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EXHIBIT C
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF
IFX CORPORATION
IFX Corporation (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, hereby certifies
that, pursuant to the provisions of Section 151 of the General Corporation Law
of the State of Delaware, its Board of Directors, at a meeting duly held on June
12, 2000, adopted the following resolution:
WHEREAS, the Board of Directors of the Corporation is authorized by the
Restated Certificate of Incorporation to issue up to 10,000,000 shares of
preferred stock in one or more series and, in connection with the creation of
any series, to fix by the resolutions providing for the issuance of shares the
powers, designations, preferences and relative, participating, optional or other
rights of the series and the qualifications, limitations or restrictions
thereof; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to such authority, to authorize and fix the terms and provisions of a
series of preferred stock, classes of such series of preferred stock and the
number of shares constituting such classes;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series of
preferred stock on the terms and with the provisions herein set forth on Annex A
attached to this resolution.
/s/ Joel Eidelstein
Name: Joel Eidelstein
Title: President
ATTEST:
/s/ Jose Leiman
Name: Jose Leiman
Title: Chief Financial Officer
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ANNEX A
SERIES A CONVERTIBLE PREFERRED STOCK
The powers, designations, preferences and relative, participating,
optional or other rights of the Series A Convertible Preferred Stock of IFX
Corporation (the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series A
Convertible Preferred Stock" and shall be divided into two classes: Class I
Series A Preferred Stock ("Class I Preferred") and Class II Series A Preferred
Stock ("Class II Preferred," and together with the Class I Preferred, the
"Series A Convertible Preferred Stock"). The Series A Convertible Preferred
Stock shall have $1.00 par value per share. The number of authorized shares
constituting the Class I Preferred shall be 1,210,398 shares. The number of
authorized shares constituting the Class II Preferred shall be 820,471 shares.
Shares of the Class I Preferred have a stated value of Twelve and 31/100 Dollars
($12.31) per share and shares of the Class II Preferred shall have a stated
value equal to the Closing Per Share Price (as defined in the Preferred Stock
Purchase Agreement dated June 15, 2000 among the Company, UBS Capital Americas
III, L.P. and UBS Capital LLC (the "Preferred Stock Purchase Agreement")) (as
applicable to the Class I Preferred or the Class II Preferred, as the case may
be, the "Stated Value").
2. DIVIDENDS.
(a) Right to Receive Dividends. Holders of Series A Convertible
Preferred Stock shall be entitled to receive dividends when, as and if declared
by the Board of Directors of the Corporation (the "Board of Directors").
(b) Participation with Common Stock. In the event the Board of
Directors shall elect to pay or declare and set apart for payment any dividend
on any shares of common stock, par value $.02 per share, of the Corporation (the
"Common Stock") in cash out of funds legally available therefor or in stock or
other consideration, the holders of the Series A Convertible Preferred Stock
shall be entitled to receive, before any dividend shall be declared and paid or
set aside for the Common Stock, dividends payable in the form and in an amount
per share equal to the per share amount that would have been payable to such
holders had such holders converted their Series A Convertible Preferred Stock
into Common Stock pursuant to Section 5 below.
(c) Dividend Preference. Dividends on the Series A Convertible
Preferred Stock shall be payable before any dividends or distributions or other
payments shall be paid or set aside for payment upon the Common Stock or any
other stock ranking on liquidation or as to dividends or distributions junior to
the Series A Convertible Preferred Stock (any such stock, together with the
Common Stock, being referred to hereinafter as "Junior Stock"). If there shall
be outstanding shares of any class or series of capital stock which is entitled
to share ratably with
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the Series A Convertible Preferred Stock in the payment of dividends or
distributions or upon liquidation ("Parity Securities"), no full dividends shall
be declared or paid or set apart for payment on any such securities unless
dividends have been or contemporaneously are ratably declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Series A Convertible Preferred Stock.
3. LIQUIDATION PREFERENCE.
(a) In the event of any bankruptcy, liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary, each holder of Series A
Convertible Preferred Stock at the time thereof shall be entitled to receive,
prior and in preference to any distribution of any of the assets or funds of the
Corporation to the holders of the Common Stock or other Junior Stock by reason
of their ownership of such stock, an amount per share of Series A Convertible
Preferred Stock equal to the sum of (x) the applicable Stated Value plus any
declared and unpaid dividends to the date of liquidation, plus (y) 10% of such
Stated Value per annum, calculated from the date of issuance of such share
through date of payment of the liquidation preference as set forth in this
Section 3 (the "Liquidation Preference"). After the payment of the full
Liquidation Preference on account of all shares of Series A Convertible
Preferred Stock as set forth in this Section 3, the remaining assets of the
Corporation legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock. If the assets and funds legally
available for distribution among the holders of Series A Convertible Preferred
Stock shall be insufficient to permit the payment to the holders of the full
aforesaid preferential amount, then the assets and funds shall be distributed
ratably among holders of Series A Convertible Preferred Stock in proportion to
the number of shares of Series A Convertible Preferred Stock owned by each
holder. If the assets and funds of the Corporation available for distribution to
stockholders upon any bankruptcy, liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, shall be
insufficient to permit the payment to holders of the full aforesaid preferential
amount and amounts payable to holders of outstanding Parity Securities, the
holders of Series A Convertible Preferred Stock and the holders of such other
Parity Securities shall share ratably (and ratably as to cash, in-kind or other
distributions) in any distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled.
(b) Except as described in the following sentence, a merger,
recapitalization, reorganization, sale of voting control to a single buyer or a
group of related buyers in one or a series of related transactions, or other
business combination transaction involving the Corporation in which the
shareholders of the Corporation immediately prior to the consummation of such
transaction do not own at least a majority of the outstanding shares of the
surviving corporation or the Corporation (as applicable) immediately following
the consummation of such transaction or sale of all or substantially all of the
assets of the Corporation (collectively, a "Liquidation Event") shall be deemed
to be a liquidation of the Corporation. Notwithstanding the foregoing, the
following shall not be deemed to be a Liquidation Event: a merger of the
Corporation with a public company (I) in which the merger consideration to be
received by the holders of the Series A Convertible Preferred Stock is fully
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registered marketable securities (the "Merger Shares") which are not subject to
any restrictions on transfer, (II) in which the value of such merger
consideration for each share of Series A Convertible Preferred Stock, valued at
the average closing price of the Merger Shares for the 30 days prior to the
consummation of the merger, or such lesser period which follows the public
announcement of the merger, is greater than 120% of the Liquidation Preference
per share as of the date of consummation of the merger, and (III) with aggregate
trading volume for the 30 calendar days prior to the merger date of at least 10
times the aggregate number of Merger Shares received by all holders of Series A
Convertible Preferred Stock.
(c) In any Liquidation Event, if the consideration received by the
Corporation is other than cash, its value will be deemed its fair market value
as determined in good faith by the Board of Directors. Any securities shall be
valued as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability covered by subsection (ii) below:
(A) If traded on a securities exchange or through The Nasdaq
National Market or Small Cap Market, the value shall be deemed to be
the average of the closing prices of the securities on such quotation
system over the thirty (30) day period ending three (3) days prior to
the closing of the Liquidation Event;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days
prior to the closing of the Liquidation Event; and
(C) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the Board of
Directors and the holders of at least a majority of the voting power
of all then outstanding shares of Series A Convertible Preferred
Stock.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a shareholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in subsections (i)(A), (B) or (C) to reflect the approximate
fair market value thereof, as mutually determined by the Board of Directors and
the holders of at least a majority of the voting power of all then outstanding
shares of Series A Convertible Preferred Stock.
4. VOTING RIGHTS.
In addition to any voting rights provided elsewhere herein or in the
Corporation's Restated Articles of Incorporation, as it may be amended or
restated from time to time (the "Articles of Incorporation"), and any voting
rights provided by law, the holders of shares of Series A Convertible Preferred
Stock shall have the following voting rights:
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(a) Election of Directors.
(i) Subject to the terms hereof, the holders of the Series A
Convertible Preferred Stock, voting as a single class in accordance with Section
4(d), shall have the right to elect one director (in addition to the directors
elected by the holders of Common Stock or any other capital stock of the
Corporation).
(ii) Any director elected by the holders of shares of Series A
Convertible Preferred Stock shall be referred to herein as a "Series A Preferred
Director." Subject to Section 4(a)(v), the initial term of the director to be
appointed pursuant to Section 4(a)(i) will commence upon his/her election by
the Series A Convertible Preferred Stock and shall expire at the first annual
meeting of stockholders of the Corporation. Upon expiration of the initial term
of such Series A Preferred Director, so long as the Series A Convertible
Preferred Stock is outstanding, the holders of the Series A Convertible
Preferred Stock shall have the right to elect a Series A Preferred Director to
replace such director in the same manner described above in Section 4(a)(i).
Subject to Section 4(a)(v), a Series A Preferred Director so elected shall hold
office for a term expiring at the annual meeting of stockholders in the year
following the election of such director. Notwithstanding the foregoing, but
subject to Section 4(a)(v), a Series A Preferred Director elected under Section
4(a)(i) shall serve until such Series A Preferred Director's successor is duly
elected and qualified or until such director's earlier removal as provided in
Section 4(a)(iii) or death or resignation and, in the event a vacancy occurs, a
replacement Series A Preferred Director shall be selected as provided in Section
4(a)(i).
(iii) A Series A Preferred Director may be removed by, and shall
not be removed except by, the vote of the holders of record of a majority of the
outstanding shares of Series A Convertible Preferred Stock, voting together as a
single class.
(iv) The Corporation shall at all times reserve and keep
available a vacant seat on the Board of Directors solely for the purpose of
enabling the holders of the Series A Convertible Preferred Stock to designate a
Series A Preferred Director as provided in this Section 4(a).
(v) This Section 4(a) shall survive a Qualified Public Offering
until such time as the holders of Series A Convertible Preferred Stock and their
Affiliates own in the aggregate less than 25% of their initial holdings of
Series A Shares determined after the Subsequent Closing (as defined in the
Preferred Stock Purchase Agreement).
(b) Certain Corporate Actions.
Until a Qualified Public Offering or until such time as the holders
of Series A Convertible Preferred Stock collectively with their Affiliates hold
less than an aggregate of 50% of the number of shares of Series A Convertible
Preferred Stock issued pursuant to the Preferred Stock Purchase Agreement (as
adjusted in connection with the events described in Section 6) determined after
the Subsequent Closing, the Corporation shall not, and shall not permit any of
its subsidiaries to, without first obtaining the affirmative vote or written
consent of
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the holders of a majority of the shares of Series A Convertible Preferred Stock,
voting as a single class in accordance with Section 4(d):
(A) amend, repeal, modify or supplement any provision of the
Restated Certificate of Incorporation (including any certificate of
designation forming a part thereof), the Bylaws of the Corporation, as
in effect on the Issuance Date, or any successor articles of
incorporation or bylaws or this Certificate of Designation, Number,
Powers, Preferences and Relative, Participating, Optional and Other
Rights of Series A Convertible Preferred Stock (the "Certificate of
Designation");
(B) authorize or permit the Corporation or any subsidiary of the
Corporation to issue any capital stock or any options, warrants or
other rights exchangeable or exercisable therefor, other than (i)
shares of Series A Convertible Preferred Stock pursuant to the
Preferred Stock Purchase Agreement, (ii) Common Stock upon conversion
of the Series A Convertible Preferred Stock or upon the exercise of
stock options to purchase up to 2,460,000 shares of Common Stock,
(iii) securities issued as consideration for any acquisition approved
by a majority of the Board of Directors (including the affirmative
vote of the Series A Preferred Directors), (iv) up to $15 million of
Common Stock, issued as consideration for any acquisition approved by
a majority of the Board of Directors (without the affirmative vote of
the Series A Preferred Directors), provided such Common Stock is
valued at no less than the greater of (1) the Stated Value (as
adjusted for stock splits, combinations, stock dividends and the like)
and (2) the average of the closing price for the Common Stock for the
30 days prior to the issuance, (v) a warrant to purchase 210,000
shares of Common Stock to Spinway, Inc. (the "Spinway Warrant"), (vi)
210,000 shares of Common Stock upon exercise of the Spinway Warrant,
or (vii) shares of Common Stock in exchange for shares of common stock
of Tutopia.com, Inc. ("Tutopia") upon a change-in-control of the
Corporation pursuant to the Tutopia Stockholders Agreement dated as of
April 24, 2000;
(C) reclassify any class or series of any Common Stock into
shares having any preference or priority as to dividends or
liquidation superior to or on a parity with any such preference or
priority of Series A Convertible Preferred Stock;
(D) authorize or effect, in a single transaction or through a
series of related transactions, (1) a liquidation, winding up or
dissolution of the Corporation or adoption of any plan for the same;
(2) a Liquidation Event; or (3) any direct or indirect purchase or
other acquisition of the Corporation or any of its subsidiaries of any
capital stock (other than the Series A Convertible Preferred Stock
pursuant to its terms);
(E) enter into or otherwise become a party to any agreement
whereby any shareholder or shareholders of the Corporation shall
transfer capital stock of the Corporation to an independent third
party or a group of independent third parties pursuant to which such
parties acquire capital stock of the Corporation possessing the voting
power to elect a majority of the Board of Directors;
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(F) declare or pay or set aside for payment any dividend or
distribution or other payment upon the Common Stock or upon any other
Junior Stock, nor redeem, purchase or otherwise acquire any Common
Stock or other Junior Stock for any consideration (or pay or make
available any moneys, whether by means of a sinking fund or otherwise,
for the redemption of or other distribution or payment with respect to
any shares of any Common Stock or other Junior Stock), except for the
repurchase of shares of Common Stock from directors, consultants or
employees of the Corporation or any subsidiary pursuant to agreements
approved by the disinterested directors on the Board of Directors,
under which the Corporation has the right to repurchase such shares
upon the occurrence of certain events, including but not limited to,
termination of employment or services;
(G) approve the annual budget of the Corporation and its
subsidiaries (the "Annual Budget");
(H) enter into any financial commitment over and above those
approved in the annual budget in excess of $15 million in the
aggregate (for the Corporation and its subsidiaries, taken together),
except as prescribed in the Annual Budget;
(I) dismiss or hire or modify or enter into any employment
agreement, non-competition agreement, bonus or stock issuance
arrangements or other compensation (including, without limitation,
fringe benefit) arrangements with its President, Chief Executive
Officer or Chief Financial Officer, or other equivalent or senior
level officer;
(J) permit the creation or existence of any lien, mortgage,
pledge, hypothecation, assignment, security interest, charge or
encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on any of
the Corporation's or any of its subsidiaries' assets with an aggregate
value in excess of $15 million, except as part of any financing in the
ordinary course of business;
(K) make any capital expenditure in any fiscal year in excess of
$15 million in the aggregate (for the Corporation and its
subsidiaries, taken together), except as prescribed in the Annual
Budget;
(L) acquire any assets or equity or other interest in any other
entity with a value in excess of $15 million in the aggregate (for the
Corporation and its subsidiaries, taken together), except as
prescribed in the Annual Budget;
(M) incur indebtedness for borrowed money (including, without
limitation, any capitalized lease obligations, accounts receivable
financing or other asset-backed financing), any guarantee or other
similar contingent obligation or any lease
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financing (whether a capitalized lease, operating lease, pursuant to a
sale leaseback arrangement or otherwise), in excess of $15 million in
the aggregate (for the Corporation and its subsidiaries, taken
together), except as prescribed in the Annual Budget;
(N) amend, supplement, restate, revise, waive or otherwise modify
any stock option plan, agreement or other arrangement of the
Corporation (each, a "Stock Option Plan"), as in effect on June 15,
2000;
(O) create or adopt any stock option plan, stock appreciation
rights plan, bonus plan or similar plan that was not in existence on
June 15, 2000, except as approved by the Compensation Committee of the
Board of Directors;
(P) dispose of or acquire assets with a value in excess of $15
million other than in the normal course of business;
(Q) liquidate, dissolve or voluntarily elect to commence
bankruptcy or insolvency proceedings under applicable laws;
(R) change in any material respect the nature of the business of
the Corporation and its subsidiaries taken as a whole;
(S) enter into any transaction, or any agreement or understanding
with any affiliate of the Corporation or any subsidiary thereof, other
than a wholly-owned subsidiary of the Corporation;
(T) (i) solicit or negotiate any inquiries or proposals with
respect to (x) any direct or indirect issuance, sale, disposition or
redemption of any securities of Latin Guide, Inc. ("LGI"), Tutopia or
any of Tutopia's subsidiaries, (y) the direct or indirect sale or
disposition of all or any material portion of the assets or business
of LGI, Tutopia or any of Tutopia's subsidiaries, or (z) any merger,
reorganization, consolidation or recapitalization or other similar
transaction involving LGI, Tutopia or any of Tutopia's subsidiaries;
or (ii) discuss with or provide to any person or entity information of
LGI, Tutopia or any of Tutopia's subsidiaries with respect to or in
contemplation of any of the foregoing; or
(U) agree to do any of the foregoing.
(c) Additional Voting Rights. Except as required by law, the holders of
Series A Convertible Preferred Stock shall be entitled to notice of any
stockholders' meeting and to vote together as a single class with the holders of
Common Stock, on an as-converted basis, upon any matter submitted to the
stockholders for a vote, other than with respect to the election of directors,
as follows: (i) the holders of the Series A Convertible Preferred Stock shall
have one (1) vote for each full share of Common Stock into which their
respective shares of Series A Convertible Preferred Stock are convertible on the
record date for the vote and (ii) the holders of Common Stock shall have one (1)
vote per share of Common Stock.
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(d) Means of Voting. On all matters on which the holders of Series A
Convertible Preferred Stock are entitled to vote pursuant to Section 4(a) and
4(b), each holder of Series A Convertible Preferred Stock shall be entitled to
one vote for each share held by such holder. The rights of the holders of Series
A Convertible Preferred Stock under this Section 4 may be exercised (i) with
respect to the election of the Series A Preferred Directors pursuant to Section
4(a), at a meeting of the holders of the Series A Convertible Preferred Stock or
by written consents executed by the holders entitled to vote therefor and
delivered to the Secretary or Assistant Secretary of the Corporation; (ii) at
any meeting of stockholders of the Corporation on all matters other than the
election of directors; (iii) at a meeting of the holders of shares of such
Series A Convertible Preferred Stock, called for the purpose by the Corporation
or by the holders of record of 25% or more of the Series A Convertible Preferred
Stock, pursuant to requests delivered in writing to the Secretary or Assistant
Secretary of the Corporation; (iv) by written consent signed by the holders of
the requisite percentage of the then outstanding shares, delivered to the
Secretary or Assistant Secretary of the Corporation; or (v) with respect to the
voting rights referred to in Section 4(c), at any meeting of the stockholders of
the Corporation or by written consent signed by the holders of the requisite
percentage of the then outstanding shares of Common Stock (and Series A
Convertible Preferred Stock), delivered to the Secretary or Assistant Secretary
of the Corporation. Except to the extent otherwise provided herein or to the
extent that holders of 75% of the Series A Convertible Preferred Stock decide
otherwise, any meeting of the holders of Series A Convertible Preferred Stock
shall be conducted in accordance with the provisions of the By-Laws of the
Corporation applicable to meetings of stockholders. In the event of a conflict
or inconsistency between the By-Laws of the Corporation and any term of this
Certificate of Designation, including, but not limited to this Section 4, the
terms of this Certificate of Designation shall prevail.
5. CONVERSION.
Shares of Series A Convertible Preferred Stock may be converted into
shares of Common Stock, on the terms and conditions set forth in this Section 5.
(a) Optional Conversion. (i) At any time and from time to time, each
holder of shares of Series A Convertible Preferred Stock may, upon 30 days'
notice to the Corporation, convert all or any portion of such shares held by
such holder into the number of shares of Common Stock determined by dividing (x)
the applicable Stated Value multiplied by the number of shares surrendered for
conversion plus any declared but unpaid dividends on such shares, by (y) the
Conversion Price on the date of conversion determined in accordance with Section
5(c).
(ii) References in this Section 5 to "Common Stock" shall include
all stock or other securities or property (including cash) into which Common
Stock is converted following any merger, reorganization or reclassification of
the capital stock of the Corporation.
(b) Mandatory Conversion. Each share of Series A Convertible Preferred
Stock shall automatically be converted into such number of shares of Common
Stock as is determined by dividing (x) the applicable Stated Value multiplied by
the number of shares
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surrendered for conversion plus any declared but unpaid dividends on such
shares, by (y) the Conversion Price on the date of conversion determined in
accordance with Section 5(c), without further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, upon the closing of an
underwritten public offering of shares of Common Stock for which the Corporation
has obtained a firm commitment from one or more underwriter(s) for at least $75
million of Common Stock and in which the Corporation receives gross proceeds
from the sale of Common Stock to the public of at least $56.25 million (before
deduction of underwriter's discounts and commissions), and which values the
equity of the Corporation at no less than $400 million pre-offering (a
"Qualified Public Offering"). Except for the purposes of the calculation in the
immediately preceding sentence, in the event of a Qualified Public Offering, the
person(s) entitled to receive the Common Stock issuable upon conversion of
Series A Convertible Preferred Stock shall not be deemed to have converted such
Series A Convertible Preferred Stock until the closing of such offering.
(c) Conversion Price. The initial Conversion Price per share for the
Class I Preferred shall be Twelve and 31/100 Dollars ($12.31) and the initial
Conversion Price for the Class II Preferred shall be the Closing Per Share
Price, each subject to adjustment as provided in Section 6 hereof.
(d) Common Stock. The Common Stock to be issued upon conversion
hereunder shall be fully paid and nonassessable.
(e) Procedures for Conversion.
(i) In order to convert shares of Series A Convertible
Preferred Stock into shares of Common Stock pursuant to Section 5(a) (or, in the
case of an automatic conversion pursuant to Section 5(b), to receive a
certificate for such holder's shares of Common Stock outstanding as a result of
such conversion), the holder shall surrender the certificate or certificates
therefore, duly endorsed for transfer, at any time during normal business hours,
to the Corporation at its principal or at such other office or agency then
maintained by it for such purpose (the "Payment Office"), accompanied, in the
case of a conversion pursuant to Section 5(a), by written notice to the
Corporation of such holder's election to convert and (if so required by the
Corporation or any conversion agent) by an instrument of transfer, in form
reasonably satisfactory to the Corporation and to any conversion agent, duly
executed by the registered holder or by his duly authorized attorney, and any
taxes required pursuant to Section 5(e)(iii). As promptly as practicable after
the surrender for conversion of any share of Series A Convertible Preferred
Stock in the manner provided in the preceding sentence, and the payment in cash
of any amount required by the provisions of Section 5(e)(iii), but in any event
within five Trading Days of such surrender for payment, the Corporation will
deliver or cause to be delivered at the Payment Office to or upon the written
order of the holder of such shares, certificates representing the number of full
shares of Common Stock issuable upon such conversion, issued in such name or
names as such holder may direct. 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 in proper order for conversion, and all rights of the holder of such
shares
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as a holder of such shares shall cease at such time and the person or persons in
whose name or names the certificates for such shares of Common Stock are to be
issued shall be treated for all purposes as having become the record holder or
holders thereof at such time; provided, however, that any such surrender and
payment on any date when the stock transfer books of the Corporation shall be
closed shall constitute the person or persons in whose name or names the
certificates for such shares of Common Stock are to be issued as the record
holder or holders thereof for all purposes immediately prior to the close of
business on the next succeeding day on which such stock transfer books are
opened and such conversion shall be at the Conversion Price in effect at such
time on such succeeding day.
For purposes hereof, "Trading Day" shall mean (i) any day on which stock is
traded on the principal stock exchange on which the Common Stock is listed or
admitted to trading, (ii) if the Common Stock is not then listed or admitted to
trading on any stock exchange but is traded on the Nasdaq Stock Market, any day
on which stock is traded on the Nasdaq Stock Market, or (iii) if the Common
Stock is not then traded on the Nasdaq Stock Market, any day on which stock is
traded in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices).
(ii) The Corporation shall not be required to issue fractional shares
of Common Stock upon conversion of shares of Series A Convertible Preferred
Stock. At the Corporation's discretion, in the event the Corporation determines
not to issue fractional shares, 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 closing price of the Common Stock on the date of
conversion.
(iii) The issuance of certificates for shares of Common Stock upon
conversion shall be made without charge for any issue, stamp or other similar
tax in respect of such issuance. However, if any such certificate is to be
issued in a name other than that of the holder of record of the shares
converted, the person or persons requesting the issuance thereof shall pay to
the Corporation the amount of any tax which may be payable in respect of any
transfer involved in such issuance or shall establish to the satisfaction of the
Corporation that such tax has been paid or is not payable.
(f) Reservation of Stock Issuable Upon Conversion. Subject to the
limitation set forth in the last sentence of this Section 5(f), the Corporation
shall reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series A Convertible Preferred Stock, 2,030,869 shares of Common Stock.
If at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series A Convertible Preferred Stock without regard to whether the
holders of Series A Convertible Preferred Stock are then entitled to convert,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the
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holders of Common Stock, holding shareholders meetings, soliciting votes and
proxies in favor of such increase to obtain the requisite stockholder approval
and upon such approval, the Corporation shall reserve and keep available such
additional shares solely for the purpose of effecting the conversion of the
shares of the Series A Convertible Preferred Stock.
(g) Merger, Etc.
(i) Notwithstanding any other provision hereof, in case of any merger
or other business combination transaction involving the Corporation which does
not constitute a Liquidation Event, then, concurrently with the consummation of
such transaction, provision shall be made so that each share of Series A
Convertible Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property (including cash) to which a
holder of the number of shares of Common Stock deliverable upon conversion of
such share of Series A Convertible Preferred Stock would have been entitled
assuming conversion immediately prior to the closing of the transaction.
(ii) In case of any merger or other business combination transaction
involving the Corporation which does not constitute a Liquidation Event, in
which the Corporation is not the surviving entity, and the Corporation or the
holders do not otherwise convert all outstanding shares of Series A Convertible
Preferred Stock, the Series A Convertible Preferred Stock shall be converted
into or exchanged for and shall become shares of the surviving corporation
having, in respect of the surviving corporation, substantially the same powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions thereon, that the Series A
Convertible Preferred Stock had immediately prior to such transaction.
6. ADJUSTMENTS.
The Conversion Price shall be subject to adjustment from time to time
as set forth in this Section 6. The Corporation shall give holders of Series A
Convertible Preferred Stock notice of any event described below which requires
an adjustment pursuant to this Section 6 at the time of such event.
(a) Definitions. As used in this Section 6, the following terms have
the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Corporation after the Initial Closing (as defined in the
Preferred Stock Purchase Agreement).
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock of other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
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"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of Series A Convertible Preferred Stock
outstanding on such date and other securities convertible into, or options or
warrants to purchase, shares of Common Stock outstanding on such date, whether
or not such options, warrants or other securities are presently convertible or
exercisable.
"Other Property" shall have the meaning set forth in Section 6(i).
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Corporation or any subsidiary of the Corporation, and shall
include all shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of up to 2,460,000
shares of Common Stock issuable pursuant to options to purchase Common Stock
under the Stock Option Plan, (ii) shares of Common Stock issued or issuable in
connection with a Qualified Public Offering, (iii) shares of Common Stock issued
upon conversion of Series A Convertible Preferred Stock, (iv) securities issued
as consideration for any acquisition approved by a majority of the Board of
Directors (including the affirmative vote of the Series A Preferred Director),
(v) the issuance of up to 820,471 shares of Series A Convertible Preferred Stock
at the Subsequent Closing (as defined in the Preferred Stock Purchase
Agreement), (vi) the issuance of an aggregate of up to 100,000 additional shares
of Common Stock (as adjusted for stock splits, combinations, stock dividends and
the like) in transactions approved by a majority of the Board of Directors,
(vii) the issuance of an aggregate of up to another 100,000 additional shares of
Common Stock (as adjusted for stock splits, combinations, stock dividends and
the like) in transactions approved by a majority of the Board of Directors
(including the affirmative vote of the Series A Preferred Director), (viii) the
Spinway Warrant, and (ix) 210,000 shares of Common Stock upon exercise of the
Spinway Warrant.
"Qualified Private Offering" shall mean a private equity offering
resulting in gross proceeds to the Corporation of at least $30 million, in which
the securities issued contain anti-dilution provisions no more favorable to the
investor than the anti-dilution provisions of the Series A Convertible Preferred
Stock which take effect following the consummation of a Qualified Private
Offering.
"Stock Option Plan" shall mean the IFX Corporation Directors Stock
Option Plan and the 1998 IFX Corporation Stock Option and Incentive Plan, as
amended.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
Corporation shall:
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(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the applicable Conversion Price immediately after the occurrence of any
such event shall be adjusted to equal the product of (A) the Conversion Price
immediately prior to the occurrence of such event and (B) a fraction, the
numerator of which shall be the number of Fully Diluted Outstanding shares of
Common Stock immediately prior to the occurrence of such event and the
denominator of which shall be the number of Fully Diluted Outstanding shares of
Common Stock immediately after the occurrence of such event.
(c) Issuance of Additional Shares of Common Stock. (i) In the event
that prior to the consummation of or in connection with a Qualified Private
Offering, the Corporation shall issue or sell any Additional Shares of Common
Stock, other than Permitted Issuances, for a consideration per Additional Share
of Common Stock less than the applicable Conversion Price, then the applicable
Conversion Price shall be reduced to the consideration per Additional Share of
Common Stock paid for such Additional Shares of Common Stock.
(ii) In the event that following the consummation of a Qualified
Private Offering, the Corporation shall issue or sell any Additional Shares of
Common Stock, other than Permitted Issuances, for a consideration per Additional
Share of Common Stock less than the applicable Conversion Price, then the
applicable Conversion Price shall be reduced to a price determined by dividing
(A) an amount equal to the sum of (x) the number of Fully Diluted Outstanding
shares of Common Stock immediately prior to such issue or sale multiplied by the
then existing Conversion Price plus (y) the aggregate consideration, if any,
received by the Corporation upon such issue or sale, by (B) the total number of
Fully Diluted Outstanding shares of Common Stock outstanding immediately after
such issue or sale.
(iii) The provisions of this Section 6(c) shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 6(b). No adjustment shall be made under this Section 6(c)
upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange rights in any
Convertible Securities, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 6(d) or Section 6(e).
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(d) Issuance of Warrants or Other Rights. Except with respect to
Permitted Issuances, if at any time the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such warrants or
other rights or upon conversion or exchange of such Convertible Securities shall
be less than the applicable Conversion Price in effect immediately prior to the
time of such distribution, issue or sale, then the applicable Conversion Price
shall be adjusted as provided in Section 6(c)(i) or (ii), as applicable, on the
basis that (i) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding, (ii) the price per share for such Additional
Shares of Common Stock shall be deemed to be the lowest price per share at which
such Additional Shares of Common Stock are issuable to such holders, and (iii)
the Corporation shall have received all of the consideration, if any, payable
for such warrants or other rights as of the date of the actual issuance thereof.
No further adjustments of the Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise of
such warrants or other rights or upon the actual issue of such Common Stock upon
such conversion or exchange of such Convertible Securities.
(e) Issuance of Convertible Securities. Except with respect to
Permitted Issuances, if at any time the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or sell, any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange shall be less than the
applicable Conversion Price in effect immediately prior to the time of such
issue or sale, then the applicable Conversion Price shall be adjusted as
provided in Section 6(c)(i) or (ii), as applicable, on the basis that (i) the
maximum number of Additional Shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding, (ii) the price per share of such Additional Shares of
Common Stock shall be deemed to be the lowest possible price in any range of
prices at which such Additional Shares of Common Stock are available to such
holders, and (iii) the Corporation shall have received all of the consideration
payable therefor, if any, as of the date of actual issuance of such Convertible
Securities. No further adjustment of the Conversion Price shall be made under
this Section 6(e) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 6(d). No
further adjustments of the Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase or any warrant or
other right to purchase any such Convertible Securities for
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which adjustments thereof have been or are to be made pursuant to other
provisions of this Section 6, no further adjustments shall be made by reason of
such issue or sale.
(f) Superseding Adjustment. If, at any time after any adjustment of the
applicable Conversion Price shall have been made pursuant to Section 6(d) or
6(e) as the result of any issuance of warrants, rights or Convertible
Securities, and either
(i) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(ii) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights, or such other
Convertible Securities, shall be increased or decreased by virtue of
provisions therein contained,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the applicable Conversion Price, on the basis
of
(iii) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or
any such right of conversion or exchange, as having been issued on the
date or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(iv) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase or
decrease of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or rights or
other Convertible Securities.
(g) Other Provisions Applicable to Adjustments Under This Section. The
following provisions shall be applicable to the making of adjustments provided
for in this Section 6:
(i) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Corporation
therefor shall be the amount of the cash
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<PAGE> 17
received by the Corporation therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Corporation
for subscription, the subscription price, or, if such Additional
Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends,
but not subtracting any compensation, discounts or expenses paid or
incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent
that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith
by the Board of Directors. In case any Additional Shares of Common
Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Common Stock or
Convertible Securities shall be issued in connection with any merger
in which the Corporation issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors, of such portion of
the assets and business of the nonsurviving corporation as the Board
of Directors in good faith shall determine to be attributable to such
Additional Shares of Common Stock, Convertible Securities, warrants or
other rights, as the case may be. The consideration for any Additional
Shares of Common Stock issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the
consideration received by the Corporation for issuing such warrants or
other rights plus the additional consideration payable to the
Corporation upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration, if any, received by the Corporation for issuing
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Corporation
in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the
Corporation upon the exercise of the right of conversion or exchange
in such Convertible Securities. In case of the issuance at any time of
any Additional Shares of Common Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of stock other
than Common Stock, the Corporation shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or
satisfied.
(ii) When Adjustments to Be Made. The adjustments required by
this Section 6 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
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(iii) When Adjustment Not Required. If the Corporation shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(iv) Escrow of Common Stock. If after any property becomes
distributable as a result of the provisions of this Section 6 by
reason of the taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record is taken, a
holder of shares of Series A Convertible Preferred Stock exercises its
conversion rights pursuant to Section 5, any Additional Shares of
Common Stock issuable and other property distributable upon exercise
by reason of such adjustment shall be held in escrow for such holder
by the Corporation to be issued to such holder upon and to the extent
that the event actually takes place. Notwithstanding any other
provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares
shall be canceled by the Corporation and escrowed property returned.
(v) Challenge to Good Faith Determination. Whenever the Board of
Directors shall be required to make a determination in good faith of
the fair value of any item under this Section 6, such determination
may be challenged in good faith by a holder of shares of Series A
Convertible Preferred Stock, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by
the Corporation and acceptable to such holder.
(h) Other Action Affecting Common Stock. In case at any time or from
time to time the Corporation shall take any action in respect of its Common
Stock, other than any action described in this Section 6 for which a specific
adjustment is provided, then, unless such action will not have a materially
adverse effect upon the rights of the holders of shares of Series A Convertible
Preferred Stock, the number of shares of Common Stock or other stock into which
such shares of Series A Convertible Preferred Stock are convertible and/or the
applicable Conversion Price shall be adjusted in such manner as may be equitable
in the circumstances.
(i) Certain Limitations. Notwithstanding anything herein to the
contrary, the Corporation shall not enter into any transaction which, by reason
of any adjustment hereunder, would cause the applicable Conversion Price to be
less than the par value per share of Common Stock.
(j) Notice of Adjustments. Whenever the number of shares of Common
Stock into which shares of Series A Convertible Preferred Stock are convertible
or whenever the applicable Conversion Price shall be adjusted pursuant to this
Section 6, the Corporation shall
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forthwith prepare a certificate to be executed by the chief financial officer of
the Corporation setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors determined the fair
value of any consideration referred to in Section 6(g)(i)), specifying any
change in the applicable Conversion Price or the number of shares of Common
Stock into which shares of Series A Convertible Preferred Stock are convertible
and (if such adjustment was made pursuant to Section 5(g)(i) or 6(h)) describing
the number and kind of any other shares of stock or Other Property into which
shares of Series A Convertible Preferred Stock are convertible, and any change
in the applicable Conversion Price or prices thereof, after giving effect to
such adjustment or change. The Corporation shall promptly cause a signed copy of
such certificate to be delivered to the holders of Series A Convertible
Preferred Stock. The Corporation shall keep at the Payment Office copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours by the holders of Series A Convertible
Preferred Stock or any prospective purchaser of shares of Series A Convertible
Preferred Stock designated by such holders.
7. TRIGGERING EVENTS.
Any of the following actions or events shall constitute a "Triggering
Event" for purposes hereof:
(a) Failure to Pay Dividends. The Corporation shall fail to pay any
dividend on any Series A Convertible Preferred Stock which it is required to pay
in accordance with Section 2 for any reason, including but not limited to, that
such payment is prohibited by applicable law or the Board of Directors elect not
to pay such dividend, or shall otherwise violate any term of Section 2 and such
failure shall not be cured within a period of 30 days after such violation
(which cure shall be effected in a manner ensuring the holders the same yield as
if such violation had not occurred).
(b) Failure of Voting Rights. The Corporation shall enter into any
transaction or take any action required to be approved by holders of Series A
Convertible Preferred Stock without obtaining the requisite approval of the
holders of the Series A Convertible Preferred Stock.
(c) Failure to Convert. The Corporation shall fail for any reason to
issue Common Stock as required under Section 5 upon the request of any holder of
Series A Convertible Preferred Stock as provided in Section 5 or shall fail for
any reason to comply in any material respect with any term of Section 5(f) or
any other term of Section 5 hereof.
(d) Registration Rights Agreement. The Corporation shall fail in any
material respect to comply with the rights of the holders of Series A
Convertible Preferred Stock pursuant to the Registration Rights Agreement, dated
as of June 15, 2000, among the Corporation, UBS Capital Americas III, L.P., UBS
Capital LLC and other stockholders of the Corporation, and such failure shall
continue for a period of 30 days after notice from any such holder.
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(e) Preferred Stock Purchase Agreement. The Corporation shall fail to
comply with Section 3, 6(e) or 6(g) of the Preferred Stock Purchase Agreement
and such failure shall continue for a period of 30 days after notice from the
Purchasers or the representations made under Section 4(c) or 4(u) of the
Preferred Stock Purchase Agreement shall prove to have been incorrect or
misleading in any material respect when made pursuant thereto or any other
material representation made under the Preferred Stock Purchase Agreement shall
prove to have been incorrect or misleading in any substantial material respect
when made.
8. REMEDIES.
(a) In the event that a Triggering Event described in Section 7 shall
occur and be continuing, each holder of Series A Convertible Preferred Stock
shall be entitled to receive all cash and other dividends, distributions and
other payments which would be paid or payable to a holder of a number of shares
of Common Stock into which the shares of Series A Convertible Preferred Stock
held by such holder are convertible at such time (without regard to the number
of shares of Common Stock which are authorized or reserved for issuance at such
time).
(b) Upon the occurrence and during the continuance of any Triggering
Event, the size of the Board of Directors shall immediately be increased by the
minimum number of directors which, if all of such additional directors were
deemed "Series A Preferred Directors," would result in Series A Preferred
Directors constituting a majority of the Board of Directors and the holders of
Series A Convertible Preferred Stock shall be entitled to appoint such newly
created directors, in the manner provided in Section 4(d).
(c) Upon the occurrence and during the continuance of any Triggering
Event, any holder of shares of Series A Convertible Preferred Stock, at its
election, may, by notice to the Corporation (the "Put Notice"), demand
repurchase of all or any portion of such holder's shares of Series A Convertible
Preferred Stock for a cash purchase price in an amount per share equal to the
Liquidation Preference. The Corporation shall, on the date (not less than 10
business days after the date of the Put Notice) designated in such Put Notice,
repurchase from the Holder such holder's shares of Series A Convertible
Preferred Stock specified in the Notice. On the date of any repurchase of shares
of Series A Convertible Preferred Stock pursuant to this Section 8(c), the
holder thereof shall surrender for redemption a certificate for the number of
shares of Series A Convertible Preferred Stock being redeemed, without any
representation or warranty (other than that the holder has good and marketable
title thereto, free and clear of liens, encumbrances and restrictions of any
kind), against payment therefor of the repurchase price by, at the option of the
holder, (i) wire transfer to an account designated by the holder for such
purpose or (ii) a certified or official bank check payable to the order of the
holder. If less than all of the holder's shares of Series A Convertible
Preferred Stock represented by a single certificate are being redeemed, the
Corporation shall cancel such certificate and issue in the name of, and deliver
to, the holder a new certificate for the portion not being redeemed. At any time
following delivery of a Put Notice but prior to the date of repurchase, any
holder of Series A Convertible Preferred Stock may, by notice to the
Corporation, withdraw the repurchase demand contained in the Put Notice.
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(d) The Corporation stipulates that the remedies at law of each holder
of Series A Convertible Preferred Stock in the event of any Triggering Event or
threatened Triggering Event or otherwise or other failure in the performance of
or compliance with any of the terms hereof are not and will not be adequate and
that, to the fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms hereof or
otherwise without requiring any holder to post a bond or other security except
to the extent required by applicable law.
(e) Any holder of Series A Convertible Preferred Stock shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with any Triggering Event or
enforcement by such holder of any obligation of the Corporation hereunder.
(f) No failure or delay on the part of any holder of Series A
Convertible Preferred Stock in exercising any right, power or remedy hereunder
or under applicable law or otherwise shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder or thereunder. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law or otherwise.
9. PREEMPTIVE RIGHT.
(a) Each holder of Series A Convertible Preferred Stock or Common Stock
issued upon conversion of Series A Convertible Preferred Stock, shall have a
right of first refusal (the "Preemptive Right") to purchase its pro rata share,
based on such holder's percentage ownership interest in the Corporation, of New
Securities (as defined below) which the Corporation, from time to time, proposes
to sell and issue (subject to such requirements and restrictions imposed by the
Securities Act of 1933, as amended, and state securities laws and to the actual
issuance of the New Securities). The pro rata shares of any holder of Series A
Convertible Preferred Stock or Common Stock issued upon conversion of Series A
Convertible Preferred Stock, for purposes of this Preemptive Right, shall be the
ratio of (i) the number of shares of Common Stock owned, of record or
beneficially, by such holder (including all shares issuable upon conversion of
the Series A Convertible Preferred Stock or the exercise or conversion of any
other option, warrant or convertible security held by such holder) immediately
prior to the issuance of the New Securities, to (ii) the total number of shares
of Common Stock issued and outstanding immediately prior to the issuance of the
New Securities, determined on a fully diluted basis after giving effect to the
exercise in full of then outstanding options and warrants and the conversion of
all securities convertible into shares of Common Stock; provided, however, that
if any holder of Series A Convertible Preferred Stock or Common Stock issued
upon conversion of Series A Convertible Preferred Stock does not elect to
purchase its entire pro rata share of such New Securities, then each other
holder that has elected to purchase its entire pro rata share shall have the
right to purchase up to a number of such unpurchased portion, in addition to its
own, in the proportion that (1) the number of shares of Common Stock owned, of
record or beneficially, by such holder (including all shares issuable upon
conversion of the Series
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A Convertible Preferred Stock or the exercise or conversion of any other option,
warrant or convertible security held by such holder) immediately prior to the
issuance of the New Securities bears to (2) the number of shares of Common Stock
owned, of record or beneficially, by all holders of Series A Convertible
Preferred Stock or Common Stock issued upon conversion of Series A Convertible
Preferred Stock (including all shares issuable upon conversion of the Series A
Convertible Preferred Stock or the exercise or conversion of any other option,
warrant or convertible security held by such holders) immediately prior to the
issuance of the New Securities. The overallotment mechanism set forth in this
paragraph shall be repeatedly applied until all New Securities available for
purchase by holders of Series A Convertible Preferred Stock or Common Stock
issued upon conversion of Series A Convertible Preferred Stock have been
purchased or no holders remain who have indicated a desire to purchase any
unsubscribed for portion in their notice to the Corporation.
(b) "New Securities" shall mean (a) any capital stock of the
Corporation, rights, options or warrants to purchase capital stock and
securities of any type whatsoever that are, or may become convertible into or
exchangeable for capital stock and (b) so-called "high yield" bonds, debt
instruments with equity like features or other similar debt instruments, which
bear a rating lower than investment-grade or are unrated, issued by the
Corporation; provided, however, that the term "New Securities" does not include
(i) the issuance of up to 2,460,000 shares of Common Stock issuable pursuant to
the outstanding options to purchase Common Stock under the Stock Option Plan,
(ii) shares of Common Stock issued or issuable in connection with a Qualified
Public Offering, (iii) shares of Common Stock issued upon conversion of Series A
Convertible Preferred Stock, (iv) securities issued as consideration for any
acquisition approved by a majority of the Board of Directors (including the
affirmative vote of the Series A Preferred Directors), (v) the issuance of up to
820,471 shares of Series A Convertible Preferred Stock at the Subsequent Closing
(as defined in the Preferred Stock Purchase Agreement), (vi) the Spinway
Warrant, (vii) 210,000 shares of Common Stock upon exercise of the Spinway
Warrant, or (viii) shares of Common Stock in exchange for shares of common stock
of Tutopia upon a change-in-control of the Corporation pursuant to the Tutopia
Stockholders Agreement dated as of April 24, 2000.
(c) In the event the Corporation proposes to undertake an issuance of
New Securities, it shall give each holder of Series A Convertible Preferred
Stock or Common Stock issued upon conversion of Series A Convertible Preferred
Stock written notice of its intention, describing the type of New Securities and
the price and the terms upon which the Corporation proposes to issue the same.
Each such holder shall have twenty (20) business days from the date of receipt
of any such notice to agree to purchase its pro rata share of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Corporation and stating therein the quantity of New
Securities to be purchased.
(d) The Corporation shall have ninety (90) days after expiration of the
twenty (20) business day period described in Section 9(c) to sell any New
Securities with respect to which a Preemptive Right was not exercised, at a
price not less than and upon terms no more favorable in the aggregate to the
purchasers thereof than specified in the Corporation's notice. To the extent the
Corporation does not sell all the New Securities offered within said ninety (90)
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day period, the Corporation shall not thereafter issue or sell such New
Securities without first again offering such securities to each holder of Series
A Convertible Preferred Stock or Common Stock issued upon conversion of Series A
Convertible Preferred Stock in the manner provided above.
(e) The rights granted under this Section 9 to each holder of Series A
Convertible Preferred Stock or Common Stock issued upon conversion of Series A
Convertible Preferred Stock shall expire upon the earlier of (i) the closing of
a Qualified Public Offering and (ii) such time as the holders of Series A
Convertible Preferred Stock and their Affiliates no longer collectively hold in
the aggregate at least 50% of the number of shares of Series A Convertible
Preferred Stock (including, for this purpose, Common Stock issued upon
conversion of the Series A Convertible Preferred Stock) issued pursuant to the
Preferred Stock Purchase Agreement (as adjusted in connection with the events
described in Section 6) determined after the Subsequent Closing (as defined in
the Preferred Stock Purchase Agreement).
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