman c/o Morrison & Foerster
555 W. Fifth Street
Los Angeles, CA 90013
I, the undersigned, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts
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herein stated are true, and, accordingly, have hereunto set my hand this twenty-
fifth day of September, 2000.
/s/ Charles S. Kaufman
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Charles S. Kaufman, Sole Incorporator
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