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Exhibit 4.1
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.
Name:/s/Joel Eidelstein
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Title: Joel Eidelstin
President
ATTEST:/s/ Jose Leiman
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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 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
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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
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
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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:
(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).
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(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 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");
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(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;
(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;
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(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 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;
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(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.
(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
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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 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
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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 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).
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(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 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
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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.
"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,
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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:
(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. (ii) 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
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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).
(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
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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 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
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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 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
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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.
(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.
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(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 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.
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(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.
(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
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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.
(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
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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 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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