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Exhibit 3.1(ii)
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
FVC.COM, INC.
FVC.COM, Inc. (hereinafter called the "CORPORATION"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, does hereby certify:
1. The name of the Corporation is FVC.COM, Inc.
2. The certificate of incorporation of the Corporation authorizes the
issuance of 5,000,000 shares of Preferred Stock, $.001 par value, and
expressly vests in the Board of Directors of the Corporation the authority
provided therein to provide for the issuance of said shares in 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 designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations, or
restrictions thereof.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a "Series A Convertible" series of Preferred Stock:
RESOLVED, that one series of the class of authorized Preferred Stock of
the Corporation be and hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There is hereby designated a series of
shares of Preferred Stock consisting of 27,437 shares designated "Series A
Convertible Preferred Stock" (the "SERIES A PREFERRED STOCK").
2. DIVIDENDS.
(a) The Series A Preferred Stock shall not be entitled to receive
dividends unless and until the Board of Directors declares a dividend in
respect of the Common Stock out of legally available funds therefor;
PROVIDED, HOWEVER, that no dividends shall be declared or paid upon the
Common Stock (other than dividends payable upon the Common Stock solely in
additional shares of Common Stock, provided that an appropriate adjustment in
the Conversion Price is made under Section 6(a) hereof) or any other stock
ranking on liquidation junior to the Series A Preferred Stock (such stock
being referred to hereinafter collectively as "JUNIOR STOCK") unless (i)
after the payment of the dividend on the Common Stock and Junior Stock (and
the simultaneous dividend on the Series A Preferred Stock) the Corporation's
net worth exceeds the aggregate liquidation preference of the Series A
Preferred Stock, provided that this clause (i) shall not apply if the
dividend is approved by the holders of a majority of the outstanding shares
of Series A Preferred Stock and (ii) there
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shall be a simultaneous declaration or payment, as applicable, of a dividend
upon the Series A Preferred Stock.
(b) In the case of any dividend being declared upon the Common
Stock, the dividend which shall be declared upon each share of Series A
Preferred Stock as a condition to such dividend upon the Common Stock shall
be equal in amount to the dividend payable upon that number of shares of
Common Stock acquirable upon conversion of a share of Series A Preferred
Stock immediately before the declaration of such dividend, with such
conversion being based on the then applicable Conversion Price determined in
accordance with Section 6 as of the record date for the declaration of such
dividend on the Common Stock.
(c) In the case of any dividend being declared upon any class of
Junior Stock that is convertible into Common Stock, the amount of the
dividend which shall be declared upon each share of Series A Preferred Stock
as a condition to such dividend on Junior Stock, divided by the number of
shares of Common Stock acquirable upon conversion of a share of Series A
Preferred Stock, shall equal the amount of the dividend declared upon each
share of such class of Junior Stock, divided by the number of shares of
Common Stock acquirable upon conversion of a share of such class of Junior
Stock, in each case assuming such conversion occurred immediately before the
declaration of such dividend.
(d) No dividend shall be declared or paid upon any class of
Junior Stock (other than Common Stock) that is not convertible into Common
Stock without the consent of holders of at least a majority of the
outstanding shares of Series A Preferred Stock.
(e) Holders of shares of Series A Preferred Stock shall be
entitled to share equally (on an as converted basis) in all such dividends
declared upon the Series A Preferred Stock.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series
A Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any Preferred Stock of the Corporation ranking
on liquidation prior and in preference to the Series A Preferred Stock (such
Preferred Stock that is senior to the Series A Preferred Stock being referred
to hereinafter as "SENIOR STOCK") upon such liquidation, dissolution or
winding up, but before any payment shall be made to the holders of Common
Stock or other Junior Stock, an amount equal to the sum of (i) $1,000 per
share (the "LIQUIDATION PREFERENCE") (subject to adjustment in the event of
any stock dividend, stock split, stock distribution or combination with
respect to such shares), and (ii) the amount of all declared but unpaid
dividends on the Series A Preferred Stock. If upon any such liquidation,
dissolution or winding up of the Corporation, the remaining assets of the
Corporation available for the distribution to its stockholders after payment
in full of amounts required to be paid or distributed to holders of any other
Senior
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Stock shall be insufficient to pay the holders of shares of Series A
Preferred Stock the full amount to which they shall be entitled, the holders
of shares of Series A Preferred Stock, and any class of stock ranking on
liquidation on a parity with the Series A Preferred Stock (such Preferred
Stock ranking on liquidation on parity with the Series A Preferred Stock
being referred to as "PARITY STOCK"), shall share ratably in any distribution
of the remaining assets and funds of the Corporation in proportion to the
respective amounts which would otherwise be payable with respect to the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. Except as set forth in this clause
(a), holders of shares of Series A Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of
the Corporation.
(b) The merger or consolidation of the Corporation with or into
any other corporation or entity, or the sale or conveyance of all or
substantially all the assets of the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of
this Section 3.
4. VOTING.
(a) Each holder of shares of Series A Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
holder's shares of Series A Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, except
as otherwise provided in Sections 4(b) through 4(d) hereof, or as required by
law, and shall be entitled, notwithstanding any provision hereof, to notice
of any stockholders' meeting in accordance with the Bylaws of the
Corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have
the right to vote; PROVIDED, HOWEVER, that the shares of Series A Preferred
Stock shall not have any voting power with respect to the election of the
directors unless and until the making of any necessary filings required by
Vulcan Ventures Incorporated ("VULCAN") and the Corporation, and the
expiration or termination of any applicable waiting periods under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), required in connection with that certain Stock Purchase Agreement (the
"STOCK PURCHASE AGREEMENT") dated June 8, 2000, as it may be amended from
time to time, between the Corporation and Vulcan. A copy of the Stock
Purchase Agreement shall be provided to any stockholder upon written request.
(b) Unless the vote or consent of a greater number of shares
shall then be required by law and so long as there is outstanding at least a
majority of the Series A Preferred Stock issued at the Closing (as defined in
the Stock Purchase Agreement), the consent of holders of at least a majority
of the outstanding shares of Series A Preferred Stock, voting separately as a
single class, in person or by proxy, either in writing without a meeting (if
such an action is at such time permitted under the Corporation's Certificate
of Incorporation) or at a special or annual meeting of stockholders called
for such purpose, shall be necessary to (i) amend, modify or repeal any
provision of the Certificate of Incorporation (including any provision of the
Certificate of Designation of Series A Convertible Preferred Stock) or Bylaws
of the Corporation in any manner (including by merger, consolidation,
operation of law or otherwise) which would adversely affect the
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powers, preferences or special rights of the Series A Preferred Stock;
PROVIDED, HOWEVER, that the holders of Series A Preferred Stock shall not be
entitled to vote as a class on any merger or consolidation that constitutes a
Change in Control (as defined in Section 6(i)(2) below) or any merger or
consolidation that does not constitute a Change in Control if the Certificate
of Incorporation is not amended in such merger or consolidation and the
Series A Preferred Stock is not converted in such merger or consolidation, it
being understood that the holders of Series A Preferred Stock will be
entitled to vote as a separate class pursuant to this clause (i) in any
merger or consolidation in which Series A Preferred Stock is converted that
is not a Change in Control, or (ii) authorize or create any shares of any
class or series of Senior Stock or Parity Stock of the Corporation or
reclassifiy any authorized stock of the Corporation into any such Senior
Stock or Parity Stock, or create or authorize any obligation or security
convertible into or evidencing the right to purchase shares of any such
Senior Stock or Parity Stock. The authorization or creation of any shares of
any class or series of Junior Stock of the Corporation or the
reclassification of any authorized stock of the Corporation into any such
Junior Stock, or the creation or authorization of any obligation or security
convertible into or evidencing the right to purchase shares of any such
Junior Stock shall be deemed not to adversely affect the powers, preferences
or special rights of the Series A Preferred Stock.
(c) Unless the vote or consent of the holders of a greater
number of shares shall then be required by law and so long as there is
outstanding at least a majority of the Series A Preferred Stock issued at the
Closing, the consent of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock, voting together as a separate class, in
person or proxy, either in writing without a meeting (if such an action is at
such time permitted under the Corporation's Certificate of Incorporation) or
at a special or annual meeting of stockholders called for such purpose, shall
be necessary to authorize or effect (i) a liquidation, winding up or
dissolution of the Corporation or adoption of any plan of the same; (ii) the
commencement by the Corporation of a voluntary case or proceeding under
applicable bankruptcy laws or any other insolvency, receivership,
reorganization, moratorium or similar laws providing relief to debtors; and
(iii) any redemption or repurchase or other acquisition by the Corporation or
subsidiary of the Corporation of any Junior Stock or Parity Stock or any
securities convertible into Junior Stock or Parity Stock, other than the
repurchase of shares in connection with the termination of employees,
consultants, directors or advisors of the Corporation pursuant to rights
under written agreements.
(d) In addition to the voting rights set forth above, after the
Closing, and so long as Vulcan together with any Affiliate (as defined in
Section 9.4 of the Stock Purchase Agreement), owns not less than 50% of the
Series A Preferred Stock issued in the Closing, the holders of the shares of
Series A Preferred Stock, voting as a single class, shall be entitled to
nominate and elect one (1) director to serve on the Board of Directors at any
annual meeting of stockholders or any special meeting held in place thereof,
or at a special meeting of the holders of the Series A Preferred Stock as
hereinafter specified to serve until the next annual meeting and until such
director's successor is elected and qualified; PROVIDED, HOWEVER, that the
shares of Series A Preferred Stock shall not have any voting power with
respect to the election of the directors unless and until the making of any
necessary filings by Vulcan and the Corporation required by, and the
expiration or
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termination of any applicable waiting periods under, the HSR Act required in
connection with the Stock Purchase Agreement.
As used herein "SERIES A PREFERRED DIRECTOR" shall mean the
director of the Corporation elected as a matter of right by the holders of
the Series A Preferred Stock pursuant to Section 4(d) above. Nothing in this
Section shall be deemed to constitute an admission that the Series A
Preferred Director is not an "independent director" for purposes of the rules
of The Nasdaq Stock Market.
At any time a vote of the holders of the Series A Preferred Stock
shall be necessary pursuant to this Section, a proper officer of the
Corporation may, and upon the written request of the holders of record of at
least twenty-five percent (25%) of the shares of the Series A Preferred Stock
then outstanding addressed to the Secretary of the Corporation shall, call a
special meeting of the holders of the Series A Preferred Stock, for the
purpose of electing the director which such holders are entitled to elect. If
such meeting shall not be called by a proper officer of the Corporation
within twenty (20) days after personal service of such written request upon
the Secretary of the Corporation, or personal service of said written request
upon the Secretary of the Corporation at its principal executive offices, the
holders of at least twenty-five percent (25%) of the outstanding shares of
Series A Preferred Stock may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting may be
called by the persons so designated upon the notice required for the annual
meeting of stockholders of the Corporation. Any holder of the Series A
Preferred Stock so designated shall have, and the Corporation shall provide
access to the lists of stockholders to be called pursuant to the provisions
hereof.
5. CONVERSION RIGHTS.
(a) EXERCISE OF CONVERSION RIGHTS. Subject to compliance with
the HSR Act, each holder of Series A Preferred Stock shall have the right, at
its option, at any time, to convert, subject to the terms and provisions of
this Section 5, all or any portion of its Series A Preferred Stock then
outstanding into such number of fully paid and non-assessable shares of
Common Stock as results from dividing (i) the sum of (A) the aggregate
Liquidation Preference of all shares of Series A Preferred Stock to be
converted plus (B) any declared but unpaid dividends on such shares, by (ii)
the applicable Conversion Price (as defined in Section 6 below) on the
Conversion Date (as defined below). Such conversion shall be deemed to have
been made at the close of business on the date that the certificate or
certificates for shares of Series A Preferred Stock shall have been
surrendered for conversion and written notice shall have been received as
provided in Section 5(b) (the "CONVERSION DATE"), so that the person or
persons entitled to receive the shares of Common Stock upon conversion of
such shares of Series A Preferred Stock shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at
such time. Upon conversion of any shares of Series A Preferred Stock pursuant
to this Section 5, the rights of the holder of such shares upon the
Conversion Date shall be the rights of a holder of Common Stock only, and
each such holder shall not have any rights in its former capacity as a holder
of shares of Series A Preferred Stock.
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(b) NOTICE TO THE CORPORATION. In order to convert all or any
portion of its outstanding Series A Preferred Stock into shares of Common
Stock, the holder of such Series A Preferred Stock shall deliver the shares
of Series A Preferred Stock to be converted to the Corporation at its
principal office, together with written notice that it elects to convert
those shares of Series A Preferred Stock into shares of Common Stock in
accordance with the provisions of this Section 5. Such notice shall specify
the number of shares of Series A Preferred Stock to be converted and the name
or names in which the holder wishes the certificates for shares of Common
Stock to be registered, together with the address or addresses of the person
or persons so named, and, if so required by the Corporation, shall be
accompanied by a written instrument or instruments of transfer in form
reasonably satisfactory to the Corporation, duly executed by the registered
holder of the shares of Series A Preferred Stock to be converted or by its
attorney duly authorized in writing.
(c) DELIVERY OF CERTIFICATE. As promptly as practicable after
the surrender as hereinabove provided of shares of Series A Preferred Stock
for conversion into shares of Common Stock, the Corporation shall deliver or
cause to be delivered to the holder, or the holder's designees, certificates
representing the number of fully paid and non-assessable shares of Common
Stock into which the shares of Series A Preferred Stock are entitled to be
converted, together with a cash adjustment in respect of any fraction of a
share to which the holder shall be entitled as provided in Section 5(d), and,
if less than the entire number of shares of Series A Preferred Stock
represented by the certificate or certificates surrendered is to be
converted, a new certificate for the number of shares of Series A Preferred
Stock not so converted. So long as any shares of Series A Preferred Stock
remain outstanding, the Corporation shall not close its Common Stock transfer
books. The issuance of certificates for shares of Common Stock upon the
conversion of shares of Series A Preferred Stock shall be made without charge
to the holder for any tax in respect of the issuance of such certificates
(other than any transfer, withholding or other tax if the shares of Common
Stock are to be registered in a name different from that of the registered
holder of Series A Preferred Stock).
(d) FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon any
conversion of any shares of Series A Preferred Stock, but, in lieu thereof,
there shall be paid an amount in cash equal to the same fraction of the
Market Price of a whole share of Common Stock as of the Conversion Date. The
"MARKET PRICE" of a share of Common Stock on or with respect to any day shall
mean (i) the closing sales price on the immediately preceding trading day of
a share of Common Stock on the principal national securities exchange or
automated quotation system on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange or automated quotation system, the average of the last
reported bid and asked prices on such immediately preceding trading day in
the over-the-counter market as furnished by the National Association of
Securities Dealers, Inc., or, if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then
engaged in such business selected in good faith by the Company or, if there
is no such firm, as furnished by any member of the National Association of
Securities Dealers, Inc., selected in good faith by the Company, or (ii) if
the shares of Common Stock are not then traded on any such exchange
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or system, the amount determined in good faith by the Board to represent the
fair value of a share of Common Stock.
(e) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of shares of
Series A Preferred Stock, the full number of whole shares of Common Stock
then deliverable upon the conversion of all shares of Series A Preferred
Stock then outstanding. The Corporation shall take at all times such
corporate action as shall be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common
Stock upon the conversion of shares of Series A Preferred Stock in accordance
with the provisions of this Section 5.
(f) REGISTRATION. If any shares of Common Stock to be reserved
for the purpose of conversion of Series A Preferred Stock require
registration or listing with, or approval of, any governmental authority,
stock exchange or other regulatory body under any federal or state law or
regulation or otherwise, before such shares may be validly issued or
delivered upon conversion, the Corporation shall, in good faith and as
expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.
(g) SHARES VALIDLY ISSUED AND NON-ASSESSABLE. All shares of
Common Stock that may be issued upon conversion of the Series A Preferred
Stock shall upon issuance by the Corporation be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof.
(h) RETIREMENT OF SHARES. Any shares of Series A Preferred
Stock converted pursuant to the provisions of this Section 5 shall be retired
and given the status of authorized and unissued Preferred Stock, undesignated
as to series, subject to reissuance by the Corporation as shares of Preferred
Stock of one or more series, as may be determined from time to time by the
Board.
(i) AUTOMATIC CONVERSION.
(1) TRANSFER OF SHARES. In the event that a holder of
shares of Series A Preferred Stock desires to transfer some or all of such
shares other than to an Affiliate, each share of Series A Preferred Stock so
transferred shall automatically convert into the number of fully paid and
non-assessable shares of Common Stock into which such share is then
convertible pursuant to Section 6 hereof automatically and without further
action, immediately upon the transfer of such shares; provided that the
mortgage, pledge or other encumbrance of shares of the Series A Preferred
Stock by a holder thereof to one or more banks, insurance companies or other
financial institutions (each, a "LENDER") shall not trigger the conversion of
such shares until such Lender forecloses on such shares, if ever.
(2) CHANGE IN CONTROL. In the event of a Change in Control
(as defined below) of the Corporation, then each share of Series A Preferred
Stock shall be converted into the number of fully paid and non-assessable
shares of Common Stock into which such share is then convertible pursuant to
Section 6 hereof automatically and without further action, immediately prior
to the Change in Control. For purposes of this Certificate
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of Designation, "Change in Control" means the merger or consolidation
(including a reverse merger) of the Corporation unless immediately following
such merger or consolidation, the owners of the outstanding capital stock of
the Corporation immediately prior to such merger or consolidation would own
at least fifty percent (50%) of the combined power to vote in the election of
directors of the surviving corporation or the owner of such surviving
corporation.
(3) MECHANICS OF CONVERSION. Upon the occurrence of the
events specified in Sections (1) or (2) above, the outstanding shares of
Series A Preferred Stock shall automatically convert without any further
action by the holders of such shares or the Corporation whether the
certificates evidencing such shares are surrendered to the Corporation or
its transfer agent. Upon the occurrence of the event set forth in Section
(1) above, the holders of such converted shares shall surrender the
certificates formerly representing such shares at the office of the
Corporation or of any transfer agent for Common Stock. Thereupon, there
shall be issued and delivered to each such holder, promptly at such office
and in his, her or its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of
Common Stock into which such shares of Series A Preferred Stock were so
converted and cash as provided in Section 5(d) above in respect of any
fraction of a share of Common Stock issuable upon such conversion. The
Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless and until
certificates evidencing such shares of Series A Preferred Stock are either
delivered to the Corporation or its transfer agent, as hereinafter provided,
or the holder thereof notifies the Corporation or such transfer agent that
such certificates have been lost, stolen, or destroyed and executes and
delivers an agreement to indemnify the Corporation from any loss incurred by
it in connection therewith.
6. CONVERSION PRICE. As used herein, the "CONVERSION PRICE" for the
Series A Preferred Stock shall initially be $8.00 per share of Common Stock,
subject to adjustment as set forth below. The Conversion Price shall be
subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS, SUBDIVISIONS, RECLASSIFICATIONS OR
COMBINATIONS. If the Corporation shall (i) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii)
subdivide or reclassify the outstanding shares of Common Stock into a greater
number of shares, or (iii) combine or reclassify the outstanding Common Stock
into a smaller number of shares, the Conversion Price in effect at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the holder of any shares of Series A Preferred Stock
surrendered for conversion after such date shall be entitled to receive the
number of shares of Common Stock which such holder would have owned or been
entitled to receive had such shares of Series A Preferred Stock been
converted immediately prior to such date. Successive adjustments in the
Conversion Price shall be made whenever any event specified above shall occur.
(b) OTHER DISTRIBUTIONS. In case the Corporation shall fix a
record date for the making of a distribution to all holders of shares of its
Common Stock (i) of shares of any
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class other than its Common Stock, (ii) of evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) of assets, or (iv) of
rights or warrants, in each such case all holders of shares of its Series A
Preferred Stock shall receive a distribution (i) of shares of any class other
than its Common Stock, (ii) of evidence of indebtedness of the Corporation or
any subsidiary of the Corporation, (iii) of assets, or (iv) of rights or
warrants, as applicable, equal in amount to the distribution which they would
have received had such holders converted their shares of Series A Preferred
Stock into Common Stock immediately prior to the distribution.
(c) CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE OR
RECLASSIFICATIONS OR REORGANIZATIONS. In case the Corporation shall at any
time after the date of issuance of the Series A Preferred Stock consolidate
with, or merge with or into, any other corporation or entity or engage in any
reorganization, recapitalization, sale of all or substantially all of the
Corporation's assets to any entity or any other transaction which is effected
in such a manner that the holders of Common Stock or Series A Preferred Stock
are entitled to receive stock, securities or assets with respect to or in
exchange for the Common Stock or Series A Preferred Stock, then each share of
Series A Preferred Stock shall after the date of such consolidation, merger,
sale, lease or conveyance or such reclassification, reorganization or other
change be convertible into the number of shares of stock or other securities
or property (including cash) to which the Common Stock issuable (at the time
of such consolidation, merger, sale, lease or conveyance or such
reclassification, recapitalization or other change) upon conversion of such
share of Series A Preferred Stock would have been entitled upon such
consolidation, merger, sale, lease or conveyance or such reclassification,
recapitalization or other change; and if the applicable event does not
constitute a Change in Control, the provisions set forth in this Section 6
with respect to the rights and interests thereafter of the holders of the
shares of Series A Preferred Stock shall be appropriately adjusted so as to
be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion of the
shares of Series A Preferred Stock.
(d) ADJUSTMENTS OF CONVERSION PRICE FOR CERTAIN DILUTING
ISSUES.
(1) SPECIAL DEFINITIONS. For purposes of this Section
6(d), the following definitions apply:
(i) "OPTIONS" shall mean rights, options, or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(ii) "ORIGINAL ISSUE DATE" shall mean the date on
which a share of Series A Preferred Stock was first issued.
(iii) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares (other than Common Stock and Series A
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.
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(iv) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 6(d)(3) deemed to
be issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock:
(A) issued or issuable to officers, directors,
employees or advisors of, or consultants or independent contractors
to, the Corporation, pursuant to options, warrants or other Common
Stock purchase rights granted in accordance with plans or other
arrangements approved by the Board of Directors of the Corporation
and, as required by law, the Corporation's stockholders;
(B) issued in connection with any merger,
consolidation or similar transaction, or any acquisition of assets
or a business, in accordance with agreements or other arrangements
approved by the Board of Directors of the Corporation;
(C) issued or issuable upon conversion of shares
of Series A Preferred Stock;
(D) issued or issuable as a dividend or
distribution on the Series A Preferred Stock; or
(E) for which adjustment of the Conversion Price
for the Series A Preferred Stock is made pursuant to Section 6(a) or
for which a distribution with respect to the Series A Preferred
Stock is made pursuant to Section 6(b);
(F) issued pursuant to any equipment leasing
arrangement or debt financing from a bank or similar financial
institution approved by the Board of Directors of the Corporation
not to exceed 100,000 shares of Common Stock in the aggregate;
(G) issued or issuable pursuant to Options
outstanding as of the Original Issuance Date; or
(H) issued upon exercise of that certain warrant
issued to Vulcan pursuant to the Stock Purchase Agreement.
(2) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in
the Conversion Price of a particular share of Series A Preferred
Stock shall be made in respect of the issuance of Additional Shares
of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by
the Corporation is less than the Conversion Price in effect on the
date of, and immediately prior to such issue, for such share of
Series A Preferred Stock.
(3) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In
the event the Corporation at any time or from time to time after
the Original Issue Date shall issue any Options or Convertible
Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions
contained therein
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designed to protect against dilution) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the
time of such issuance of Options or Convertible Securities; PROVIDED,
HOWEVER, that Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
Section 6(d)(5) hereof) of such Additional Shares of Common Stock would be
less than the Conversion Price in effect on the date of and immediately
prior to such issuance of Options or Convertible Securities, or such record
date, as the case may be; and PROVIDED FURTHER that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares
of Common Stock upon the exercise of such Options or conversion or exchange
of such Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provided, with the passage of time or otherwise, for any
increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; PROVIDED, HOWEVER, that no such
adjustment of the Conversion Price shall affect Common Stock previously
issued upon conversion of Series A Preferred Stock;
(iii) Upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually issued upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was
the consideration actually received by the Corporation for the issue
of all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such
exercise, or for the issue of all such Convertible Securities
which were actually converted or exchanged, plus additional
consideration, if any, actually received by the Corporation upon
such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of
such Options and the consideration received by the Corporation
for Additional Shares of Common Stock deemed to have
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been then issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or
not exercised, plus the consideration deemed to have been
received by the Corporation (determined pursuant to Section
6(d)(5)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(iv) no readjustment pursuant to Sections 6(d)(2)(ii)
or (iii) above shall have the effect of increasing the Conversion Price to
an amount which exceeds the lower of (1) the Conversion Price on the original
adjustment date, or (2) the Conversion Price that would have resulted from
any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(v) in the case of any Options which expire by their
terms not more than sixty (60) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made, except as to shares of
Series A Preferred Stock converted in such period, until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in Section 6(d)(3)(iii) above; and
(vi) if any such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be canceled as of the close of
business on such record date, and shall instead be made on the actual date
of issuance, if any, of such Options or Convertible Securities.
(4) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 6(d)(3)) without consideration
or for a consideration per share less than the Conversion Price in effect on
the date of and immediately prior to such issue, then and in such event, the
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying the Conversion
Price then in effect by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (determined on a fully diluted
basis, as described below) immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at the Conversion Price then in effect, and the
denominator of which shall be the number of shares of Common Stock
outstanding (determined on a fully diluted basis, as described below)
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued. For the purposes of the above calculation, the number
of shares of Common Stock outstanding immediately prior to such issuance
shall be calculated on a fully diluted basis, as if all shares of Series A
Preferred Stock and all Convertible Securities had been fully converted into
shares of Common Stock immediately prior to such issuance and any
outstanding Options had been fully exercised immediately prior to such
issuance (and the resulting securities fully converted into shares of Common
Stock, if so convertible) as of such date but not including in such
calculation any additional shares of Common Stock issuable with respect to
shares of Series A Preferred Stock, Convertible Securities or outstanding
Options solely as a result of the adjustment of
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<PAGE>
the Conversion Price (or other conversion ratios) resulting from the issuance
of Additional Shares of Common Stock causing such adjustment. For the
purposes of the foregoing, outstanding Options shall be deemed to include
(without duplication) any Options issued to directors, officers, employees or
advisors of, or consultants to, the Corporation in accordance with plans or
other arrangements approved by the Board of Directors of the Corporation.
(5) DETERMINATION OF CONSIDERATION. For purposes of this
Section 6(d), the consideration received by the Corporation for the issuance
of any Additional Shares of Common Stock shall be computed as follows:
(i) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation,
excluding amounts paid or payable for accrued interest or accrued
dividends;
(B) insofar as it consists of services, goods or
other property other than cash, be computed at the fair value
thereof at the time of such issue, as determined in good faith by
the Board of Directors of the Corporation; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other
assets of the corporation for consideration which covers both cash
and services, goods or other property other than cash, be in the
proportion of such consideration so received, computed as provided
in clauses (A) and (B) above, as determined in good faith by the
Board of Directors of the Corporation.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6(d)(3) relating
to Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the maximum aggregate amount
of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein
designed to protect against dilution) payable to the Corporation
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein designed to protect
against dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
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<PAGE>
(e) NOTICE TO HOLDERS. In the event the Corporation shall
propose to take any action of the type described in subsections (a), (b), (c)
and (d) of this Section 6, the Corporation shall give notice to each holder
of shares of Series A Preferred Stock, which notice shall specify the record
date, if any, with respect to any such action and the approximate date on
which such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable upon
conversion of shares of Series A Preferred Stock. In the case of any action
which would require the fixing of a record date, such notice shall be given
at least 15 days prior to the date so fixed, and in the case of all other
action, such notice shall be given at least 20 days prior to the taking of
such proposed action.
(f) STATEMENT REGARDING ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Conversion Price of the Series A
Preferred Stock pursuant to this Section 6, the Corporation shall compute
such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. Each such statement shall be signed by
the Corporation's Chief Financial Officer.
(g) TREASURY STOCK. For the purposes of this Section 6, the
sale or other disposition of any Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(h) STOCKHOLDER APPROVAL. Notwithstanding any other provision
in this Section 6 to the contrary, no adjustment (other than as set forth in
this Section 6(h)) shall be made in the Conversion Price prior to the receipt
by the Corporation of any requisite stockholder approval required by the
rules of the National Association of Securities Dealers, Inc., if such rules
are applicable to such adjustment. If such rules are applicable, (i) the
Conversion Price shall immediately be adjusted to the maximum extent as would
not require stockholder approval under such rules and (ii) the Corporation
shall use its commercially reasonable efforts to obtain such stockholder
approval as soon as reasonably practicable, including by calling a special
meeting of stockholders to vote on such Conversion Price adjustment.
7. GOOD FAITH. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in the carrying out
of all the provisions of this Certificate of Designation and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion and other rights of the holders of the shares of Series A
Preferred Stock against impairment of any kind.
8. NO REDEMPTION RIGHTS. The Series A Preferred Stock shall not be
subject to redemption, whether at the option of either the Corporation or any
holder of the Series A Preferred Stock.
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<PAGE>
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series A Convertible issue of
Preferred Stock and fixing the number, powers, preferences and relative,
optional, participating, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics thereof
shall, upon the effective date of said series, be deemed to be included in
and be a part of the certificate of incorporation of the Corporation pursuant
to the provisions of Sections 104 and 151 of the General Corporation Law of
the State of Delaware.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, said Corporation has caused this Certificate to
be signed by its Chief Financial Officer, this 8th day of June, 2000. The
signature below shall constitute the affirmation or acknowledgment of the
signatory, under penalties of perjury, that the instrument is the act and
deed of the Corporation and that the facts stated herein are true.
/s/ Truman Cole
-----------------------------------
Truman Cole
Chief Financial Officer
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