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EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAWARE TECHNOLOGIES, INC.
Incorporated Pursuant to an Original
Certificate of Incorporation
filed with the Secretary of State
of Delaware on March 16, 1988
-----------------------------
We, the undersigned, for the purpose of amending and restating the Restated
Certificate of Incorporation of Dataware Technologies, Inc. (the "Corporation")
under the laws of the State of Delaware hereby certify as follows:
FIRST: The name of the Corporation is Dataware Technologies, Inc.
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SECOND: The registered office of the Corporation in the State of Delaware
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is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is the Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
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activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation shall be authorized to issue Twenty-two Million
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(22,000,000) shares of capital stock, which shall be divided into Fourteen
Million (14,000,000) shares of Common Stock with a par value of one cent ($.01)
per share and Eight Million (8,000,000) shares of Preferred Stock with a par
value of one cent ($.01) per share.
The following is a statement of the designations, preferences, voting
powers, qualifications, special or relative rights and privileges in respect of
the authorized capital stock of the Corporation.
Preferred Stock
---------------
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article FOURTH, to provide by resolution for the
issuance of the shares of Preferred Stock in one or more series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
The authority of the Board with respect to each series shall include, but
shall not be limited to, determination of the following:
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(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of the
series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
Common Stock
------------
The Common Stock is subject to the rights and preferences of the Preferred
Stock as hereinbefore set forth or authorized.
Subject to the provisions of any applicable law or of the by-laws of the
Corporation, as from time to time amended, with respect to the fixing of a
record date for the determination of stockholders entitled to vote, and except
as otherwise provided herein or by law or by the resolution or resolutions
providing for the issue of any series of Preferred Stock, the holders of
outstanding shares of Common Stock shall have exclusive voting rights for the
election of directors and for all other purposes, each holder of record of
shares of Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
Subject to the rights of any one or more series of Preferred Stock, the
holders of Common Stock shall be entitled to receive such dividends from time to
time as may be declared by the Board of Directors out of any funds of the
Corporation legally available for the payment of such dividends.
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In the event of the liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, after payment shall have been
made to the holders of the Preferred Stock of the full amount to which they are
entitled, the holders of Common Stock shall be entitled to share ratably
according to the number of shares of Common Stock held by them in all remaining
assets of the Corporation available for distribution to its stockholders.
Issuance
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Subject to the provisions of this Certificate of Incorporation and except
as otherwise provided by law, the shares of stock of the Corporation, regardless
of class, may be issued for such consideration and for such corporate purposes
as the Board of Directors may from time to time determine.
FIFTH: The following provisions are inserted for the management of the
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business and for the conduct of the affairs of the Corporation:
1. Any vote or votes authorizing liquidation of the Corporation or
proceedings for its dissolution may provide, subject to the rights of creditors
and the rights expressly provided for particular classes or series of stock, for
the distribution among the stockholders of the Corporation of the assets of the
Corporation as provided herein, wholly or in part or in kind, whether such
assets be in cash or other property, and may authorize the Board of Directors of
the Corporation to determine the valuation of the different assets of the
Corporation for the purpose of such liquidation and may divide or authorize the
Board of Directors to divide such assets or any part thereof among the
stockholders of the Corporation, in such manner that every stockholder will
receive a proportionate amount in value (determined as provided herein) of cash
or property of the Corporation upon such liquidation or dissolution even though
each stockholder may not receive a strictly proportionate part of each such
asset.
2. The directors shall be divided into three classes, as nearly equal in
number as the then total number of directors constituting the entire Board
permits, with the term of office of one class expiring each year. The initial
Class I directors shall be Messrs. Barton L. Faber and James F. Morgan and shall
hold office for a term expiring at the 1994 annual meeting of stockholders; the
initial Class II directors shall be Messrs. Stephen H. Beach and Kurt Mueller
and shall hold office for a term expiring at the 1995 annual meeting of
stockholders; and the initial Class III directors shall be Messrs. David
Dominik, William R. Lonergan, and Jeffrey O. Nyweide and shall hold office for a
term expiring at the 1996 annual meeting of stockholders. At each such annual
meeting of stockholders and at each annual meeting thereafter, successors to the
class of directors whose term expires at that meeting shall be elected for a
term expiring at the third annual meeting following their election and until
their successors shall be elected and qualified, subject to prior death,
resignation, retirement or removal. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, but in no
event will a decrease in the number of directors shorten the term of any
incumbent director. Notwithstanding the foregoing, and except as otherwise
required by law, whenever the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the election, terms of office and other features
of such directorships shall be governed by the terms of the vote establishing
such series, and such directors so elected
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shall not be divided into classes pursuant to this Article FIFTH unless
expressly provided by such terms.
3. Each director chosen to fill a vacancy in the Board of Directors shall
be elected to complete the term of office of the director who is being
succeeded. In the case of any election of a new director to fill a directorship
created by an enlargement of the Board, the Board shall in such election assign
the class of directors to which such additional director is being elected, and
each director so elected shall hold office for the same term as the other
members of the class to which the director is assigned.
4. Elections of directors need not be by ballot.
5. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the by-laws of the Corporation.
6. The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
Indemnification shall include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking shall be
accepted without reference to the financial ability of such person to make such
repayments.
The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved or ratified by the Board of Directors
of the Corporation.
The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the extent authorized
from time to time by its Board of Directors, grant indemnification rights to
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article.
Any person seeking indemnification under this Article shall be deemed to
have met the standard of conduct required for such indemnification unless the
contrary shall be established.
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Any amendment or repeal of the provisions of this Article shall not
adversely affect any right or protection of a director or officer of this
Corporation with respect to any act or omission of such director or officer
occurring before such amendment or repeal.
7. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article FIFTH to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended
from time to time.
Any repeal or modification of this Article FIFTH shall not increase the
personal liability of any director of this Corporation for any act or occurrence
taking place before such repeal or modification, nor otherwise adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
SIXTH: No action required to be taken or that may be taken at any annual
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or special meeting of stockholders of the Corporation may be taken by written
consent without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
SEVENTH: The Corporation reserves the right to amend, alter, change or
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repeal any provisions contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders are granted subject to this reservation.
The amendments and the restatement of the Restated Certificate of
Incorporation herein certified have been duly adopted by written consent of the
stockholders in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware and written notice of the
adoption of this Restated Certificate of Incorporation has been given as
provided by Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.
The undersigned, hereby declaring and certifying that the facts stated in
this Restated Certificate of Incorporation are true, hereunto set their hands
and seals this 26th day of July, 1993.
/s/ Kurt Mueller
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Kurt Mueller, President
ATTESTED:
/s/ Peter Wirth
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Peter Wirth, Assistant Secretary
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CERTIFICATE OF MERGER
of
LEDGE MULTIMEDIA, INC.
into
DATAWARE TECHNOLOGIES, INC.,
(the surviving corporation)
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
Dataware Technologies, Inc. hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Dataware Technologies, Inc. ("Dataware"), a Delaware corporation;
and
(b) Ledge Multimedia, Inc. ("Ledge"), a Massachusetts corporation.
2. An agreement of merger (the "Agreement") has been approved, adopted,
certified, executed and acknowledged by Dataware and Ledge in accordance with
the provisions of subsection (c) of Section 252 of the General Corporation Law
of the State of Delaware.
3. The name of the surviving corporation is Dataware Technologies, Inc.
4. The Restated Certificate of Incorporation of the surviving corporation
shall be its certificate of incorporation, without amendment.
5. The executed Agreement is on file at the principal place of business
of Dataware at 222 Third Street, Cambridge, Massachusetts 02142.
6. A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of Dataware or
Ledge.
7. The authorized capital stock of Ledge immediately before the merger is
200,000 shares of common stock, $0.01 par value.
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IN WITNESS WHEREOF, Dataware Technologies, Inc. has caused this certificate to
be signed by Kurt Mueller, Chairman and Chief Executive Officer, and attested by
Matthew C. Dallett, Assistant Secretary, this 30th day of December 1995.
DATAWARE TECHNOLOGIES, INC.
By: /s/ Kurt Mueller
--------------------------
Kurt Mueller,
Chairman and Chief Executive Officer
Attest:
/s/ Matthew C. Dallett
---------------------------
Matthew C. Dallett
Assistant Secretary
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CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
DATAWARE TECHNOLOGIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the Chairman of the Board and the Assistant Secretary of Dataware
Technologies, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, do hereby certify that, pursuant to
authority conferred on the Board of Directors of the Corporation by the Restated
Certificate of Incorporation of the Corporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation, by vote of its members,
duly adopted the following resolution:
Series A Junior Participating Preferred Stock
---------------------------------------------
RESOLVED: That, pursuant to the authority vested in the Board of Directors of
the Company by Article Fourth of its Restated Certificate of
Incorporation, as amended, a series of Preferred Stock of the Company
be and it hereby is created, and the designations, powers, preferences
and rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
1. Authorized Amount and Designation. The shares of such series shall be
---------------------------------
designated as "Series A Junior Participating Preferred Stock" (the "Junior
Preferred Stock"). The number of shares constituting such series shall be
300,000 shares and the par value shall be $0.01 per share. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior Preferred
--------
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Company convertible into Junior Preferred Stock.
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2. Dividends and Distributions.
----------------------------
(A) Subject to the prior and superior rights of the holders of
any shares of any series of preferred stock (collectively, the "Preferred
Stock") ranking prior and superior to the Junior Preferred Stock with respect to
dividends, the holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock of the Company (the "Common Stock"), and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Junior Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Junior Preferred Stock. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case, the amount to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Company shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Junior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro
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rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Junior Preferred Stock shall
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have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the Company.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Company's
Restated Certificate of Incorporation, in any other Resolution of the Board of
Directors of the Company creating a series of Preferred Stock, or by law, the
holders of shares of Junior Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Company having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein or as otherwise provided by law,
holders of Junior Preferred Stock shall have no voting rights.
4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock, as provided in Section 2 of
this vote, are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
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(iii) redeem or purchase or otherwise acquire, for consideration,
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided that the
Company may at any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Company ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Junior Preferred Stock; or
(iv) redeem, purchase or otherwise acquire, for consideration,
any shares of Junior Preferred Stock, or any shares of stock ranking on a parity
with the Junior Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire, for consideration, any shares of stock of the
Company unless the Company could, under paragraph (A) of this section 4 purchase
or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or
-----------------
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall, upon
their cancellation, become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock, subject to the
conditions and restrictions on issuance set forth herein, in the Company's
Restated Certificate of Incorporation, in any other Resolution of the Board of
Directors of the Company creating a series of Preferred Stock, or as otherwise
required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Company, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock unless,
prior thereto, the holders of shares of Junior Preferred Stock shall have
received $100.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Junior Preferred Stock shall be entitled
to receive, to the extent greater than the foregoing, an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except distributions made ratably on the Junior
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company shall, at any
time, declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the aggregate amount to
which holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the preceding sentence
shall be adjusted by
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multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Company shall enter into any
---------------------------
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Junior Preferred
Stock shall at the same time be similarly exchanged or changed into an amount
per share (subject to the provision for adjustment hereinafter set forth) equal
to 100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company shall,
at any time, declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
8. Redemption. The shares of Junior Preferred Stock shall not be
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redeemable.
9. Rank. The Junior Preferred Stock shall rank junior with respect to the
----
payment of dividends and the distribution of assets to all series of the
Company's Preferred Stock that specifically provide that they shall rank prior
to the Junior Preferred Stock. Nothing herein shall preclude the Board from
creating any series of Preferred Stock ranking on a parity with or prior to the
Junior Preferred Stock as to the payment of dividends or the distribution of
assets.
10. Amendment. The Restated Certificate of Incorporation of the Company
---------
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Junior Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Junior Preferred Stock, voting together as a
single series.
11. Fractional Shares. The Junior Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of the Junior Preferred Stock.
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IN WITNESS WHEREOF, this Certificate is executed and attested on behalf of
the Corporation by the undersigned as of the 28th day of June, 1996.
/s/ Kurt Mueller
-----------------------------
Kurt Mueller
Chairman of the Board and
Attest Chief Executive Officer
/s/ Matthew C. Dallett
----------------------------
Matthew C. Dallett
Assistant Secretary
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DATAWARE TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
----------------------------
Dataware Technologies, Inc., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
(1) That pursuant to authority vested in the Board of Directors of the
Corporation by the Restated Certificate of Incorporation, of the Corporation,
the Board of Directors of the Corporation, by unanimous written consent dated
April 7, 1997, adopted a resolution providing for the creation of a series of
the Corporation's Preferred Stock, $.01 par value, which series is designated as
"Series B Convertible Preferred Stock," which resolution is as follows:
VOTED: That, pursuant to the authority vested in the Board of Directors of
the Company by Article IV of its Restated Certificate of
Incorporation, a series of Series B Convertible Preferred Stock of the
Company, $.01 par value ("Series B Stock"), be and it hereby is
created with the designations, powers, preferences and rights of the
shares of such series and the qualifications, limitation or
restrictions thereof as set forth in Exhibit A hereto; and that the
proper officers of the Company be, and they hereby are, authorized and
directed to execute and file a Certificate of Designations with the
Secretary of State of Delaware setting forth the designations, powers,
preferences and rights of the Series B Stock, and the qualifications,
limitations or restrictions thereof.
(2) That attached hereto is said Exhibit A as adopted pursuant to
said resolution.
IN WITNESS WHEREOF, Dataware Technologies, Inc. has caused this
certificate to be signed as of the 14th day of April, 1997.
DATAWARE TECHNOLOGIES, INC.
Attest:
/s/ Matthew C. Dallett By: /s/ Kurt Mueller
---------------------- --------------------------
Matthew C. Dallett Kurt Mueller
Assistant Secretary Chairman of the Board and
Chief Executive Officer
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Exhibit A
SERIES B CONVERTIBLE PREFERRED STOCK
The rights, preferences, privileges, and limitations granted to and
imposed on the Series B Convertible Preferred Stock (the "Series B Convertible
Preferred Stock"), which series shall consist of 3,000 shares, are as set forth
below. The following rights, preferences, privileges, and limitations are
subject to the designation, description, and terms of one or more subsequent
series of Preferred Stock by the Board of Directors of Dataware Technologies,
Inc. (the "Corporation") pursuant to authority granted by the Certificate of
Incorporation. To the extent that the rights, preferences, privileges, and
limitations of any such subsequent series conflict or are inconsistent with any
of the rights, preferences, privileges, and limitations of the Series B
Convertible Preferred Stock, the designation and description of terms of the
subsequent series which is the latest so designated shall control and prevail
over the rights, preferences, privileges, and limitations of the Series B
Convertible Preferred Stock.
Section 1. Definitions. As used herein, the following terms shall
-----------
have the following meanings:
"AMEX" shall mean the American Stock Exchange, Inc.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Corporation.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
Corporation.
"Computation Date" shall mean
(1) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after the
Issuance Date, the date which is 31 days after the Issuance Date;
(2) each date which is 30 days after the Computation Date
specified in the preceding clause (1), if the Corporation shall not have
filed the Registration Statement with the SEC prior to such 30th day;
(3) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after the
Issuance Date, the date on which the Corporation shall have so filed the
Registration Statement;
(4) the date which is 91 days after the Issuance Date, unless the
Registration Statement theretofore has been declared effective by the SEC,
(5) each date which is 30 days after the Computation Date
specified in the preceding clause (4), if the Registration Statement has
not been declared effective by the SEC prior to such 30th day,
15
<PAGE>
(6) if the Registration Statement has not been declared
effective by the SEC within 90 days after the Issuance Date, the date on
which the Registration Statement is declared effective by the SEC,
(7) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of the
Registration Rights Agreement, the date which is 30 days after the date the
Corporation was so required to request acceleration (if the Corporation
shall not have so requested acceleration prior to such 30th day);
(8) each date which is 30 days after the Computation Date
referred to in the preceding clause (7), if the Corporation shall have
failed to so request acceleration of the Registration Statement prior to
such 30th day;
(9) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of the
Registration Rights Agreement, the date on which the Corporation shall have
so requested acceleration of the Registration Statement;
(10) the date on which the Registration Statement has ceased for
30 days (whether or not consecutive) to be available, for use by any holder
of shares of Series B Convertible Preferred Stock which is named therein as
a selling stockholder with the SEC, if, at any time during which the
Registration Statement is required by the Registration Rights Agreement to
remain available for such use, the Registration Statement ceases to be so
available for any reason (including, without limitation, by reason of an
SEC stop order, a material misstatement or omission therein or the
information contained in the Registration Statement having become outdated)
and shall remain so unavailable on such 30th day and each date which is the
30th day (whether or not consecutive) after such 30th day on which the
Registration Statement shall have remained so unavailable,
(11) the date on which the Registration Statement becomes
available for use by holders of shares of Series B Convertible Preferred
Stock, if, at any time during which the Registration Statement is required
by the Registration Rights Agreement to remain available for such use, the
Registration Statement ceases to be so available for any reason (including,
without limitation, by reason of an SEC stop order, a material misstatement
or omission therein or the information contained in the Registration
Statement having become outdated),
(12) the date on which any holder of shares of Series B
Convertible Preferred Stock shall have become unable for 30 days (whether
or not consecutive) to convert shares of Series B Convertible Preferred
Stock in accordance with Section 10(a) for any reason (other than by reason
of the 4.9% limitation set forth in Section 10(a)), if any holder of shares
of Series B Convertible Preferred Stock shall remain unable so to convert
shares of Series B Convertible Preferred Stock on such 30th day and each
date which is 30 days after such 30th day if holders then remain unable to
so convert, and
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<PAGE>
(13) the date on which holders of shares of Series B Convertible
Preferred Stock become able to convert shares of Series B Convertible
Preferred Stock in accordance with Section 10(a), if any holder of shares
of Series B Convertible Preferred Stock shall have become unable to convert
shares of Series B Convertible Preferred Stock in accordance with Section
10(a) for any reason (other than by reason of the 4.9% limitation set forth
in Section 10(a));
provided, however, that if more than one event which could give rise to a
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Computation Date during any period shall have occurred, only one of such events
shall be deemed to result in a Computation Date so that the adjustments provided
herein by reason of the occurrence of a Computation Date shall be made only once
in respect of any period of time and then in the maximum amount based on all
such Computation Dates.
"Computed Price" of one share of Common Stock on any date shall mean
the lesser of (1) the product obtained by multiplying (a) the Conversion
Percentage applicable on such date times (b) the arithmetic average of the per
-----
share Market Price of the Common Stock for the Measurement Period with respect
to the applicable dividend payment date and (2) the greater of (a) $ 3.99625
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
on or after the date of filing of this Certificate of Designations with the
Secretary of State of the State of Delaware) and (b) on and after the 90th day
after the Issuance Date, an amount equal to the arithmetic average of the Market
Price of the Common Stock for the Measurement Period for the date which is 90
days after the Issuance Date (subject to equitable adjustments for stock splits,
stock dividends, combinations, recapitalizations, reclassifications and similar
events occurring on or after the date which is 90 days after the Issuance Date);
provided, however, that in no event shall the Computed Price determined in
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accordance with this clause (2) be greater than $6.00 (subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring on or after the date of filing of
this Certificate of Designations with the Secretary of State of the State of
Delaware).
"Conversion Agent" shall mean American Stock Transfer & Trust Company,
or its duly appointed successor.
"Conversion Amount" initially shall be equal to $1,000.00, subject to
adjustment as hereinafter provided.
"Conversion Date" shall mean the date on which the notice of
conversion is actually received by the Conversion Agent, whether by mail,
courier, personal service, telephone line facsimile transmission or other means,
in case of a conversion at the option of the holder pursuant to Section 10(a).
"Conversion Notice" shall mean a written notice, duly signed by or on
behalf of the holder, stating the number of shares of Series B Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Percentage" shall mean with respect to a Conversion Date
or a dividend payment date 80%; provided however, that notwithstanding any
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other provision hereof
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<PAGE>
(1) if (v) the Corporation shall fail to file the Registration Statement with
the SEC on or before the date which is 30 days after the Issuance Date, (w) the
Registration Statement is not ordered effective by the SEC within 90 days after
the Issuance Date, (x) the Corporation shall fail to request acceleration of the
Registration Statement as and when required by Section 3(a) of the Registration
Rights Agreement, (y) the Registration Statement shall cease to be available for
use by any holder of shares of Series B Convertible Preferred Stock which is
named therein as a selling stockholder for any reason (including, without
limitation, by reason of an SEC stop order, a material misstatement or omission
in the Registration Statement or the information contained in the Registration
Statement having become outdated) as contemplated by clauses (10) and (11) of
the definition of Computation Date, or (z) a holder of shares of Series B
Convertible Preferred Stock shall have become unable to convert any shares of
Series B Convertible Preferred Stock in accordance with Section 10(a) (other
than by reason of the 4.9% limitation set forth in Section 10(a)), as
contemplated by clauses (12) and (13) of the definition of Computation Date,
then in each such case (1) the applicable percentage stated above in this
paragraph shall be reduced by two-and-one-half percentage points on each
Computation Date (pro rated in the case of any Computation Date which is less
than 30 days after a Computation Date) and (2) the Conversion Percentage
applicable to a particular conversion shall be subject to reduction as provided
in Section 10(b)(6).
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Current Market Price" shall mean with respect to any date the
arithmetic average of the Market Price of the Common Stock on the 30 consecutive
trading days commencing 45 trading days before such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Issuance Date" shall mean the first date of original issuance of any
shares of Series B Convertible Preferred Stock.
"Junior Dividend Stock" shall mean, collectively, the Common Stock and
any other class or series of capital stock of the Corporation, including the
Junior Preferred Stock (as defined below in Section 4), ranking junior as to
dividends to the Series B Convertible Preferred Stock.
"Junior Liquidation Stock" shall mean the Common Stock or any other
class or series of the Corporation's capital stock, including the Junior
Preferred Stock, ranking junior as to liquidation rights to the Series B
Convertible Preferred Stock.
"Liquidation Preference" shall mean, for each share of Series B
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.
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<PAGE>
"Mandatory Conversion Date" shall mean the date which is three years
after the Issuance Date.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on the principal securities exchange or
other market on which such security is listed for trading, as reported by such
exchange or other market; provided, however, that if during any Measurement
-------- -------
Period:
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market
Price of the Common Stock for each day in such Measurement Period prior to
the earlier of (1) the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution and (2) the date on
which ex-dividend trading in the Common Stock with respect to such dividend
or distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the
earlier of (1) the record date fixed for such determination and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
dividend or distribution begins and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock (other than any rights issuable
pursuant to the Rights Agreement), or fix a record date for such issuance,
which rights or warrants entitle such holders (for a period expiring within
forty-five (45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for
or purchase shares of Common Stock at a price per share less than the
Market Price (determined without regard to this proviso) for any day in
such Measurement Period which is prior to the end of such 45-day period,
then the Market Price for such day shall be reduced so that the same shall
equal the price determined by multiplying the Market Price (determined
without regard to this proviso) by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the record date fixed for the determination of stockholders
entitled to receive such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered would
purchase at such Market Price, and of which the denominator shall be the
number of shares of Common Stock outstanding on the close of business on
such record date plus the total number of additional shares of Common Stock
so offered for subscription or purchase. In determining whether any rights
or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than the Market Price (determined without regard to
this proviso), and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such consideration, if
other than cash, to be determined in good faith by a resolution of the
Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision
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<PAGE>
shall be fixed, then the Market Price of the Common Stock for each day in
such Measurement Period prior to the earlier of (1) the day upon which such
subdivision becomes effective and (2) the date on which ex-dividend trading
in the Common Stock with respect to such subdivision begins shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Market Price for each day in such Measurement Period prior to
the day upon which such combination becomes effective shall be
proportionately increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i)
of this proviso applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or warrants referred
to in clause (ii) of this proviso and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation)
(the foregoing hereinafter in this clause (iv) of this proviso called the
"Securities"), or fix a record date for any such distribution, then, in
each such case, the Market Price for any day in such Measurement Period
prior to the earlier of (1) the record date for such distribution and (2)
the date on which ex-dividend trading in the Common Stock with respect to
such distribution begins shall be reduced so that the same shall be equal
to the price determined by multiplying the Market Price (determined without
regard to this proviso) by a fraction of which the numerator shall be the
Market Price (determined without regard to this proviso) on such date less
the fair market value (as determined in good faith by resolution of the
Board of Directors of the Corporation) on such date of the portion of the
Securities so distributed or to be distributed applicable to one share of
Common Stock and the denominator shall be the Market Price (determined
without regard to this proviso); provided, however, that in the event the
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then fair market value (as so determined) of the portion of the Securities
so distributed applicable to one share of Common Stock is equal to or
greater than the Market Price (determined without regard to this clause
(iv) of this proviso) on any such day, in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of shares of Series B
Convertible Preferred Stock shall have the right to receive in payment of
dividends on the shares of Series B Convertible Preferred Stock or upon
conversion of the shares of Series B Convertible Preferred Stock, as the
case may be, the amount of Securities the holders of shares of Series B
Convertible Preferred Stock would have received had the number of shares of
Common Stock to be issued in payment of such dividends on the shares of
Series B Convertible Preferred Stock, or had the holders of shares of
Series B Convertible Preferred Stock converted the shares of Series B
Convertible Preferred Stock, in either such case immediately prior to the
record date for such distribution. If the Board of Directors of the
Corporation determines the fair market value of any distribution for
purposes of this clause (iv) by reference to the actual or when issued
trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market on the
same day for which an adjustment in the Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of
20
<PAGE>
Common Stock, or rights or warrants to subscribe for or purchase shares of
Common Stock to which clause (ii) of this proviso applies (or both), shall
be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other
than such shares of Common Stock or rights or warrants to which clause (ii)
of this proviso applies (and any Market Price reduction required by this
clause (iv) with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (and any further Market Price
reduction required by clauses (i) and (ii) of this proviso with respect to
such dividend or distribution shall then be made), except that any shares
of Common Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of clause (i) of this proviso;
(v) The Corporation or any subsidiary of the Corporation shall (x) by
dividend or otherwise, distribute to all holders of its Common Stock cash
in (or fix any record date for any such distribution), or (y) repurchase or
reacquire shares of its Common Stock (other than shares surrendered in
payment of the exercise price or tax obligations incurred in connection
with the exercise of a stock option issued to any of the Corporation's
employees, directors, or consultants; each, an "Option Share Surrender")
for, in either case, an aggregate amount that, combined with (1) the
aggregate amount of any other such distributions to all holders of its
Common Stock made exclusively in cash after the Issuance Date and within
the twelve (12) months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to this clause (v) has been
made, (2) the aggregate amount of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Corporation) of consideration paid in respect of any repurchase or other
reacquisition by the Corporation or any subsidiary of the Corporation of
any shares of Common Stock (other than an Option Share Surrender) made
after the Issuance Date and within the twelve (12) months preceding the
date of payment of such distribution or making of such repurchase or
reacquisition, as the case may be, and in respect of which no adjustment
pursuant to this clause (v) has been made, and (3) the aggregate of any
cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration
payable in respect of any tender offer by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within
the twelve (12) months preceding the date of payment of such distribution
or completion of such repurchase or reacquisition, as the case may be, and
in respect of which no adjustment pursuant to clause (vi) of this proviso
has been made, exceeds 10% of the product of the Market Price (determined
without regard to this proviso) on any day in such Measurement Period prior
to the earlier of (1) the record date with respect to such distribution and
(2) the date on which ex-dividend trading in the Common Stock with respect
to such distribution begins or the date of such repurchase or
reacquisition, as the case may be, times the number of shares of Common
Stock outstanding on such date, then, and in each such case, the Market
Price for such day shall be reduced so that the same shall equal the price
determined by multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction (i) the numerator of which shall
be equal to the Market Price (determined without regard to this proviso)
for such day less an amount equal to the quotient of (x) the excess of such
combined amount over such
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<PAGE>
10% and (y) the number of shares of Common Stock outstanding on such day and
(ii) the denominator of which shall be equal to the Market Price (determined
without regard to this proviso) on such day; provided, however, that in the
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event the portion of the cash so distributed or paid for the repurchase or
reacquisition of shares (determined per share based on the number of shares of
Common Stock outstanding) applicable to one share of Common Stock is equal to or
greater than the Market Price (determined without regard to this clause (v) of
this proviso) of the Common Stock on any such day, in lieu of the foregoing
adjustment, adequate provision shall be made so that the holders of shares of
Series B Convertible Preferred Stock shall have the right to receive in payment
of dividends on shares of Series B Convertible Preferred Stock or upon
conversion of shares of Series B Convertible Preferred Stock, as the case may
be, the amount of cash the holders of shares of Series B Convertible Preferred
Stock would have received had the number of shares of Common Stock to be issued
in payment of such dividends on shares of Series B Convertible Preferred Stock,
or had the holders of shares of Series B Convertible Preferred Stock converted
shares of Series B Convertible Preferred Stock, in either such case, immediately
prior to the record date for such distribution or the payment date of such
repurchase, as applicable; or
(vi) A tender offer made by the Corporation or any of its subsidiaries
for all or any portion of the Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined in good faith by
resolution of the Board of Directors of the Corporation) that combined together
with (1) the aggregate of the cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Corporation), as of
the expiration of such tender offer, of consideration payable in respect of any
other tender offers, by the Corporation or any of its subsidiaries for all or
any portion of the Common Stock expiring within the twelve (12) months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to this clause (vi) has been made, (2) the aggregate amount of any cash
plus the fair market value (as determined in good faith by a resolution of the
Board of Directors of the Corporation) of consideration paid in respect of any
repurchase or other reacquisition by the Corporation or any subsidiary of the
Corporation of any shares of Common Stock (other than an Option Share Surrender)
made after the Issuance Date and within the twelve (12) months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this clause (vi) has been made, and (3) the aggregate amount of any
distributions to all holders of the Corporation's Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such tender offer
and in respect of which no adjustment pursuant to clause (v) of this proviso has
been made, exceeds 10% of the product of the Market Price (determined without
regard to this proviso) on any day in such period times the number of shares of
Common Stock outstanding on such day, then, and in each such case, the Market
Price for such day shall be reduced so that the same shall equal the price
determined by multiplying the Market Price (determined without regard to this
proviso) for such day by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding on such day multiplied by the Market Price
(determined without regard to this proviso) for such day and the denominator
shall
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<PAGE>
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the last time tenders could have
been made pursuant to such tender offer (the "Expiration Time") (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on such day and the Market
Price (determined without regard to this proviso) of the Common Stock on
the trading day next succeeding the Expiration Time. If the application of
this clause (vi) to any tender offer would result in an increase in the
Market Price (determined without regard to this proviso) for any day, no
adjustment shall be made for such tender offer under this clause (vi) for
such day;
provided further, however, that if on any date there shall be no reported
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closing bid price of such security, the "Market Price" on such date shall be the
closing bid of such security on the date next preceding such date on which a
closing bid price for such security has been so reported; provided further,
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however, that if on any date there shall be no reported closing bid price of
-------
such security and at the time the closing bid price for such date is being
determined there shall be known a closing bid price so reported for the date
next subsequent to such date on which a closing bid price shall have been so
reported, then the Market Price on such date for which there shall have been no
reported closing bid price shall be the lower of (x) the Market Price as
determined pursuant to the second proviso to this definition and (y) the closing
bid price as so reported for such succeeding day for which a closing bid price
as so reported is known.
"Maximum Share Amount" shall mean 1,335,256 shares, or such greater
number as permitted by the rules of the Nasdaq (such amount to be subject to
equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the date of filing this Certificate of Designations with
the Secretary of State of the State of Delaware), of Common Stock.
"Measurement Period" shall mean, with respect to any date, the period
of five (5) consecutive trading days ending one trading day prior to such date.
"Nasdaq" shall mean the Nasdaq National Market.
"Notice of Redemption" shall mean a notice given by the Corporation to
the holders of Series B Convertible Preferred Stock pursuant to Section 9, which
notice shall state (1) that the Corporation is exercising its right to redeem
all or a portion of the outstanding shares of Series B Convertible Preferred
Stock pursuant to Section 9, (2) the number of shares of Series B Convertible
Preferred Stock held by such holder which are to be redeemed, (3) the Redemption
Price per share of Series B Convertible Preferred Stock to be redeemed or the
formula for determining the same, determined in accordance herewith and (4) the
applicable Redemption Date.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Optional Redemption Event" shall mean any one of the following
events:
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<PAGE>
(1) For any period of five consecutive trading days there shall be no
closing bid price of the Common Stock on any national securities exchange
or the Nasdaq;
(2) The Common Stock ceases to be listed for trading on the Nasdaq,
the NYSE, the AMEX or the Nasdaq SmallCap Market;
(3) The inability for 30 or more days (whether or not consecutive) of
any holder of shares of Series B Convertible Preferred Stock who is
entitled to optional redemption rights under Section 11 to sell such shares
of Common Stock issued or issuable on conversion of shares of Series B
Convertible Preferred Stock pursuant to the Registration Statement for any
reason on each of such 30 days;
(4) The Corporation shall fail or default in the timely performance
of any material obligation to a holder of shares of Series B Convertible
Preferred Stock under the terms of this Certificate of Designations or
under the Registration Rights Agreement or any other agreements or
documents entered into in connection with the issuance of shares of Series
B Convertible Preferred Stock, as such instruments may be amended from time
to time;
(5) Any consolidation or merger of the Corporation with or into
another entity (other than a merger or consolidation of a subsidiary of the
Corporation into the Corporation or a wholly-owned subsidiary of the
Corporation) where the shareholders of the Corporation immediately prior to
such transaction do not collectively own at least 51% of the outstanding
voting securities of the surviving corporation of such consolidation or
merger immediately following such transaction or the common stock of such
surviving corporation is not listed for trading on the Nasdaq, the NYSE,
the AMEX or the Nasdaq SmallCap Market; or
(6) The taking of any action, including any amendment to the
Corporation's Certificate of Designations, which materially and adversely
affects the rights of any holder of shares of Series B Convertible
Preferred Stock.
"Optional Redemption Notice" shall have the meaning provided in
Section 11(b).
"Optional Redemption Price" shall mean the greater of (i) the sum of
(a) the sum of (1) $1,000, (2) an amount equal to the accrued but unpaid
dividends on the share of Series B Convertible Preferred Stock to be redeemed,
and (3) an amount equal to the accrued and unpaid interest on dividends in
arrears on such share of Series B Convertible Preferred Stock through the date
of redemption pursuant to Section 11 (as provided in Section 5) plus (b) an
----
amount equal to the product obtained by multiplying (x) the sum stated in the
immediately preceding clause (a) times (y) the quotient (expressed as a
-----
percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the date of redemption
pursuant to Section 11 by (B) the Conversion Percentage in effect on the date of
--
redemption pursuant to Section 11 and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would,
but for the redemption pursuant to Section 11, be issuable on conversion in
accordance with Section 10(a) of one share of Series B Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
24
<PAGE>
the holder of such share of Series B Convertible Preferred Stock on the date of
redemption pursuant to Section 11 (determined without regard to any limitation
on conversion contained in Section 10(a)) times (y) the arithmetic average of
-----
the Market Price of the Common Stock for the five consecutive trading days
ending one trading day prior to the date of redemption pursuant to Section 11.
"Parity Dividend Stock" shall mean any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series B Convertible Preferred Stock.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series B Convertible Preferred Stock.
"Redemption Date" shall mean the date of a redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 9, determined in
accordance therewith.
"Redemption Price" shall mean the greater of (i) the sum of (a) the
sum of (1) $1,000, (2) an amount equal to the accrued but unpaid dividends on
such share of Series B Convertible Preferred Stock, and (3) an amount equal to
the accrued and unpaid interest on dividends in arrears (determined as provided
in Section 5) through the Redemption Date plus (b) an amount equal to the
----
product obtained by multiplying (x) the sum stated in the immediately preceding
clause (a) times (y) the quotient (expressed as a percentage) obtained by
-----
dividing (A) the amount determined by subtracting from 100 percent the
Conversion Percentage in effect on the Redemption Date by (B) the Conversion
--
Percentage in effect on the Redemption Date and (ii) an amount equal to the
product obtained by multiplying (x) the number of shares of Common Stock which
would, but for the redemption pursuant to Section 9, be issuable on conversion
in accordance with Section 10(a) of one share of Series B Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series B Convertible Preferred Stock on the
Redemption Date (determined without regard to any limitation on conversion
contained in Section 10(a)) times (y) the arithmetic average of the Market Price
-----
of the Common Stock for the five consecutive trading days ending one trading day
prior to the Redemption Date.
"Registration Effective Date" shall mean, with respect to any share of
Series B Convertible Preferred Stock, the date on which the Registration
Statement is first ordered effective by the SEC.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement entered into between the Corporation and the original holder of the
shares of Series B Convertible Preferred Stock, as amended or modified from time
to time in accordance with their terms.
"Registration Statement" shall mean the Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 2(a) of
the Registration Rights Agreement.
"Restricted Person" shall have the meaning provided in Section 10(a).
25
<PAGE>
"Rights Agreement" shall mean the Rights Agreement dated July 8, 1996
between the Corporation and American Stock Transfer & Trust Company, as Rights
Agent, as it may be amended from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
"Senior Dividend Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series B
Convertible Preferred Stock.
"Senior Liquidation Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series B
Convertible Preferred Stock.
"Series B Convertible Preferred Stock" shall mean the Series B
Convertible Preferred Stock of the Corporation.
"Share Limitation Redemption Date" shall mean each date on which the
Corporation is required to redeem shares of Series B Convertible Preferred Stock
as provided in this Section 7(a).
"Share Limitation Redemption Price" shall mean the greater of (i) the
sum of (a) the sum of (1) $1,000, (2) an amount equal to the accrued but unpaid
dividends on the share of Series B Convertible Preferred Stock to be redeemed
pursuant to Section 7(a), and (3) an amount equal to the accrued and unpaid
interest on dividends in arrears on such share of Series B Convertible Preferred
Stock through the applicable Share Limitation Redemption Date (as provided in
Section 5) plus (b) an amount equal to the product obtained by multiplying (x)
----
the sum stated in the immediately preceding clause (a) times (y) the quotient
-----
(expressed as a percentage) obtained by dividing (A) the amount determined by
subtracting from 100 percent the Conversion Percentage in effect on the
applicable Share Limitation Redemption Date by (B) the Conversion Percentage in
--
effect on the applicable Share Limitation Redemption Date and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock which would, but for the redemption pursuant to Section 7(a), be issuable
on conversion in accordance with Section 10(a) of one share of Series B
Convertible Preferred Stock and any accrued and unpaid dividends thereon and any
accrued and unpaid interest on dividends thereon in arrears if a Conversion
Notice were given by the holder of such share of Series B Convertible Preferred
Stock on the applicable Share Limitation Redemption Date (determined without
regard to any limitation on conversion contained in Section 10(a)) times (y) the
-----
arithmetic average of the Market Price of the Common Stock for the five
consecutive trading days ending one trading day prior to the applicable Share
Limitation Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of such
Common Stock on conversion of the Series B Convertible Preferred Stock, as and
26
<PAGE>
to the extent required under Rule 4460(i) of the Nasdaq as in effect from time
to time or any successor provision.
"Subscription Agreement" shall mean the Subscription Agreement between
the Corporation and the original holder of shares of Series B Convertible
Preferred Stock pursuant to which the shares of Series B Convertible Preferred
Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
Section 2. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series B Convertible Preferred Stock", and the number of
shares constituting the Series B Convertible Preferred Stock shall be 3,000, and
shall not be subject to increase.
Section 3. Stated Capital. The amount to be represented in stated
--------------
capital at all times for each share of Series B Convertible Preferred Stock
shall be the greater of (i) the sum of (a) the sum of (1) $1,000, (2) to the
extent legally available, the accrued but unpaid dividends on such share of
Series B Convertible Preferred Stock, and (3) an amount equal to the accrued and
unpaid interest on dividends in arrears (as provided in Section 5) through the
date of determination plus (b) an amount equal to the product obtained by
----
multiplying (x) the sum stated in the immediately preceding clause (a) times (y)
-----
the quotient (expressed as a percentage) obtained by dividing (A) the amount
determined by subtracting from 100 percent the Conversion Percentage in effect
on such date of determination by (B) the Conversion Percentage in effect on such
--
date of determination and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, at the time of
such determination, be issuable on conversion in accordance with Section 10(a)
of one share of Series B Convertible Preferred Stock and any accrued and unpaid
dividends thereon and any accrued and unpaid interest on dividends thereon in
arrears if a Conversion Notice (as defined herein) were given by the holder of
such share of Series B Convertible Preferred Stock on the date of such
determination (determined without regard to any limitation on conversion
contained in 10(a)) times (y) the arithmetic average of the Market Price of the
-----
Common Stock for the five consecutive trading days ending one trading day prior
to the date of such determination. The Corporation shall take such action as
may be required to maintain the amount required by this Section 3 to be
represented in stated capital for the Series B Convertible Preferred Stock not
less frequently than monthly.
Section 4. Rank. All Series B Convertible Preferred Stock shall rank
----
(i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, (ii) on a parity with
any additional series of the class of Preferred Stock which series the Board of
Directors may from time to time authorize, both as to payment of dividends and
as to distributions of assets upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, (iii) on a parity with the
shares of any additional class of preferred stock (or series of preferred stock
of such class) which the Board of Directors or the stockholders may from time to
time authorize in accordance herewith, which class (or series thereof) by its
terms ranks on a parity with the shares of Series B Convertible Preferred Stock
and (iv) senior to any other class or series of preferred stock (other than as
stated in the immediately preceding clauses (ii) and (iii)) of the Corporation.
The Series B Convertible
27
<PAGE>
Preferred Stock shall rank prior to the Corporation's Series A Junior
Participating Preferred Stock (the "Junior Preferred Stock") with respect to the
payment of dividends and the distribution of assets upon liquidation,
distribution, or winding up of the Corporation, whether voluntary or
involuntary.
Section 5. Dividends and Distributions. (a) The holders of shares of
---------------------------
Series B Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $45.00 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest (except as otherwise
provided herein as to dividends in arrears) from the date of original issuance
and shall be payable quarterly on January 1, April 1, July 1, and October 1 of
each year commencing July 1, 1997 (except that if any such date is a Saturday,
Sunday, or legal holiday, then such dividend shall be payable on the next
succeeding day that is not a Saturday, Sunday, or legal holiday) to holders of
record as they appear on the stock books of the Corporation on such record
dates, not more than 20 nor less than 10 days preceding the payment dates for
such dividends, as shall be fixed by the Board. Dividends on the Series B
Convertible Preferred Stock shall be paid in cash or, subject to the limitations
in Section 5(b) hereof, shares of Common Stock of the Corporation or any
combination of cash and shares of Common Stock, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of
Series B Convertible Preferred Stock for each quarterly dividend period shall be
computed by dividing the annual dividend amount by four. The amount of
dividends payable for the initial dividend period and any period shorter than a
full quarterly dividend period shall be computed on the basis of a 360-day year
of twelve 30-day months. Dividends not paid on a payment date, whether or not
such dividends have been declared, will bear interest at the rate of 12% per
annum until paid. Except as provided in the Rights Agreement, no dividends or
other distributions, other than the dividends payable solely in shares of any
Junior Dividend Stock, shall be paid or set apart for payment on any shares of
Junior Dividend Stock, and no purchase, redemption, or other acquisition shall
be made by the Corporation of any shares of Junior Dividend Stock unless and
until all accrued and unpaid dividends on the Series B Convertible Preferred
Stock and interest on dividends in arrears at the rate specified herein shall
have been paid or declared and set apart for payment.
If at any time any dividend on any the Senior Dividend Stock shall be
in default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series B Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividends for the then current dividend period, shall have
been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series B Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series B Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series B Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series B
Convertible Preferred Stock (and interest on dividends
28
<PAGE>
in arrears at the rate specified herein) and the Parity Dividend Stock shall be
paid or declared and set apart for payment pro rata, so that the amount of
dividends paid or declared and set apart for payment per share on the Series B
Convertible Preferred Stock and the Parity Dividend Stock shall in all cases
bear to each other the same ratio that accrued and unpaid dividends per share on
the shares of Series B Convertible Preferred Stock and the Parity Dividend Stock
bear to each other.
Any references to "distribution" contained in this Section 5 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole discretion
to issue shares of Common Stock in payment of dividends on the Series B
Convertible Preferred Stock, the Corporation shall issue and dispatch, or cause
to be issued and dispatched, by the third trading day after such dividend
payment date to each holder of such shares a certificate representing the number
of whole shares of Common Stock arrived at by dividing the per share Computed
Price of such shares of Common Stock into the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series B Convertible Preferred Stock held by such holder which are being paid in
shares of Common Stock were being paid in cash; provided, however, that if
-------- -------
certificates representing shares of Common Stock are issued and dispatched to
holders of Series B Convertible Preferred Stock subsequent to the fifth trading
day after a dividend payment date, the percentage used to calculate the Computed
Price will be reduced by one for each trading day after the third trading day
following such dividend payment date to the date of dispatch of shares of Common
Stock. No fractional shares of Common Stock shall be issued in payment of
dividends. In lieu thereof, the Corporation shall pay cash in an amount equal
to the product of (x) the Market Price of the Common Stock for the Measurement
Period applicable to such dividend times (y) the fraction of a share of Common
-----
Stock which would otherwise be issuable by the Corporation. The Corporation
shall not exercise its right to issue shares of Common Stock in payment of
dividends on Series B Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid
in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on
any securities exchange or market on which the Common Stock is then listed;
or have not been approved for quotation if the Common Stock is traded in
the over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of one share of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of
Common Stock as a
29
<PAGE>
dividend payment or (B) are no longer listed on a national securities
exchange, on the Nasdaq National Market or the Nasdaq SmallCap Market;
(vi) the issuance of shares of Common Stock in payment of dividends
on Series B Convertible Preferred Stock held by any Restricted Person would
result in any Restricted Person beneficially owning more than 4.9% of the
Common Stock, determined as provided in the proviso to the second sentence
of Section 10(a) hereof; or
(vii) an Optional Redemption Event shall have occurred and any
holder shall be entitled to exercise optional redemption rights under
Section 10 hereof by reason of such Optional Redemption Event.
Shares of Common Stock issued in payment of dividends on Series B
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof is
hereby authorized; and the dispatch thereof will be, and for all purposes shall
be deemed to be, payment in full of the cumulative dividends to which holders
are entitled on the applicable dividend payment date.
(c) Except as provided in the Rights Agreement, neither the
Corporation nor any subsidiary of the Corporation shall redeem, repurchase or
otherwise acquire in any one transaction or series of related transactions any
shares of Common Stock, Junior Dividend Stock or Junior Liquidation Stock if the
number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any Option Share
Surrender) is more than either (x) 5.0% of the number of shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one person or group of affiliated
persons, unless the Corporation or such subsidiary offers to purchase for cash
from each holder of shares of Series B Convertible Preferred Stock at the time
of such redemption, repurchase or acquisition the same percentage of such
holder's shares of Series B Convertible Preferred Stock as the percentage of the
number of outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series B Convertible Preferred Stock
equal to the greater of (i) the sum of (a) the sum of (1) $1,000, (2) an amount
equal to the accrued but unpaid dividends on such share of Series B Convertible
Preferred Stock, plus (3) an amount equal to the accrued and unpaid interest on
----
dividends in arrears (determined as provided in Section 5) through the date of
purchase pursuant to this Section 5(c) plus (b) an amount equal to the product
----
obtained by multiplying (x) the sum stated in the immediately preceding clause
(a) times (y) the quotient (expressed as a percentage) obtained by dividing (A)
-----
the amount determined by subtracting from 100 percent the Conversion Percentage
in effect on the date of purchase pursuant to this Section 5(c) by (B) the
--
Conversion Percentage in effect on the date of purchase pursuant to this Section
5(c) and (ii) an amount equal to the product obtained by multiplying (x) the
number of shares of Common Stock which would, but for the purchase pursuant to
this Section 5(c), be issuable on conversion in accordance with Section 10(a) of
one share of Series B Convertible Preferred Stock and any accrued and unpaid
dividends thereon and any accrued and unpaid interest on
30
<PAGE>
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series B Convertible Preferred Stock on the date of purchase
pursuant to this Section 5(c) (determined without regard to any limitation on
conversion contained in Section 10(a)) times (y) the arithmetic average of the
-----
Market Price of the Common Stock for the Measurement Period with respect to the
date of purchase pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any Tender Offer for outstanding shares of Common Stock, unless
the Corporation contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Corporation or any subsidiary of the Corporation, unless
such person agrees with the Corporation to make an offer, in either such case to
each holder of outstanding shares of Series B Convertible Preferred Stock to
purchase for cash at the time of purchase in such Tender Offer the same
percentage of shares of Series B Convertible Preferred Stock held by such holder
as the percentage of outstanding shares of Common Stock offered to be purchased
in such Tender Offer at a price per share of Series B Convertible Preferred
Stock equal to the greater of (i) the sum of (a) the sum of (1) $1,000, (2) an
amount equal to the accrued but unpaid dividends on such share of Series B
Convertible Preferred Stock, and (3) an amount equal to the accrued and unpaid
interest on dividends in arrears (determined as provided in Section 5) through
the date of purchase pursuant to this Section 5(d) plus (b) an amount equal to
----
the product obtained by multiplying (x) the sum stated in the immediately
preceding clause (a) times (y) the quotient (expressed as a percentage) obtained
-----
by dividing (A) the amount determined by subtracting from 100 percent the
Conversion Percentage in effect on the date of purchase pursuant to this Section
5(d) by (B) the Conversion Percentage in effect on the date of purchase pursuant
--
to this Section 5(d) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(d), be issuable on conversion in accordance
with Section 10(a) of one share of Series B Convertible Preferred Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series B Convertible Preferred Stock on the date of purchase
pursuant to this Section 5(d) (determined without regard to any limitation on
conversion contained in Section 10(a)) times (y) the price per share of Common
-----
Stock offered in such Tender Offer.
Section 6. Liquidation Preference. In the event of a liquidation,
----------------------
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series B Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; provided, however, that such rights shall accrue to the
-------- -------
holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series B Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series B Convertible Preferred Stock and
the Parity
31
<PAGE>
Liquidation Stock, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities, or
other property in and of itself will be considered a liquidation, dissolution,
or winding up of the Corporation.
Section 7. Mandatory Redemption.
--------------------
(a) Mandatory Redemption Based on Maximum Share Amount. (1)
--------------------------------------------------
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the Nasdaq, the Corporation shall not be required to issue upon conversion of
shares of Series B Convertible Preferred Stock pursuant to Section 10 more than
the Maximum Share Amount, less the aggregate number of shares of Common Stock
issued by the Corporation pursuant to Section 5 as dividends on the Series B
Convertible Preferred Stock. The Maximum Share Amount shall be allocated among
the shares of Series B Convertible Preferred Stock at the time of initial
issuance thereof pro rata based on the total number of authorized shares of
Series B Convertible Preferred Stock provided in Section 2. Each certificate
for shares of Series B Convertible Preferred Stock initially issued shall bear a
notation as to the number of shares constituting the portion of the Maximum
Share Amount allocated to the shares of Series B Convertible Preferred Stock
represented by such certificate for purposes of conversion thereof. The
Corporation shall maintain records which show the number of shares of Common
Stock issued by the Corporation pursuant to Section 5 as dividends on the shares
of Series B Convertible Preferred Stock represented by each certificate, which
records shall be controlling in the absence of manifest error. Upon surrender
of any certificate for shares of Series B Convertible Preferred Stock for
transfer or re-registration thereof (or, at the option of the holder, for
conversion pursuant to Section 10(a) of less than all of the shares of Series B
Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series B Convertible Preferred Stock
evidenced by such new certificate (including, without limitation, by taking into
account the number of shares of Common Stock issued by the Corporation pursuant
to Section 5 as a dividend on the shares of Series B Convertible Preferred Stock
represented by the certificate so surrendered and not previously reflected on
the certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series B Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing an
aggregate number of shares of Series B Convertible Preferred Stock equal to the
number of shares of Series B Convertible Preferred Stock represented by the
certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series B Convertible Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Maximum Share Amount allocated thereto determined by pro rata
allocation from among the remaining portion of the Maximum Share Amount
allocated to the certificate so surrendered. If any shares of Series B
Convertible Preferred Stock represented by a single certificate are converted in
full pursuant to Section 10, all of the portion of the Maximum Share Amount
allocated to such shares of Series B Convertible Preferred Stock which remains
unissued after such conversion shall be re-allocated pro rata to the outstanding
shares of Series B Convertible Preferred Stock held of record by the holder of
32
<PAGE>
record at the close of business on the date of such conversion of the shares of
Series B Convertible Preferred Stock so converted, and if there shall be no
other shares of Series B Convertible Preferred Stock held of record by such
holder at the close of business on such date, then such portion of the Maximum
Share Amount shall be allocated pro rata among the shares of Series B
Convertible Preferred Stock outstanding on such date.
(2) The Corporation shall promptly, but in no event later than five
business days after the occurrence, give notice to each holder (by telephone
line facsimile transmission at such number as such holder has specified in
writing to the Corporation for such purposes or, if such holder shall not have
specified any such number, by overnight courier or first class mail, postage
prepaid, at such holder's address as the same appears on the stock books of the
Corporation) and any holder may at any time after the occurrence give notice to
the Corporation, in either case, if on any ten trading days within any period of
20 consecutive trading days the Corporation would not have been required to
convert shares of Series B Convertible Preferred Stock of such holder in
accordance with Section 10(a) as a consequence of the limitations set forth in
Section 7(a)(1) had all outstanding shares of Series B Convertible Preferred
Stock held by such holder been converted into Common Stock on each such day,
determined without regard to the limitation, if any, on such holder contained in
the proviso to the second sentence of Section 10(a) (any such notice, whether
given by the Corporation or a holder, an "Inconvertibility Notice"). If the
Corporation shall have given or been required to give any Inconvertibility
Notice, or if a holder shall have given any Inconvertibility Notice, then within
ten business days after such Inconvertibility Notice is given or was required to
be given, the holder receiving or giving, as the case may be, the
Inconvertibility Notice shall have the right by written notice to the
Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series B Convertible Preferred Stock (which,
if applicable, shall be all of such holder's outstanding shares of Series B
Convertible Preferred Stock) as shall not, on the business day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 7(a)(1) (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)), within ten business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder directs the Corporation to redeem outstanding
shares of Series B Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series B Convertible Preferred
Stock, the Corporation would have been able, within the limitations set forth in
Section 7(a)(1), to convert all of such holder's outstanding shares of Series B
Convertible Preferred Stock (determined without regard to the limitation, if
any, on such holder contained in the proviso to the second sentence of Section
10(a)) on any ten trading days within any period of 20 consecutive trading days
commencing after the period of 20 consecutive trading days which gave rise to
the applicable Inconvertibility Notice from the Corporation or such holder of
shares of Series B Convertible Preferred Stock, as the case may be, had all of
such holder's outstanding shares of Series B Convertible Preferred Stock been
surrendered for conversion into Common Stock on each of such ten trading days
within such 20 trading day period, then the Corporation shall not be required to
redeem any shares of Series B Convertible Preferred Stock by reason of such
Inconvertibility Notice.
33
<PAGE>
(3) Notwithstanding the giving of any notice by the Corporation to
the holders of Series B Convertible Preferred Stock pursuant to Section 7(a)(2)
or the giving or the absence of any notice by the holders of the Series B
Convertible Preferred Stock in response thereto or any redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 7(a)(2), thereafter the
provisions of Section 7(a)(2) shall continue to be applicable on any occasion
unless the Stockholder Approval shall have been obtained from the stockholders
of the Corporation or waived by the Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation shall
make payment in immediately available funds of the applicable Share Limitation
Redemption Price to such holder of shares of Series B Convertible Preferred
Stock to be redeemed to or upon the order of such holder as specified by such
holder in writing to the Corporation at least one business day prior to such
Share Limitation Redemption Date. If the Corporation is required to redeem all
or any portion of a holder's outstanding shares of Series B Convertible
Preferred Stock pursuant to this Section 7(a), the Corporation shall make
payment to such holder of the shares of Series B Convertible Preferred Stock to
be redeemed in respect of each share of Series B Convertible Preferred Stock to
be redeemed of an amount equal to the Share Limitation Redemption Price. Upon
redemption of less than all of the shares of Series B Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three business days after surrender of such certificate to the Corporation,
the Corporation shall issue a replacement certificate for the shares of Series B
Convertible Preferred Stock evidenced by such certificate which have not been
redeemed. Only whole shares of Series B Convertible Preferred Stock may be
redeemed.
(b) No Other Mandatory Redemption. The shares of Series B
-----------------------------
Convertible Preferred Stock shall not be subject to mandatory redemption by the
Corporation except as provided herein.
Section 8. No Sinking Fund. The shares of Series B Convertible
---------------
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
Section 9. Optional Redemption. So long as the Corporation is in
-------------------
compliance in all material respects with its obligations to the holders of
shares of Series B Convertible Preferred Stock (including, without limitation,
its obligations under the Registration Rights Agreement and the provisions of
this Certificate of Designations), the Corporation shall have the right,
exercisable on not less than 20 days or more than 30 days written notice to the
holders of record of the shares of Series B Convertible Preferred Stock to be
redeemed, at any time on or after the date on which the Registration Statement
shall have been effective with the SEC for 60 consecutive days to redeem all,
and from time to time to redeem any part of not less than 200 shares (or such
lesser number of shares of Series B Convertible Preferred Stock as shall remain
outstanding at the time of exercise of such redemption right), of Series B
Convertible Preferred Stock in accordance with this Section 9. Any Notice of
Redemption under this Section shall be delivered to the holders of the shares of
Series B Convertible Preferred Stock at their addresses appearing on the records
of the Corporation; provided, however, that any failure or defect in the giving
-------- -------
of notice to any such holder shall not affect the validity of notice to or the
redemption of shares of Series B Convertible Preferred Stock of any other
holder. On the Redemption Date and after receipt by the Corporation of
certificates for shares of Series B Preferred Stock to be redeemed pursuant to
this Section 9, the Corporation shall make payment
34
<PAGE>
of the applicable Redemption Price to each holder of shares of Series B
Convertible Preferred Stock to be redeemed to or upon the order of such holder
as specified by such holder in writing to the Corporation at least one business
day prior to the Redemption Date. If the Corporation exercises its right to
redeem all or a portion of the outstanding shares of Series B Convertible
Preferred Stock the Corporation shall make payment to the holders of the shares
of Series B Convertible Preferred Stock to be redeemed in respect of each share
of Series B Convertible Preferred Stock to be redeemed of an amount equal to the
Redemption Price. Upon redemption of less than all of the shares of Series B
Convertible Preferred Stock evidenced by a particular certificate, promptly, but
in no event later than three business days after surrender of such certificate
to the Corporation, the Corporation shall issue and deliver to the holder of
record of the surrendered certificate (or such holder's assignee) a replacement
certificate for the shares of Series B Convertible Preferred Stock which have
not been redeemed. Only whole shares of Series B Convertible Preferred Stock may
be redeemed. If the Corporation exercises its right to redeem less than all
outstanding shares of Series B Convertible Preferred Stock, then such redemption
shall be made, as nearly as practical, pro rata among the holders of record of
the Series B Convertible Preferred Stock. No share of Series B Convertible
Preferred Stock as to which the holder exercises the right of conversion
pursuant to Section 10 or the optional repurchase right pursuant to Section 11
may be redeemed by the Corporation pursuant to this Section 9 on or after the
date of exercise of such conversion right or optional redemption right, as the
case may be, regardless of whether the Notice of Redemption shall have been
given prior to the date of exercise of such conversion right or optional
redemption right, as the case may be.
Section 10. Conversion.
----------
(a) Conversion at Option of Holder. The holders of the Series B
------------------------------
Convertible Preferred Stock may convert any or all of their shares of Series B
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as hereinafter provided.
Commencing on the earlier of (1) the date which is 90 days after the Issuance
Date and (2) the Registration Effective Date, and at any time thereafter, each
share of Series B Convertible Preferred Stock may be converted at the office of
the Conversion Agent or at such other additional office or offices, if any, as
the Board of Directors may designate, initially into such number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) determined by dividing (x) the sum of (i)
$1,000, (ii) accrued but unpaid dividends to the applicable Conversion Date on
the share of Series B Convertible Preferred Stock being converted, and (iii)
accrued but unpaid interest on the dividends on the share of Series B
Convertible Preferred Stock being converted in arrears to the applicable
Conversion Date at the rate provided in Section 5 (such sum, the "Conversion
Amount") by (y) the lesser of (a) the product of (I) the Conversion Percentage
with respect to the applicable Conversion Date times (II) the arithmetic average
-----
of the Market Price of the Common Stock for the Measurement Period with respect
to the applicable Conversion Date and (b) the greater of (I) $ 3.99625 (subject
to equitable adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring on or after
the date of filing of this Certificate of Designations with the Secretary of
State of the State of Delaware) and (II) on and after the 90th day after the
Issuance Date, an amount equal to the arithmetic average of the Market Price of
the Common Stock for the Measurement Period for the date which is 90 days after
the Issuance Date (subject to equitable adjustments for stock splits, stock
dividends, combinations, recapitalizations,
35
<PAGE>
reclassifications and similar events occurring on or after the date which is 90
days after the Issuance Date); provided, however, that in no event shall the
-------- -------
amount determined in accordance with this clause (b) be greater than $6.00
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
on or after the date of filing of this Certificate of Designations with the
Secretary of State of the State of Delaware), in each case subject to adjustment
as hereinafter provided (the "Conversion Rate"); provided further, however, that
---------------- -------
in no event shall any holder of shares of Series B Convertible Preferred Stock
be entitled to convert any shares of Series B Convertible Preferred Stock in
excess of that number of shares of Series B Convertible Preferred Stock upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by such holder and any person whose beneficial ownership of
shares of Common Stock would be aggregated with such holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the
Exchange Act, and Regulation 13D-G thereunder (each a "Restricted Person" and
collectively, the "Restricted Persons") (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted shares of Series
B Convertible Preferred Stock) and (2) the number of shares of Common Stock
issuable upon the conversion of the number of shares of Series B Convertible
Preferred Stock with respect to which the determination in this proviso is being
made, would result in beneficial ownership by such holder and all Restricted
Persons of such holder of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence.
(b) Other Provisions. (1) Notwithstanding anything in this Section
----------------
10(b) to the contrary, no change in the Conversion Amount pursuant to Section
10(b) shall actually be made until the cumulative effect of the adjustments
called for by this Section 10(b) since the date of the last change in the
Conversion Amount would change the Conversion Amount by more than 1%. However,
once the cumulative effect would result in such a change, then the Conversion
Rate shall actually be changed to reflect all adjustments called for by this
Section 10(b) and not previously made. Notwithstanding anything in this Section
10(b), no change in the Conversion Amount shall be made that would result in a
Conversion Price of less than the par value of the Common Stock into which
shares of Series B Convertible Preferred Stock are at the time convertible.
(2) The holders of shares of Series B Convertible Preferred Stock at
the close of business on the record date for any dividend payment to holders of
Series B Convertible Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series B
-------- -------
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of
Series B Convertible Preferred Stock on a record date for a dividend payment who
(or whose transferee) tenders any
36
<PAGE>
of such shares for conversion into shares of Common Stock on or after such
dividend payment date will receive the dividend payable by the Corporation on
such shares of Series B Convertible Preferred Stock on such date, and the
converting holder need not make any payment of the amount of such dividend in
connection with such conversion of shares of Series B Convertible Preferred
Stock. Except as provided above, no adjustment shall be made in respect of cash
dividends on Common Stock or Series B Convertible Preferred Stock that may be
accrued and unpaid at the date of surrender of shares of Series B Convertible
Preferred Stock.
(3) (A) The right of the holders of Series B Convertible Preferred
Stock to convert their shares shall be exercised by delivering (which may be
done by telephone line facsimile transmission) a Conversion Notice to the
Conversion Agent, as provided above. If a holder of Series B Convertible
Preferred Stock elects to convert any shares of Series B Convertible Preferred
Stock in accordance with Section 10(a), such holder shall not be required to
physically surrender the certificate(s) representing such shares of Series B
Convertible Preferred Stock to the Corporation unless all of the shares of
Series B Convertible Preferred Stock represented thereby are so converted. Each
holder of shares of Series B Convertible Preferred Stock and the Corporation
shall maintain records showing the number of shares so converted and the dates
of such conversions or shall use such other method, satisfactory to such holder
and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any shares of Series B Convertible Preferred Stock evidenced by a particular
certificate therefor are converted as aforesaid, the holder of Series B
Convertible Preferred Stock may not transfer the certificate(s) representing
such shares of Series B Convertible Preferred Stock unless such holder first
physically surrenders such certificate(s) to the Corporation, whereupon the
Corporation will forthwith issue and deliver upon the order of such holder of
shares of Series B Convertible Preferred Stock new certificate(s) of like tenor,
registered as such holder of shares of Series B Convertible Preferred Stock
(upon payment by such holder of shares of Series B Convertible Preferred Stock
of any applicable transfer taxes) may request, representing in the aggregate the
remaining number of shares of Series B Convertible Preferred Stock represented
by such certificate(s). Each holder of shares of Series B Convertible Preferred
Stock, by acceptance of a certificate for such shares, acknowledges and agrees
that (1) by reason of the provisions of this paragraph, following conversion of
any shares of Series B Convertible Preferred Stock represented by such
certificate, the number of shares of Series B Convertible Preferred Stock
represented by such certificate may be less than the number of shares stated on
such certificate and by reason of Section 7(a), the number of shares of Common
Stock from the Maximum Share Amount allocated to the shares of Series B
Convertible Preferred Stock represented by such certificate for purposes of
conversion of such shares may be less than the number thereof stated on such
certificate and (2) the Corporation may place a legend on the certificates for
shares of Series B Convertible Preferred Stock which refers to or describes the
provisions of this paragraph.
(B) The Corporation shall pay any transfer tax arising in connection
with any conversion of shares of Series B Convertible Preferred Stock except
that the Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery upon
conversion of shares of Common Stock or other securities or property in a name
other than that of the holder of the shares of the Series B
37
<PAGE>
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The number of shares of Common Stock to be issued upon each conversion of shares
of Series C Convertible Preferred Stock shall be the number set forth in the
applicable Conversion Notice which number shall be conclusive absent manifest
error. The Corporation shall notify a holder who has given a Conversion Notice
of any claim of manifest error within one business day after such holder gives
such Conversion Notice and no such claim of error shall limit or delay
performance of the Corporation's obligation to issue upon such conversion the
number of shares of Common Stock which are not in dispute. A Conversion Notice
shall be deemed for all purposes to be in proper form unless the Corporation
notifies a holder of shares of Series B Convertible Preferred Stock being
converted within one business day after a Conversion Notice has been given
(which notice shall specify all defects in the Conversion Notice) and any
Conversion Notice containing any such defect shall nonetheless be effective on
the date given if the converting holder promptly corrects all such defects.
(4) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the outstanding
shares of Series B Convertible Preferred Stock, the Corporation promptly shall
seek 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.
(5) In case of any consolidation or merger of the Corporation with
any other corporation (other than a wholly-owned subsidiary of the Corporation)
in which the Corporation is not the surviving corporation, or in case of any
sale or transfer of all or substantially all of the assets of the Corporation,
or in the case of any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property, the
Corporation shall make appropriate provision or cause appropriate provision to
be made so that each holder of shares of Series B Convertible Preferred Stock
then outstanding shall have the right thereafter to convert such shares of
Series B Convertible Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series B Convertible Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis
38
<PAGE>
which preserves the economic benefits of the conversion rights of the holders of
shares of Series B Convertible Preferred Stock on a basis as nearly as practical
as such rights exist hereunder prior thereto. If, in connection with any such
consolidation, merger, sale, transfer, or share exchange, each holder of shares
of Common Stock is entitled to elect to receive securities, cash, or other
assets upon completion of such transaction, the Corporation shall provide or
cause to be provided to each holder of Series B Convertible Preferred Stock the
right to elect the securities, cash, or other assets into which the Series B
Convertible Preferred Stock held by such holder shall be convertible after
completion of any such transaction on the same terms and subject to the same
conditions applicable to holders of the Common Stock (including, without
limitation, notice of the right to elect, limitations on the period in which
such election shall be made, and the effect of failing to exercise the
election). The Corporation shall not effect any such transaction unless the
provisions of this paragraph have been complied with. The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers, or
share exchanges.
(6) If a holder shall have given a Conversion Notice for shares of
Series B Convertible Preferred Stock, the Corporation shall issue and deliver to
such person certificates for the Common Stock issuable upon such conversion
within three business days after such Conversion Notice is given and the person
converting shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of any action or inaction by
the converting holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder of any obligation to the Corporation, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Corporation to the holder in connection with such conversion. If the
Corporation fails to issue and deliver the certificates for the Common Stock to
the holder converting shares of Series B Convertible Preferred Stock pursuant to
the first sentence of this paragraph as and when required to do so, in addition
to any other liabilities the Corporation may have hereunder and under applicable
law (1) the Corporation shall pay or reimburse such holder on demand for all
out-of-pocket expenses including, without limitation, reasonable fees and
expenses of legal counsel incurred by such holder as a result of such failure,
(2) the Conversion Percentage applicable to such conversion shall be reduced by
two-and-one-half percentage points from the Conversion Percentage otherwise
applicable to such conversion and (3) such holder may by written notice (which
may be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing) given at any time
prior to delivery to such holder of the certificates for the shares of Common
Stock issuable upon such conversion of shares of Series B Convertible Preferred
Stock, rescind such conversion, whereupon such holder shall have the right to
convert such shares of Series B Convertible Preferred Stock thereafter in
accordance herewith.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock to
39
<PAGE>
purchase fractional shares of Common Stock which would otherwise be issuable in
respect of the aggregate number of such shares surrendered for conversion at one
time by the same holder, the Corporation shall pay in cash an amount equal to
the product of (i) the arithmetic average of the Market Price of a share of
Common Stock on the three consecutive trading days ending on the trading day
immediately preceding the Conversion Date and (ii) such fraction of a share.
(8) The Conversion Amount shall be adjusted from time to time under
certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:
(i) In case the Corporation shall (other than pursuant to the Rights
Agreement) issue rights or warrants on a pro rata basis to all holders of the
Common Stock entitling such holders to subscribe for or purchase Common Stock on
the record date referred to below at a price per share less than the Current
Market Price for such record date, then in each such case the Conversion Amount
in effect on such record date shall be adjusted in accordance with the formula
C\\1\\ = C x O + N
-----
O + N x P
-----
M
where
C\\1\\ = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock issuable
pursuant to the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which
amount shall include amounts received by the Corporation in
respect of the issuance and the exercise of such rights or
warrants).
M = the Current Market Price per share of Common Stock on the
record date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall (other than pursuant to the Rights
Agreement), by dividend or otherwise, distribute to all holders of its Junior
Stock (as hereinafter defined) evidences of its indebtedness or assets
(including securities, but excluding any warrants or subscription rights
referred to in subparagraph (i) above and any dividend or distribution paid in
cash out of the retained earnings of the Corporation), then in each such case
the Conversion Amount then in effect shall be adjusted in accordance with the
formula
C\\1\\ = C x M
-----
M - F
40
<PAGE>
where
C\\1\\ = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Market Price per share of Common Stock on the
record date mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities to
be distributed divided by the number of shares of Common Stock
outstanding on the record date. The Board of Directors shall
determine such fair market value, which determination shall be
conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series B Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest cent
or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant to
Section 10(b)(5), the holder of any Series B Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable on
the Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein provided,
the Corporation shall send to each holder and each transfer agent, if any, for
the Series B Convertible Preferred Stock and the Common Stock, a statement
signed by the Chairman of the Board, the President, or any Vice President of the
Corporation and by its Treasurer or its Secretary or an Assistant Secretary
stating the adjusted Conversion Amount determined as provided in this Section
10, and any adjustment so evidenced, given in good faith, shall be binding upon
all stockholders and upon the Corporation. Whenever the Conversion Amount is
adjusted, the Corporation will give notice by mail to the holders of record of
Series B Convertible Preferred Stock, which notice shall be made within 15 days
after the effective date of such adjustment and shall state the adjustment and
the Conversion Amount. Notwithstanding the foregoing notice provisions, failure
by the Corporation to give such notice or a defect in such notice shall not
affect the binding nature of such corporate action of the Corporation.
(11) Whenever the Corporation shall propose to take any of the
actions specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of Section
10(b)(8) which would result in any adjustment in the Conversion Amount under
this Section 10(b), the Corporation
41
<PAGE>
shall cause a notice to be mailed at least 20 days prior to the date on which
the books of the Corporation will close or on which a record will be taken for
such action, to the holders of record of the outstanding Series B Convertible
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation and the date as of which holders of
record of the Common Stock shall participate in any such actions or be entitled
to exchange their Common Stock for securities or other property, as the case may
be. Failure by the Corporation to mail the notice or any defect in such notice
shall not affect the validity of the transaction.
(c) Mandatory Conversion. So long as the Corporation shall be in
--------------------
compliance in all material respects with its obligations to the holders of the
Series B Convertible Preferred Stock (including its obligations under the
Registration Rights Agreement and the provisions of this Certificate of
Designations) and so long as the Registration Statement shall be effective, on
the Mandatory Conversion Date all of the outstanding shares of Series B
Convertible Preferred Stock shall be converted, in accordance with the
provisions, and subject to the limitations, of this Section 10 into shares of
Common Stock to the extent the same are at such time convertible into shares of
Common Stock. On the Mandatory Conversion Date all outstanding shares of Series
B Convertible Preferred Stock (or such lesser number of shares of Series B
Convertible Preferred Stock as are convertible into Common Stock on the
Mandatory Conversion Date) shall be converted into such number of shares of
Common Stock as shall be determined pursuant to this Section 10 as if the
conversion of such number of shares of Series B Convertible Preferred Stock were
made by the holders thereof in accordance herewith without any further action on
the part of the holders of such shares of Series B Convertible Preferred Stock.
Upon receipt by the Corporation of certificates for shares of Series B
Convertible Preferred Stock converted into shares of Common Stock in accordance
with this Section 10(c), the Corporation shall issue and, within three trading
days after such surrender, deliver to or upon the order of such holder (1) that
number of shares of Common Stock as shall be issuable in respect of the
conversion of the number of shares of Series B Convertible Preferred Stock
converted, together with accrued and unpaid dividends thereon to the date of
conversion and accrued and unpaid interest on dividends on such shares which are
in arrears, into Common Stock as shall be determined in accordance herewith and
(2) a new certificate for the balance of shares of Series B Convertible
Preferred Stock, if any.
Section 11. Redemption at Option of Holders. (a) Each holder of
-------------------------------
shares of Series B Convertible Preferred Stock shall be entitled, at such
holder's option, by notice to the Corporation given within 20 days after the
occurrence of an Optional Redemption Event, to require the Corporation to redeem
all or a portion of such shares following the occurrence of an Optional
Redemption Event.
(b) To exercise the optional redemption right, a holder of shares of
Series B Convertible Preferred Stock shall deliver to the Corporation a notice
of redemption (an "Optional Redemption Notice"), accompanied by the certificate
for the shares of Series B Convertible Preferred Stock to be redeemed. Any
Optional Redemption Notice shall state (1) that the holder delivering such
notice is thereby requiring the Corporation to redeem shares of Series B
Convertible Preferred Stock pursuant to this Section 11, (2) the Optional
Redemption Event giving rise to such redemption, and (3) the number of shares of
Series B Convertible Preferred Stock held by such holder which are to be
redeemed. In no event later than five business days following receipt of such
notice by the Corporation, the Corporation shall make payment in
42
<PAGE>
immediately available funds of the Optional Redemption Price applicable on the
date of such redemption with respect to the shares of Series B Convertible
Preferred Stock to be redeemed to or upon the order of such holder as specified
by such holder in the Optional Redemption Notice. Upon redemption of less than
all of the shares of Series B Convertible Preferred Stock evidenced by a
particular certificate, promptly, but in no event later than three business days
after surrender of such certificate to the Corporation, the Corporation shall
issue a replacement certificate for the shares of Series B Convertible Preferred
Stock which have not been redeemed. Only whole shares of Series B Convertible
Preferred Stock may be redeemed.
Section 12. Voting Rights. Except as otherwise required by law or
-------------
expressly provided herein, shares of Series B Convertible Preferred Stock shall
not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series B Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Restated Certificate of Incorporation if the amendment, alteration, or repeal
materially and adversely affects the powers, preferences, or special rights of
the Series B Convertible Preferred Stock, or (2) the creation and issuance of
any Senior Dividend Stock or Senior Liquidation Stock; provided, however, that
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any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and adversely
such powers, preferences, or special rights and any such increase or creation
and issuance may be made without any such vote by the holders of Series B
Convertible Preferred Stock except as otherwise required by law.
Section 13. Outstanding Shares. For purposes of this Certificate of
------------------
Designations, all shares of Series B Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of surrender of certificates representing
shares of Series B Convertible Preferred Stock for conversion into Common Stock,
all shares of Series B Convertible Preferred Stock converted into Common Stock;
(ii) from the date of registration of transfer, all shares of Series B
Convertible Preferred Stock held of record by the Corporation or any subsidiary
or Affiliate (as defined herein) of the Corporation and (iii) from the Share
Limitation Redemption Date, Redemption Date or Optional Redemption Date all
shares of Series B Convertible Preferred Stock which are redeemed, so long as in
each case the Share Limitation Redemption Price, the Redemption Price or the
Optional Redemption Price, as the case may be, of such shares of Series B
Convertible Preferred Stock shall have been paid by the Corporation as and when
required hereby. For the purposes of this Certificate of Designations,
"Affiliate" means any person, other than the original holders of the shares of
Series B Convertible Preferred Stock, directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation.
"Control" is the power to direct the management and policies of a person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise.
43
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
OF
NTERGAID, INC.
INTO
DATAWARE TECHNOLOGIES, INC.
(The Surviving Corporation)
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
The undersigned officers of Dataware Technologies, Inc., (the "Company") a
corporation incorporated on the 16th day of March, 1988, pursuant to the
provisions of the General Corporation Law of the State of Delaware do hereby
certify as follows:
1. The Company owns all the capital stock of Ntergaid, Inc. ("Ntergaid"),
a corporation organized and existing under the laws of the State of Connecticut.
2. The Directors of the Company, at a meeting of the Board of Directors
on October 13, 1998 duly adopted the following resolutions:
VOTED: That it is advisable and in the best interests of the Company
-----
that Ntergaid, a Connecticut corporation which is a wholly-owned
subsidiary of the Company, be merged with and into the Company
pursuant to Section 253 of the General Corporation Law of the
State of Delaware and Section 33-818 of the Connecticut Business
Corporation Act; and that the Plan of Merger between the Company
and Ntergaid presented to this meeting (the "Plan of Merger"), is
hereby approved and adopted.
VOTED: That the President or any Vice President, and the Secretary or
-----
any Assistant Secretary or Treasurer of the Company are each
hereby authorized to execute and file, or cause to be filed, with
the Secretary of State of the State of Delaware, under the
corporate seal of the Company, a Certificate of Ownership and
Merger, to merge Ntergaid and assume its liabilities and
obligations.
VOTED: That the President or any Vice President, and the Secretary or
-----
any Assistant Secretary of the Company are each hereby authorized
to execute and file, or cause to be filed, with the Secretary of
the State of the State of Connecticut, under the corporate seal
of the Company, a Certificate of Merger evidencing the merger
contemplated by the Plan of Merger.
VOTED: That the merger of Ntergaid into the Company shall be effective
-----
upon the filing of the Certificate of Ownership and Merger with
the Secretary of State of
44
<PAGE>
State of Delaware and the Certificate of Merger with the
Secretary of State of Connecticut.
VOTED: That the officers of the Company are each authorized to do all
-----
other necessary acts and things to effect said merger.
3. Approval of the Company's shareholders is not required for this
transaction.
IN WITNESS WHEREOF, Dataware Technologies, Inc. has caused this Certificate
of Ownership and Merger to be signed and executed by its duly authorized
officer, this 13/th/ day of October, 1998.
DATAWARE TECHNOLOGIES, INC., a Delaware corporation
By: /s/ Kurt Mueller
---------------------------
Kurt Mueller, President
45
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
DATAWARE TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Dataware Technologies, Inc. (the "Corporation"), a corporation existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify that (a) at a meeting of Directors duly held on February 8,
2000, the Board of Directors duly adopted resolutions pursuant to Section 242 of
the General Corporation Law of the State of Delaware, setting forth an amendment
to the Restated Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable, and (b) the stockholders of the Corporation duly
approved said amendment at the Annual Meeting of Stockholders held on April 13,
2000 in accordance with the General Corporation Law of the State of Delaware.
The resolution setting forth the amendment is as follows:
RESOLVED: Article FOURTH, subsection (a) of the Corporation's Restated
Certificate of Incorporation is hereby amended to read as follows:
"FOURTH: The Corporation shall be authorized to issue Thirty-Eight Million
------
(38,000,000) shares of capital stock, which shall be divided into Thirty Million
(30,000,000) shares of Common Stock with a par value of one cent ($.01) per
share and Eight Million (8,000,000) shares of Preferred Stock with a par value
of one cent ($.01) per share."
46
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its duly authorized officer this 13/th/ day of April,
2000.
DATAWARE TECHNOLOGIES, INC.
By: /s/ David Mahoney
---------------------
David Mahoney
47
<PAGE>
DATAWARE TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATIONS OF
8% SERIES C CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation Law of the State of
Delaware)
Dataware Technologies, Inc., a Delaware corporation (the "Corporation"),
hereby certifies in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL") that:
(1) Pursuant to the Restated Certificate of Incorporation of the
Corporation, on August 25, 2000, the Board adopted the following resolution
providing for the creation of a series of the Corporation's preferred stock,
$.01 par value, which series is designated as "8% Series C Convertible Preferred
Stock:"
VOTED: That, pursuant to Article FOURTH of the Restated Certificate of
Incorporation, a series of 8% Series C Convertible Preferred Stock of
the Company, $.01 par value ("Series C Stock"), be and it hereby is
created with the designations, powers, preferences and rights, and the
qualifications, limitations and restrictions, as presented to this
meeting; and that the proper officers of the Company are hereby
authorized and directed to execute and file a Certificate of
Designations with the Secretary of State of Delaware with respect to
the Series C Stock.
(2) That the certificate attached hereto as Exhibit A contains the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions, of the Series C Stock, as adopted pursuant to said
resolution.
IN WITNESS WHEREOF, Dataware Technologies, Inc. has caused this
certificate to be signed as of August 31, 2000.
DATAWARE TECHNOLOGIES, INC.
By: /s/ Michael Gonnerman
----------------------------
Michael Gonnerman
Vice President, Treasurer, and
Chief Financial Officer
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<PAGE>
Exhibit A
Terms of Preferred Stock
Section 1. Designation, Amount and Par Value. The series of
---------------------------------
preferred stock shall be designated as its 8% Series C Convertible Preferred
Stock (the "Preferred Stock"), which series shall consist of 350 (which shall
---------------
not be subject to increase without the consent of the holders of the Preferred
Stock (each, a "Holder" and collectively, the "Holders")). Each share of
------ -------
Preferred Stock shall have a par value of $.01 per share and a stated value
equal to the sum of $10,000 plus all accrued and unpaid dividends, and amounts
owed by the Corporation under the Purchase Agreement (as defined below) that are
payable in kind, to the date of determination to the extent not previously paid
in cash (the "Stated Value").
------------
Section 2. Dividends.
---------
(a) Holders shall be entitled to receive, out of funds legally
available therefor, and the Corporation shall pay, cumulative dividends at the
rate per share (as a percentage of the Stated Value per share) of 8% per annum,
payable on each Conversion Date (as defined herein) for such share, in cash or
by accretion of the Stated Value. The decision whether to accrete dividends
hereunder to the Stated Value or to pay for dividends in cash shall be at the
discretion of the Corporation. The Corporation shall provide the Holders written
notice of its intention to accrete dividends hereunder to the Stated Value or
pay dividends in cash not less than ten days prior to each Conversion Date for
so long as shares of Preferred Stock are outstanding (the Corporation may
indicate in such notice that the election contained in such notice shall
continue for later periods until revised). Failure to timely provide such
written notice shall be deemed (if permitted hereunder) an election by the
Corporation to accrete dividends hereunder to the Stated Value. Dividends on the
Preferred Stock shall be calculated on the basis of a 360-day year, shall accrue
daily commencing on the Original Issue Date (as defined in Section 6), and shall
be deemed to accrue from such date whether or not earned or declared and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends. Except as otherwise provided herein, if
at any time the Corporation pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Stock
held by each Holder. Any dividends to be paid in cash hereunder that are not
paid within three Trading Days (as defined in Section 6) following a Conversion
Date shall continue to accrue and shall entail a late fee, which must be paid in
cash, at the rate of 18% per annum or the lesser rate permitted by applicable
law (such fees to accrue daily, from the date such dividend is due hereunder
through and including the date of payment).
(b) So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any subsidiary thereof shall (i) other than pursuant
to forfeiture/repurchase provisions of employee benefit plans or agreements with
employees or consultants relating to shares of Common Stock issued in connection
with the employment or consulting relationship, redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 6),
(ii) directly or indirectly pay or declare any dividend or make any distribution
(other
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<PAGE>
than a dividend or distribution described in Section 5 or dividends due and paid
in the ordinary course on preferred stock of the Corporation at such times when
the Corporation is in compliance with its payment and other obligations
hereunder) upon, nor shall any distribution be made in respect of, any Junior
Securities, nor shall any monies be set aside for or applied to the purchase or
redemption (through a sinking fund or otherwise) of any Junior Securities or
shares pari passu with the Preferred Stock, or (iii) consummate any "going
private" or other similar transaction having the effect of causing the
Corporation to no longer be publically reporting and trading.
(c) In no circumstances may either the Corporation or any Holder
require redemption of any shares of Preferred Stock held by such Holder without
the other's consent
Section 3. Voting Rights. Except as otherwise provided herein and
-------------
as otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of a majority
of the shares of the Preferred Stock then outstanding, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or
alter or amend this Certificate of Designation, (b) authorize or create any
class of stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in Section 4) senior to or otherwise pari passu with the
Preferred Stock, (c) amend its certificate or articles of incorporation or other
charter documents so as to affect adversely any rights of the Holders, (d)
increase the authorized number of shares of Preferred Stock, or (e) enter into
any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
-----------
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to receive out of the assets of
-----------
the Corporation, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value per share before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Corporation shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the Holders shall be
distributed among the Holders ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of 50% or more of the assets of the
Corporation or the effectuation by the Corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or a consolidation or merger of the Corporation with
or into any other company or companies into one or more companies not wholly-
owned by the Corporation shall not be treated as a Liquidation, but instead
shall be subject to the provisions of Section 5. The Corporation shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.
Section 5. Conversion.
----------
(a)(i) Conversions at Option of Holder. Each share of Preferred Stock
-------------------------------
shall be convertible into shares of Common Stock (subject to the limitations set
forth in Section 5(a)(iii))
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<PAGE>
at the Conversion Ratio (as defined in Section 6), at the option of the Holder,
at any time and from time to time from and after the Original Issue Date.
Holders shall effect conversions by providing the Corporation and the Escrow
Agent (as defined in Section 6), if any, with the form of conversion notice
attached hereto as Exhibit A (a "Conversion Notice"). Each Conversion Notice
--------- -----------------
shall specify the number of shares of Preferred Stock to be converted, the
number of shares of Preferred Stock owned prior to and following such
conversion, and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
---------------
Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered hereunder. To effect a conversion of Preferred Stock,
a Holder need not surrender the certificate(s) representing such Preferred Stock
to the Corporation or the Escrow Agent unless all of the shares of Preferred
Stock represented thereby are so converted, in which case, following such
conversion the Holder will deliver such certificate to the Corporation. The
number of shares of Preferred Stock owned by the Holder and the relevant
Conversion Price as determined by the Holder and reflected in the Conversion
Notice shall control absent manifest or computational error.
(ii) Automatic Conversion. Subject to the provisions of this
--------------------
paragraph and Section 5(a)(iii)(C), all outstanding shares of Preferred Stock
for which Conversion Notices have not previously been received or for which
redemption has not been made or required hereunder shall be automatically
converted on the third anniversary of the Original Issue Date at the Conversion
Ratio. The conversion contemplated by this paragraph shall not occur without the
consent of the Holder at such time as (a) the Holder is not permitted to resell
Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act,
without volume restrictions, (b) there are not sufficient shares of Common Stock
authorized and reserved for issuance upon such conversion; (c) the Corporation
shall be in default of any material respect on its covenants and obligations
hereunder or under the Purchase Agreement or Escrow Agreement (as defined in
Section 6); or (d) the Escrow Agent, if any, shall not have in its possession
for the benefit of the Holder, the number of freely tradeable shares of Common
Stock issuable upon such conversion. Notwithstanding the foregoing, the three-
year period for automatic conversion under this Section shall be extended (on a
day-for-day basis) for any Trading Days that a Holder is unable to resell
Underlying Shares due to the Common Stock not being listed or quoted for trading
on the Nasdaq National Market ("Nasdaq") or on the New York Stock Exchange,
------
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent Market").
------------------
The provisions of Sections 5(a)(iii)(A) and (B) shall not apply to any automatic
conversion pursuant to this Section 5(a)(ii).
(iii) Certain Conversion Restrictions.
--------------------------------
(A) A Holder may not convert shares of Preferred Stock or receive
shares of Common Stock as payment of dividends hereunder to the extent such
conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act (as defined in Section 6) and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of,
-51-
<PAGE>
and payment of dividends on, the shares of Preferred Stock held by such Holder
after application of this Section. Since the Holder will not be obligated to
report to the Corporation the number of shares of Common Stock it may hold at
the time of a conversion hereunder, unless the conversion at issue would result
in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Corporation shall notify the Holder of this fact and shall honor
the conversion for the maximum number of shares of Preferred Stock permitted to
be converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Corporation. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert shares of Preferred Stock or
receive shares of Common Stock as payment of dividends hereunder to the extent
such conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
dividends on, the shares of Preferred Stock held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Corporation the number of shares of Common Stock it may hold at the time of
a conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Corporation shall notify the Holder of this fact and shall honor
the conversion for the maximum number of shares of Preferred Stock permitted to
be converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not
-52-
<PAGE>
to any other Holder) upon not less than 61 days prior notice to the Corporation.
Other Holders shall be unaffected by any such waiver.
(C) Notwithstanding any other provision of this Certificate of
Designation, if the Common Stock is then listed for trading on the Nasdaq
National Market or the Nasdaq SmallCap Market and the Corporation has not
obtained the Shareholder Approval (as defined below), then the Corporation may
not issue in excess of 2,142,395 shares of Common Stock (which equals 19.999% of
the number of shares of Common Stock outstanding on the Trading Day immediately
preceding the Original Closing Date) (subject to equitable adjustments from time
to time for stock splits, stock dividends, combinations, recapitalizations, and
similar events affecting the Common Stock after the date of filing this
Certificate of Designation) upon conversions of Preferred Stock at a price per
share that is less than the Closing Price (as defined in Section 6) on the
Trading Day immediately preceding the Original Issue Date (such number of
shares, the "Issuable Maximum"). Each Holder shall be entitled to a portion of
----------------
the Issuable Maximum equal to the quotient obtained by dividing (x) the number
of shares of Preferred Stock issued and sold to such Holder on the Original
Issue Date by (y) the number of shares of Preferred Stock issued and sold by the
Corporation on the Original Issue Date. If any Holder shall no longer hold
shares of Preferred Stock, then such Holder's remaining portion of the Issuable
Maximum shall be allocated pro-rata among the remaining Holders. If on any
Conversion Date (A) the shares of Common Stock are listed for trading on the
Nasdaq National Market or Nasdaq SmallCap Market, (B) the Conversion Price then
in effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon conversion in full of all then outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued
upon conversion of shares of Preferred Stock would exceed the Issuable Maximum,
and (C) the Corporation shall not have previously obtained the vote of
shareholders (the "Shareholder Approval"), if any, as may be required by the
--------------------
applicable rules and regulations of the Nasdaq Stock Market (or any successor
entity) applicable to approve the issuance of shares of Common Stock in excess
of the Issuable Maximum pursuant to the terms hereof, then the Corporation shall
issue to the Holder requesting a conversion a number of shares of Common Stock
equal to such Holder's pro-rata portion (which shall be calculated pursuant to
the terms hereof) of the Issuable Maximum and, with respect to the remainder of
the aggregate Stated Value of the shares of Preferred Stock then held by such
Holder for which a conversion in accordance with the Conversion Price would
result in an issuance of shares of Common Stock in excess of such Holder's pro-
rata portion (which shall be calculated pursuant to the terms hereof) of the
Issuable Maximum, the Corporation shall have the option to either: (1) obtain
the Shareholder Approval applicable to such issuance as soon as is possible, but
in any event not later than the 60th day after such request, or (2) within ten
Trading Days cause the Common Stock to be delisted from the Nasdaq Stock Market
and quoted for trading on the OTC Bulletin Board, in which case, the downward
adjustment to the Conversion Price set forth in Section 5(c) shall apply. If the
Corporation shall have elected, but failed by the 60th day after the Conversion
Date on which the provisions of this Section first apply (including as may be
indicated in writing by the Holder in writing to the Corporation) for any
reason, to obtain the Shareholder Approval pursuant to the immediately preceding
sentence, then within ten Trading Days of such 60th day the Corporation shall
cause the Common Stock to be delisted from the Nasdaq Stock Market and quoted
for trading on the OTC Bulletin Board, in which case, the
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<PAGE>
downward adjustment to the Conversion Price set forth in Section 5(c) shall
apply. Shares of Common Stock issued to and then held by the Holder as a result
of conversions of Preferred Stock shall not be entitled to cast votes on any
resolution to obtain Shareholder Approval pursuant hereto.
(b) Upon each delivery of a Conversion Notice, (A) the Escrow Agent,
if any, is hereby authorized and directed to deliver to the Holder from the
shares of Common Stock then held by it pursuant to the Escrow Agreement for
deliveries of Underlying Shares to the converting Holder a certificate or
certificates representing the number of shares of Common Stock issuable upon the
conversion of shares of Preferred Stock (if there is no Escrow Agent for such
purpose or for any reason there are insufficient shares of Common Stock
deposited with the Escrow Agent for delivery to the Holder upon conversion
hereunder, the Corporation will deliver to the Holder within three Trading Days
the shares of Common Stock issuable upon the conversion of Preferred Stock), and
(B) the Corporation shall deliver within Three Trading Days of the Conversion
Date a bank check in the amount of accrued and unpaid dividends (if the
Corporation has timely elected to pay accrued dividends in cash). The
Corporation shall, upon request of the Holder, if available, use its best
efforts to deliver any certificate or certificates required to be delivered by
the Corporation under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by the
third Trading Day after the Conversion Date, the Holder shall be entitled to
elect by written notice to the Corporation and the Escrow Agent at any time on
or before its receipt of such certificate or certificates thereafter, to rescind
such conversion.
(c)(i) The conversion price for each share of Preferred Stock in
effect on any Conversion Date (the "Conversion Price") shall be the lesser of
----------------
(i) $4.69518 (the "Fixed Conversion Price") and (ii) 95% of the average of the
----------------------
three lowest Per Share Market Values during the thirty consecutive Trading Days
immediately preceding the applicable Conversion Date (which such Per Share
Market Values shall be subject to equitable adjustment for stock splits, stock
dividends, combinations, recapitalizations, and similar events affecting the
Common Stock during such thirty Trading Day period), provided, that such thirty
--------
Trading Day period shall be extended for the number of Trading Days during such
period in which trading in the Common Stock is suspended by the NASDAQ or a
Subsequent Market on which the Common Stock is then listed. Notwithstanding the
foregoing, upon the occurrence of each Material Event (as defined in Purchase
Agreement, the Fixed Conversion Price shall be automatically be adjusted
downward by 10% of its then current price and the discount reflected in the
Conversion Price determined under clause (ii) of this Section 5(c)(i) shall be
lowered 10 percentage points from its then current discount (for example, to 85%
for the first such occurrence, and 75% for the second such occurrence).
(ii) If the Corporation, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or pari
passu securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine
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<PAGE>
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification and exchange
of the Common Stock any shares of capital stock of the Corporation, then the
Fixed Conversion Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 5(c)(ii) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Corporation, at any time while any shares of Preferred
Stock are outstanding, shall issue rights, warrants or options to all holders of
Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Per Share Market Value
at the record date mentioned below, then the Fixed Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such rights,
warrants or options, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right, warrant or option to purchase shares
of Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant
or option shall expire and shall not have been exercised, the Fixed Conversion
Price shall immediately upon such expiration shall be recomputed and effective
immediately upon such expiration shall be increased to the price which it would
have been (but reflecting any other adjustments in the Fixed Conversion Price
made pursuant to the provisions of this Section 5 upon the issuance of other
rights or warrants) had the adjustment of the Fixed Conversion Price made upon
the issuance of such rights, warrants, or options been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights, warrants or options
actually exercised.
(iv) If the Corporation or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while any
shares of Preferred Stock are outstanding, shall issue shares of Common Stock or
rights, warrants (including those issued under the Purchase Agreement), options
or other securities or debt that is convertible into or exchangeable for shares
of Common Stock ("Common Stock Equivalents") entitling any Person to acquire
------------------------
shares of Common Stock, at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less
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<PAGE>
than the Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price), then, at the option of the Holder, the
Conversion Price shall be replaced with the conversion, exchange or purchase
price for such Common Stock or Common Stock Equivalents (including any reset
provisions thereof) for all subsequent conversions of Preferred Stock or such
conversions as shall be indicated by the Holder on its Conversion Notice. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Corporation shall notify the Holder and the Escrow Agent in
writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalent subject to this section, indicating therein the
applicable issuance price, reset price, exchange price, conversion price and
other pricing terms.
(v) If the Corporation, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv) above), then in each such case the Fixed Conversion Price at which
each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Fixed Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Per Share
Market Value determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the disposition of
any such shares shall be considered an issue or sale of Common Stock.
(vii) Whenever the Fixed Conversion Price or the Conversion
Price is adjusted pursuant to Section 5(c)(ii),(iii), (iv) or (v) the
Corporation shall promptly mail to each Holder, a notice setting forth the Fixed
Conversion Price or the Conversion Price (as applicable) after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock or
exchange pursuant to which all Common Stock is exchanged for securities, cash or
other property, the Holders shall have the right thereafter to convert shares of
Preferred Stock only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities, cash or
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<PAGE>
property as a holder of the number of shares of Common Stock of the Corporation
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(ix) In case of any (1) merger or consolidation of the
Corporation (other than a merger or consolidation in which the shareholders of
the Corporation immediately preceding the closing of such merger or
consolidation own immediately following such closing in excess of 66 2/3% of the
surviving entity's voting securities, provided that the surviving entity is a
publically traded entity that files reports under the Exchange Act and that
neither the conversion rights of the Holders nor the Holders' right to resell
Underlying Shares are restricted or impaired in any way as a result of such
merger or consolidation), or (2) sale by the Corporation of more than one-half
of the assets of the Corporation (on an as valued basis) in one or a series of
related transactions; a Holder shall have the right thereafter to (A) convert
its shares of Preferred Stock into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and such Holder shall be
entitled upon such event or series of related events to receive 150% of the
amount of securities, cash and property as the shares of Common Stock into which
such shares of Preferred Stock could have been converted immediately prior to
such merger, consolidation or sales would have been entitled or (B) in the case
of a merger or consolidation, (x) require the surviving entity to issue shares
of convertible preferred stock with such aggregate stated value equal to the
Stated Value of the shares of Preferred Stock then held by such Holder, plus all
accrued and unpaid dividends and other amounts owing thereon, which newly issued
shares of preferred stock shall have terms identical (including with respect to
conversion) to the terms of the Preferred Stock and shall be entitled to all of
the rights and privileges of a Holder set forth herein and the agreements
pursuant to which the Preferred Stock was issued (including, without limitation,
as such rights relate to the acquisition, transferability, registration and
listing of such shares of stock other securities issuable upon conversion
thereof), and (y) simultaneously with the issuance of such convertible preferred
stock, shall have the right to convert such instrument only into shares of stock
and other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale. In the
case of clause (B), the conversion price applicable for the newly issued shares
of convertible preferred stock shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction, the Conversion Ratio immediately prior to the effectiveness or
closing date for such transaction and the Conversion Price stated herein. The
terms of any such merger, sale or consolidation shall include such terms so as
continue to give the Holders the rights set forth herein. This provision shall
similarly apply to successive such events.
(x) If (a) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock, (b) the Corporation shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock, (c)
the Corporation shall authorize the granting to all holders of Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights, (d) the approval of any stockholders of the
Corporation shall be required in connection with any reclassification of the
Common Stock, any
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<PAGE>
consolidation or merger to which the Corporation is a party, any sale or
transfer of all or substantially all of the assets of the Corporation, or any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property, or (e) the Corporation shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation; then the Corporation shall notify the Holders at their last
addresses as they shall appear upon the stock books of the Corporation, at least
20 calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange. Holders are entitled to
convert shares of Preferred Stock during the 20-day period commencing the date
of such notice to the effective date of the event triggering such notice.
(d) The Corporation covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable (taking into account the provisions of Section
5(a) and Section 5(c)) upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid and nonassessable.
(e) Upon a conversion hereunder the Corporation shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If any
fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon a conversion hereunder, the Corporation shall pay an
amount in cash equal to the Conversion Ratio multiplied by such fraction.
(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock shall be
canceled and may not be reissued.
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(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Corporation
addressed to One Canal Park Cambridge, MA 02141 Facsimile No.: (617) 577-2893,
attention Chief Financial Officer, or to such other address or facsimile number
as shall be specified in writing by the Corporation for such purpose. Any and
all notices or other communications or deliveries to be provided to the Holder
or the Escrow Agent shall be in writing and delivered personally, by facsimile
or sent by a nationally recognized overnight courier service, addressed (A) to
each Holder at the facsimile telephone number or address of such Holder
appearing on the books of the Corporation, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder and
(B) to the Escrow Agent as directed in writing by the Escrow Agent. Any notice
or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:30 p.m. (New York City time) (with
confirmation of transmission), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date
(with confirmation of transmission), (iii) upon receipt, if sent by a nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given.
Section 6. Definitions. For the purposes hereof, the following terms
-----------
shall have the following meanings:
"Closing Price" means on any particular date (a) the closing sales
-------------
price per share of Common Stock as of 4:00 PM (New York time)on such date on the
Nasdaq or on such Subsequent Market on which the shares of Common Stock are then
listed or quoted, or if there is no such price on such date, then the closing
sales price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed or
quoted on the Nasdaq or a Subsequent Market, the closing sales price for a share
of Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the shares of Common Stock are not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority of the shares of the Preferred Stock.
"Commission" means the Securities and Exchange Commission.
----------
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"Common Stock" means the Corporation's common stock, par value $.01
------------
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator of
----------------
which is Stated Value and the denominator of which is the Conversion Price at
such time.
"Escrow Agent" means the Escrow Agent, if any, under the Escrow
------------
Agreement.
"Escrow Agreement" means the Escrow Agreement, dated the date of the
----------------
Purchase Agreement, among the Corporation, the original Holders and the Escrow
Agent, in the form attached to the Purchase Agreement, as amended, modified or
supplemented from to time in accordance with its terms.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Junior Securities" means the Common Stock and all other equity or
-----------------
equity equivalent securities of the Corporation other than those securities that
are outstanding on the Original Issue Date and which are explicitly senior in
rights or liquidation preference to the Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
----------------------
bid price per share of Common Stock as of 4:00 PM (New York time) on such date
on the Nasdaq or on such Subsequent Market on which the shares of Common Stock
are then listed or quoted, or if there is no such price on such date, then the
closing bid price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed or
quoted on the Nasdaq or a Subsequent Market, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the shares of Common Stock are not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority of the shares of the Preferred Stock.
"Person" means a corporation, an association, a partnership, an
------
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
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"Purchase Agreement" means the Convertible Preferred Stock Purchase
------------------
Agreement, dated as of the Original Issue Date, to which the Corporation and the
original Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Trading Day" means (a) a day on which the shares of Common Stock are
-----------
traded on the Nasdaq or on such Subsequent Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock are not
listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common
Stock are traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin
Board, a day on which the shares of Common Stock are quoted in the over-the-
counter market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, that in the event that the shares of Common Stock are not listed or
--------
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Transaction Documents" shall have the meaning set forth in the
---------------------
Purchase Agreement.
"Underlying Shares" means, collectively, the shares of Common Stock
-----------------
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof.
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EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert the shares of 8% Series C Convertible
Preferred Stock of Dataware Technologies, Inc. (the "Corporation") indicated
-----------
below, into shares of the Corporation's common stock, par value $.01 per share
(the "Common Stock"), according to the conditions hereof, as of the date written
------------
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Corporation in accordance therewith. No fee will be charged to
the Holder for any conversion, except for such transfer taxes, if any.
<TABLE>
<S> <C>
Conversion calculations: ___________________________________________________________
Date to Effect Conversion
___________________________________________________________
Shares of Preferred Stock owned prior to Conversion
___________________________________________________________
Number of shares of Preferred Stock to be Converted
___________________________________________________________
Stated Value of shares of Preferred Stock to be Converted
___________________________________________________________
Number of shares of Common Stock to be Issued
___________________________________________________________
Applicable Conversion Price
___________________________________________________________
Shares of Preferred Stock owned subsequent to Conversion
___________________________________________________________
Signature
___________________________________________________________
Name
___________________________________________________________
Address
</TABLE>
62
