EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into
as of ____________, 1997 by and between Power Integrations, Inc., a California
corporation ("PI California"), and Power Integrations Delaware Corporation, a
Delaware corporation ("PI Delaware").
WITNESSETH:
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WHEREAS, PI Delaware is a corporation duly organized and existing under the
laws of the State of Delaware;
WHEREAS, PI California is a corporation duly organized and existing under
the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, PI Delaware has authority to
issue 1,000 shares of Common Stock, par value $0.001 per share (the "PI Delaware
Common Stock"), of which 100 shares are issued and outstanding and owned by PI
California;
WHEREAS, on the date of this Merger Agreement, PI California has authority
to issue 100,000,000 shares of Common Stock (the "PI California Common Stock"),
of which ____________ shares are issued and outstanding, and 54,000,000 shares
of Preferred Stock (the "PI California Preferred Stock"), of which 45,863,796
shares are issued and outstanding;
WHEREAS, the respective Boards of Directors for PI Delaware and PI
California have determined that, for the purpose of effecting the
reincorporation of PI California in the State of Delaware, it is advisable and
to the advantage of said two corporations and their stockholders that PI
California merge with and into PI Delaware upon the terms and conditions herein
provided; and
WHEREAS, the respective Boards of Directors of PI Delaware and PI
California, the stockholders of PI California, and the sole stockholder of PI
Delaware have adopted and approved this Merger Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, PI California and PI Delaware hereby agree to merge as follows:
1. Merger. PI California shall be merged with and into PI Delaware,
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and PI Delaware shall survive the merger ("Merger"), effective upon the date
when this Merger Agreement is made effective in accordance with applicable law
(the "Effective Date").
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2. Governing Documents. The Certificate of Incorporation of PI
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Delaware shall be amended to read in full as follows:
FIRST: The name of the Corporation is Power Integrations, Inc.
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(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
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State of Delaware is Incorporating Services, Ltd., 00 Xxxx Xxxxx
Xxxxxx, xx xxx Xxxx xx Xxxxx, Xxxxxx of Kent. The name of the
registered agent at that address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
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activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
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STOCK
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The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Preferred Stock" and "Common Stock". The total
number of shares of Preferred Stock the Corporation shall have authority to
issue is 54,000,000, $0.001 par value per share, and the total number of shares
of Common Stock the Corporation shall have authority to issue is 100,000,000,
$0.001 par value per share. The Preferred Stock shall be divided into six
series, namely, "Series A Preferred Stock", consisting of 8,400,000 shares,
"Series B Preferred Stock", consisting of 8,000,000 shares, "Series C Preferred
Stock", consisting of 11,392,900 shares, "Series D Preferred Stock", consisting
of 3,280,000 shares, "Series E Preferred Stock", consisting of 12,300,000
shares, and "Series F Preferred Stock", consisting of 10,091,000 shares.
The Board of Directors is hereby authorized, within the limitations and
restrictions stated herein, to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon a wholly unissued series
of Preferred Stock, and the number of shares constituting any such series and
the designation thereof, or any of them; and to increase or decrease the number
of shares constituting any such series and the designation thereof, or any of
them; and, except as to the Series D Preferred Stock, to increase or decrease
the number of shares of any series subsequent to the issue of shares of that
series, but, in respect of decreases, not below the number of shares of such
series then outstanding. In case the number of shares of any series should be
so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolutions originally fixing the
number of shares of such series.
The relative rights, preferences, privileges and restrictions granted to or
imposed upon the shares of the respective series of Preferred Stock are as
follows:
1. Dividends.
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(a) Dividend Rights. The holders of outstanding Preferred Stock shall
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be entitled to receive in any fiscal year, if, when and as declared by the Board
of Directors, out of any assets at the time legally available therefor,
distributions (as defined below) at the rate of Four Cents ($0.04) per annum,
respectively, per share of Series A Preferred Stock and Series F Preferred
Stock, Eight Cents ($0.08) per annum, respectively, per share of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and Six
Cents ($0.06) per annum per share of Series E Preferred Stock (as adjusted, in
each case, for stock splits, stock dividends, recapitalizations and the like),
prior and in preference to any distribution to the holders of Common Stock.
Distributions may be declared and paid upon Common shares in any fiscal year of
the Corporation only if distributions shall have been paid to or declared and
set apart upon all shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
and Series F Preferred Stock, at the rate set for such series for such fiscal
year of the Corporation. The right to such distributions on Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, and Series F Preferred Stock shall not be
cumulative and no right shall accrue to holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock by reason of the fact that
distributions on said shares are not declared in any prior year, nor shall any
undeclared distribution bear or accrue interest. Any declared but unpaid
distribution shall accrue interest at the minimum rate necessary to avoid
imputed interest under the Internal Revenue Code of 1986, as amended, from the
date such distribution was declared until the date such distribution is paid.
After distributions shall have been paid to or declared and set apart upon the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
at the rate provided in this Article FOURTH, Section 1(a), for any one fiscal
year of the Corporation, if the Board of Directors elects to declare additional
distributions out of any assets legally available therefor, such additional
distributions shall be declared on all shares of Preferred Stock and Common
Stock, with the amount of such distribution for each share of Preferred Stock
equal to the amount of such distribution for one share of Common Stock
multiplied by the number of shares of Common Stock into which such share of
Preferred Stock is convertible as of the record date fixed for declaration of
such distribution. Distributions, if paid, or if declared and set apart for
payment, must be paid on, or declared and set apart for payment on, all
outstanding series of Preferred Stock contemporaneously, and if less than full
dividends are paid or declared and set apart for payment, the same percentage of
dividend rate will be paid on, or declared and set apart for payment on, each
outstanding share of Preferred Stock.
(b) Definition of "Distribution." For purposes of this Article
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FOURTH, Section 1, unless the context otherwise requires, "distribution" shall
mean the transfer of cash or property without consideration, whether by way of
dividend or otherwise, payable other than in Common Stock, or the purchase or
redemption of shares of this Corporation (other than repurchases of Common Stock
held by employees, directors or consultants of this Corporation pursuant to
agreements providing for such repurchase upon the termination of such person's
service to this Corporation) for cash or property, including any such transfer,
purchase or redemption by a subsidiary of this Corporation.
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(c) Consent to Repurchases. Each holder of shares of Preferred Stock
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shall be deemed to have consented to any repurchases by the Corporation of
shares of Common Stock issued to or held by employees, directors or consultants
pursuant to agreements providing for such repurchase upon the termination of
such person's service to this Corporation.
2. Preference on Liquidation.
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(a) Amount, Priority, Etc.
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(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
then outstanding shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be made in respect of the
Corporation's Common Stock, an amount equal to Fifty Cents ($0.50) per share of
Series A Preferred Stock, One Dollar ($1.00) per share of Series B Preferred
Stock, One Dollar ($1.00) per share of Series C Preferred Stock, One Dollar and
Twenty-five Cents ($1.25) per share of Series D Preferred Stock, Seventy-five
Cents ($0.75) per share of Series E Preferred Stock, and Fifty-five Cents
($0.55) per share of Series F Preferred Stock, for each such share held plus all
declared and unpaid dividends thereon to the date fixed for distribution (as
adjusted for stock splits, stock dividends, recapitalizations and the like). If,
upon liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, and Series F Preferred Stock the full amounts to which they
shall be entitled pursuant to this Article FOURTH, Section 2(a)(i), the entire
assets of the Corporation available for distribution shall be distributed to the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock ratably according to the respective amounts which would be
payable in respect of the shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, and Series F Preferred Stock held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full.
(ii) After setting apart or paying in full the preferential
amounts due the holders of the Preferred Stock pursuant to Article FOURTH,
Section 2(a)(i), the remaining assets of the Corporation available for
distribution to stockholders, if any, shall be distributed to the holders of
Preferred Stock and Common Stock, with the amount of such distribution for each
share of Preferred Stock equal to the amount of such distribution for one share
of Common Stock (each such issued and outstanding share of Common Stock
entitling the holder thereof to receive an equal proportion of said remaining
assets) multiplied by the number of shares of Common Stock into which such share
of Preferred Stock is convertible as of the date fixed for such distribution.
(b) Merger. The merger or consolidation of the Corporation into or
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with another corporation in which this Corporation shall not survive or in which
the stockholders of
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the Corporation shall receive in such transaction less than fifty percent (50%)
of the voting securities of the surviving corporation or the sale, transfer or
lease (but not including a transfer by pledge or mortgage to a bona fide lender)
of all or substantially all of the assets of the Corporation shall be deemed to
be a liquidation, dissolution or winding up of the Corporation as those terms
are used in this Article FOURTH, Section 2.
(c) Notice. In the event of any voluntary or involuntary liquidation,
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dissolution or winding up of the Corporation, the Corporation shall, within
twenty (20) days after the date the Board of Directors approves such action, or
twenty (20) days prior to any stockholders' meeting called to approve such
action, or twenty (20) days after the commencement of any involuntary
proceeding, whichever is earlier, give each holder of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock written
notice of the proposed action. In addition to any other means of delivery, such
notice shall be sent by facsimile transmission to any holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock who has
provided the Corporation with a facsimile transmission number in writing. Such
written notice shall describe the material terms and conditions of such proposed
action, including a description of the stock, cash and property to be received
by the holders of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
and Series F Preferred Stock upon consummation of the proposed action, and the
date of delivery thereof. If any material change in the facts set forth in the
written notice shall occur, the Corporation shall promptly give written notice
of such material change to each holder of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, and Series F Preferred Stock.
(d) Consummation of Liquidation. The Corporation shall not consummate
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any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation before the expiration of thirty (30) days after the mailing of the
initial written notice or twenty (20) days after the mailing of any subsequent
written notice, whichever is later; provided that any such 30-day or 20-day
period may be shortened upon the written consent of the holders of all of the
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and
Series F Preferred Stock.
(e) Appraisal. In the event of any voluntary or involuntary
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liquidation, dissolution or winding up of the Corporation which will involve the
distribution of assets other than cash, the Corporation shall promptly engage
competent independent appraisers reasonably acceptable to a majority of each of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, and Series F
Preferred Stock to determine the value of the assets to be distributed to the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and
Series F Preferred Stock. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice of the appraiser's valuation
to each holder of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
and Series F Preferred Stock.
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3. Voting.
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(a) General. Except as otherwise required by law or as set forth
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herein, the shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and
Series F Preferred Stock shall be voted together and equally with the shares of
the Corporation's Common Stock as one class at any annual or special meeting of
stockholders of the Corporation, or may act by written consent in the same
manner as the Corporation's Common Stock, upon the following basis: each holder
of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock shall be entitled to such number of votes for each share of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, and Series F
Preferred Stock held by him on the record date fixed for such meeting, or on the
effective date of such written consent, as shall be equal to the number of votes
that would be accorded to the number of whole shares of the Corporation's Common
Stock into which all of his or her shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, and Series F Preferred Stock are convertible immediately after
the close of business on the record date fixed for such meeting or the effective
date of such written consent.
(b) Special Voting Rights and Restrictions upon Series D Preferred
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Stock.
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(i) Election of Directors; Quorum. For so long as there shall
be one million (1,000,000) shares of Series D Preferred Stock outstanding (as
adjusted for any stock split, stock dividend, recapitalization or similar event)
the holders of the Series D Preferred Stock shall be entitled to elect one (1)
director of the Corporation, and the number of directors of the Corporation
shall not exceed nine (9). The foregoing voting right may be exercised initially
by unanimous written consent of the holders of all of the outstanding shares of
Series D Preferred Stock, at a special meeting called pursuant to this Article
FOURTH, Section 3(b)(i) or at an annual meeting and thereafter, at annual
meetings of the stockholders of the Corporation. The director elected by the
holders of Series D Preferred Stock shall continue in office until his successor
shall be elected. Such director may be removed for cause in the same manner as
any other director of the Corporation, but may be removed without cause only by
the affirmative vote of a majority of the outstanding shares of Series D
Preferred Stock given at a meeting specially called for such purpose. Should
there be a vacancy in the directorship created by this Article FOURTH, Section
3(b)(i) for a period exceeding thirty (30) days for any reason, the appropriate
officer of the Corporation shall, upon the written request of holders of record
of thirty percent (30%) of the Series D Preferred Stock then outstanding
addressed to the secretary of the Corporation, call a special meeting of holders
of the Series D Preferred Stock for the purpose of electing such a director. At
any meeting of stockholders at which a Series D Preferred Stock director is to
be elected hereunder, the presence in person or by proxy of the holders of at
least one-third of the then outstanding shares of Series D Preferred Stock shall
be required and be sufficient to constitute a quorum of such series for the
election of the director (and any other business presented only to such series).
The absence of a quorum of such series at any meeting of stockholders of the
Corporation shall not prevent such other stockholders from electing other
directors (or taking action not required to be presented to the Series D
Preferred Stock). In lieu of the election of a director by the holders of the
Series D Preferred Stock at a special meeting of
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the holders of Series D Preferred Stock contemplated hereby, the holders of all
of the outstanding shares of Series D Preferred Stock may elect a director by
unanimous written consent.
(ii) Voting Restrictions. Notwithstanding the provisions of Article
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FOURTH, Section 3(a) above, and except as provided in Article FOURTH, Section
3(b)(i), in this Article FOURTH, Section 3(b)(ii) and in Article FOURTH, Section
7, with respect to all matters on which holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock,
and Series F Preferred Stock vote together with the Common Stock as a class, the
Series D Preferred Stock shall be automatically voted for, against or in
abstention, in proportion to the votes cast for, against or in abstention
(whether at a meeting or by written consent) of the outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Common Stock and where the
aforesaid Preferred Stock is voted or takes action by written consent as a
single class apart from the Common Stock, the Series D Preferred Stock shall
automatically be voted for, against or in abstention, in proportion to the votes
cast for, against or in abstention (whether at a meeting or by written consent)
of the outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock. In the
following circumstances, however, the Series D Preferred Stock shall be voted by
the holders thereof, in their absolute discretion but as a single class, as the
case may be and as the matter is presented, either with the holders of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, Series E Preferred Stock, and Series F Preferred Stock, voting as a
single class, or with the aforesaid Preferred Stock voting together with the
Common Stock:
(1) in respect of any transaction involving a Change of
Control (as defined below) of the Corporation, unless in such case a majority of
the outstanding Series D Preferred Stock has elected to exercise the repurchase
right provided in Article FOURTH, Section 6 below and the Corporation has
legally available funds to effect such repurchase; and
(2) in respect of any conversion referred to in Article
FOURTH, Section 4(a)(ii) below.
(iii) Definition of Change of Control. A Change in Control shall
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be deemed to have occurred on the effective date of any one or more of the
following events:
(1) a reorganization or merger under which a vote of the
outstanding shares of the Corporation is required under the Delaware
Corporations Code;
(2) the merger or consolidation of the Corporation into or
with another Person (as defined below) in which the Corporation shall not
survive or in which the stockholders of the Corporation shall receive in the
transaction less than fifty percent (50%) of the voting securities of the
surviving Person;
(3) the sale, lease or transfer of all or substantially
all of the assets of the Corporation (but not including a transfer by pledge or
mortgage to a bona fide lender);
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(4) any Person or Group (as such terms are defined in
Regulation 13d under the Securities Act of 1934, as amended) shall acquire 40%
or more of the Corporation's then outstanding Voting Stock (which shall mean any
and all shares of common and preferred stock, capital stock, rights to purchase,
warrants, options, participations of or interests in capital stock which then
entitle the holder thereof or would, upon payment of an exercise or Conversion
Price, entitle such holder to vote in the election of the directors of the
Corporation); or
(5) during any twelve-month period, the individuals who
constituted the Board of Directors at the beginning of such period shall cease
to constitute two-thirds (2/3) thereof (but excluding, for purposes of
calculating such two-thirds, any changes due to death, retirement at normal
retirement age or the nomination by a group theretofore contractually entitled
to nominate a director of a new individual in place of a previously nominated
individual).
4. Conversion Rights.
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(a) Optional and Automatic Conversion. Each share of Series A
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Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock shall be
convertible at the option of the holder thereof at any time into fully paid and
nonassessable shares of Common Stock of the Corporation. Each and every share
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
shall automatically be converted into fully paid and nonassessable shares of
Common Stock of the Corporation immediately upon the earlier of (i) the closing
of a primary sale of the Corporation's securities in an underwritten registered
public offering with an aggregate offering price to the public of at least Five
Million Dollars ($5,000,000) and at a per share price not less than the greater
of (A) One Dollar ($1.00) per share and (B) the then effective Conversion Price
of the Series D Preferred Stock (in both cases adjusted to reflect stock splits,
reverse stock splits, stock dividends and stock recapitalizations) or (ii) the
vote or consent in writing of over fifty percent (50%) of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, and Series F Preferred Stock then outstanding,
voting together as a single class (except as otherwise required by law)
approving the conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, and Series F Preferred Stock into Common Stock.
(b) Conversion Price. The number of shares of Common Stock into which
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each share of the Series A Preferred Stock may be converted shall be determined
by dividing Fifty Cents ($0.50) by the Series A Conversion Price (determined as
hereinafter provided) in effect at the time of the conversion. The number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted shall be determined by dividing One Dollar ($1.00) by the Series B
Conversion Price (determined as hereinafter provided) in effect at the time of
conversion. The number of shares of Common Stock into which each share of Series
C Preferred Stock may be converted shall be determined by dividing One Dollar
($1.00) by the Series C Conversion Price (determined as hereinafter provided) in
effect at the time of conversion. The number of shares of Common Stock into
which each share of Series D Preferred Stock may be
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converted shall be determined by dividing One Dollar Twenty-Five Cents ($1.25)
by the Series D Conversion Price (determined as hereinafter provided) in effect
at the time of conversion. The number of shares of Common Stock into which each
share of Series E Preferred Stock may be converted shall be determined by
dividing Seventy-Five Cents ($0.75) by the Series E Conversion Price (determined
as hereinafter provided) in effect at the time of conversion. The number of
shares of Common Stock into which each share of Series F Preferred Stock may be
converted shall be determined by dividing Fifty-Five Cents ($0.55) by the Series
F Conversion Price (determined as hereinafter provided) in effect at the time of
conversion. The initial Series A Conversion Price per share, Series B Conversion
Price per share, Series C Conversion Price per share, Series D Conversion Price
per share, Series E Conversion Price, and Series F Conversion Price per share at
which shares of Common Stock shall be issuable upon conversion of any shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, and Series F Preferred
Stock, as the case may be, shall be Forty-nine Cents ($0.49), Eighty-five and
two-tenths Cents ($0.852), Eighty-five and two-tenths Cents ($0.852), Eighty-
five Cents ($0.85), Sixty-nine and Six-tenths Cents ($0.696), and Fifty-three
and nine tenths Cents ($0.539), respectively, subject to adjustment as provided
in Article FOURTH, Section 5 hereof.
(c) Procedure for Conversion. The holder of any shares of Series A
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Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock may
exercise the conversion rights as to such shares or any part thereof by
delivering to the Corporation during regular business hours, at the
Corporation's principal office or at the office of any transfer agent of the
Corporation for the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F
Preferred Stock, as the case may be, or at such other place as may be designated
by the Corporation, the certificate or certificates for the shares to be
converted, duly endorsed for transfer to the Corporation (if required by it),
accompanied by written notice stating that the holder elects to convert such
shares. Conversion shall be deemed to have been effected on the date when such
delivery is made, and such date is referred to herein as the "Conversion Date".
As promptly as practicable thereafter the Corporation shall issue and deliver to
or upon the written order of such holder, at such office or other place
designated by the Corporation, a certificate or certificates for the number of
full shares of Common Stock to which such holder is entitled and a check for
cash with respect to any fractional interest in a share of Common Stock as
provided in subsection 4(d) below. The holder shall be deemed to have become a
stockholder of record on the applicable Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event the holder
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date. Upon conversion of only a portion of the
number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F
Preferred Stock, as the case may be, represented by a certificate surrendered
for conversion, the Corporation shall issue and deliver to or upon the written
order of the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
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Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred
Stock, as the case may be, representing the unconverted portion of the
certificate so surrendered.
(d) No Fractional Shares. No fractional shares of Common Stock or
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scrip shall be issued upon conversion of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock. If more than one share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock
shall be surrendered for conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair market value
of such fractional interest as determined by the Corporation's Board of
Directors.
(e) Taxes. The Corporation shall pay any and all issue and other
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taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, or Series F Preferred Stock pursuant hereto. 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 of shares of Common Stock in a name
other than that in which the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or
Series F Preferred Stock so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(f) Common Stock Reserve. The Corporation shall at all times reserve
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and keep available, out of its authorized but unissued Common Stock, solely for
the purpose of effecting the conversion of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, and Series F Preferred Stock, the full number of shares of
Common Stock issuable upon the conversion of all Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, and Series F Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to obtaining
necessary director and stockholder action), in accordance with the laws of the
State of Delaware, increase the authorized amount of its Common Stock if at any
time the authorized number of shares of its Common Stock remaining unissued
shall not be sufficient to permit the conversion of all of the shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock at the
time outstanding.
10
(g) Registration of Common Stock Issued Upon Conversion. If any
---------------------------------------------------
shares of Common Stock to be reserved for the purpose of conversion of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F 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 will in good faith and as
expeditiously as possible endeavor to secure such registration, listing or
approval, as the case may be.
(h) Status of Common Stock Issued Upon Conversion. All shares of
---------------------------------------------
Common Stock which may be issued upon conversion of the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock will upon
issuance by the Corporation be validly issued, fully paid and non-assessable and
free from all taxes, liens and charges with respect to the issuance thereof.
(i) Status of Converted Stock. All certificates of Series A Preferred
-------------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock surrendered for
conversion shall be appropriately canceled on the books of the Corporation, and
the shares so converted shall be restored to the status of authorized but
unissued Preferred Stock of the Corporation, undesignated as to series.
(j) Notice of Certain Events. In case:
------------------------
(i) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, payable otherwise than in cash; or
(ii) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or
(iii) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another Corporation or
conveyance of all or substantially all of the assets of the Corporation to
another Corporation; then, and in any such case, the Corporation shall cause to
be mailed by first class mail to the transfer agent for the Preferred Stock, and
to the holders of record of the outstanding Preferred Stock, at least twenty
(20) days prior to the date hereinafter specified, a notice stating the date on
which (x) a record is to be taken for the purpose of such dividend, distribution
or rights, or (y) such reclassification, reorganization, consolidation, merger
or conveyance is to take place and the date, if any is to be fixed, as of which
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up. In addition to any other means of
delivery, such notice shall be sent by facsimile transmission to any holder of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F
11
Preferred Stock who has provided the Corporation with a facsimile transmission
number in writing.
5. Adjustment of Conversion Price. The Conversion Price with respect to
------------------------------
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred
Stock, as the case may be, (the term "Conversion Price" as used herein without
description as to a particular series of Preferred Stock shall refer to the
respective conversion price of each series of Preferred Stock) from time to time
in effect shall be subject to adjustment from time to time as follows:
(a) Stock Dividends, Stock Splits, Etc. In case the Corporation shall
at any time subdivide the outstanding shares of Common Stock, or shall issue a
stock dividend on its outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in case the Corporation shall at any time combine
the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
concurrently with such subdivision, dividend or combination, as the case may be.
(b) Reorganization, Etc. In case of any capital reorganization or any
-------------------
reclassification of the capital stock of the Corporation or in case of the
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation (but not including any conveyance of assets deemed to be a
liquidation, dissolution, or winding up of the Corporation pursuant to Article
FOURTH, Section 2(b) above and without affecting the rights of the Series D
Preferred Stock pursuant to Article FOURTH, Section 6 below), each share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
shall thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, and Series F Preferred Stock would have been entitled
upon such reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock, to the
end that the provisions set forth herein (including provisions with respect to
changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any share of stock or
other property thereafter deliverable upon the conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock.
(c) Lower Priced Issuances.
----------------------
(i) Upon the issuance by the Corporation, at any time after
the date of the filing of this Certificate of Incorporation, of Common Stock, or
any right or option to
12
purchase Common Stock or stock convertible into Common Stock, or any obligation,
share of stock or other security convertible into or exchangeable for Common
Stock for a consideration per share less than the Series A Conversion Price, the
Series B Conversion Price, the Series C Conversion Price, the Series D
Conversion Price, the Series E Conversion Price, and/or the Series F Conversion
Price in effect immediately prior to the time of such issue or sale, other than
an issuance of stock or securities pursuant to subsection 5(a) or 5(b) or the
issuance of shares of Common Stock upon conversion of any Preferred Stock, then,
upon such issue or sale, the relevant Conversion Price shall be reduced to a
price (calculated to the nearest tenth of a cent) determined by dividing:
(1) an amount equal to the sum of (x) the number of shares
of Common Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price, (y) the number of shares of Common Stock
issuable upon conversion or exchange of any obligations or of any shares of
stock of the Corporation outstanding immediately prior to such issue or sale
multiplied by the then existing Conversion Price and (z) an amount equal to the
aggregate "consideration actually received" by the Corporation upon such issue
or sale, by
(2) the sum of the number of shares of Common Stock
outstanding immediately after such issue or sale and the number of shares of
Common Stock issuable upon conversion or exchange of any obligations or of any
shares of stock of the Corporation outstanding immediately after such issue or
sale.
(ii) Calculation of Consideration, Outstanding Shares, Etc. For
-----------------------------------------------------
purposes of this subsection 5(c), the following provisions shall be applicable:
(1) Cash Consideration. In the case of an issue or sale for
------------------
cash of shares of Common Stock, the "consideration actually received" by the
Corporation therefor shall be deemed to be the amount of cash received, before
deducting therefrom any commissions or expenses paid by the Corporation.
(2) Non-cash Consideration. In case of the issuance
----------------------
(otherwise than upon conversion or exchange of obligations or shares of stock of
the Corporation) of additional shares of Common Stock for a consideration other
than cash or a consideration partly other than cash, the amount of the
"consideration actually received" other than cash received by the Corporation
for such shares shall be deemed to be the value of such consideration as
determined by the Board of Directors.
(3) Options, Warrants, Etc. In case of the issuance by the
----------------------
Corporation in any manner of any rights to subscribe for or to purchase shares
of Common Stock, or any options for the purchase of shares of Common Stock or
stock convertible into Common Stock, all shares of Common Stock or stock
convertible into Common Stock to which the holders of such rights or options
shall be entitled to subscribe for or purchase pursuant to such rights or
options shall be deemed issued and "outstanding" as of the date of the offering
of such rights or the granting of such options, as the case may be, and the
minimum aggregate consideration named in such rights or options for the shares
of Common Stock or stock convertible into Common
13
Stock covered thereby, plus the consideration, if any, received by the
Corporation for such rights or options, shall be deemed to be the "consideration
actually received" by the Corporation (as of the date of the offering of such
rights or the granting of such options, as the case may be) for the issuance of
such shares.
(4) Convertible Securities. In case of the issuance or
----------------------
issuances by the Corporation in any manner of any obligations or of any shares
of stock of the Corporation that shall be convertible into or exchangeable for
Common Stock, all shares of Common Stock issuable upon the conversion or
exchange of such obligations or shares shall be deemed issued as of the date
such obligations or shares are issued, and the amount of the "consideration
actually received" by the Corporation for such additional shares of Common Stock
shall be deemed to be the total of (x) the amount of consideration received by
the Corporation upon the issuance of such obligations or shares, as the case may
be, plus (y) the minimum aggregate consideration, if any, other than such
obligations or shares, receivable by the Corporation upon such conversion or
exchange, except in adjustment of dividends.
(5) Readjustment Upon Expiration of Options, Etc. On the
expiration of any rights or options referred to in subsection 5(c)(2)(3), or the
termination of any right of conversion or exchange referred to in subsection
5(c)(2)(4), or any change in the number of shares of Common Stock deliverable
upon exercise of such options or rights or upon conversion of or exchange of
such convertible or exchangeable securities, or upon the repurchase of shares of
Common Stock which have been issued pursuant to the Corporation's stock option
plan and were subject to repurchase upon the terms of the plan, each Conversion
Price then in effect shall forthwith be readjusted to such Conversion Price as
would have obtained had the adjustments made upon the issuance of such option,
right or convertible or exchangeable securities been made upon the basis of the
delivery of only the number of shares of Common Stock actually delivered or to
be delivered upon the exercise of such rights or options or upon the conversion
or exchange of such securities.
(6) Non-triggering Issuances. Anything herein to the
------------------------
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price with respect to the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, or
Series F Preferred Stock as a result of the grant of options to purchase Common
Stock, or the issuance of Common Stock to officers, employees, directors or
consultants of the Corporation or its subsidiaries pursuant to stock option or
stock purchase plans or agreements approved by the Corporation's Board of
Directors; provided, that with respect to the Series D Preferred Stock, the
Corporation shall be required to commence making such adjustments when in excess
of 2,125,775 shares (net of repurchases, cancellations, terminations and
expirations and adjusted for stock splits, stock dividends, recapitalizations
and the like) of Common Stock have, after the date of the issuance of such
Series D Preferred Stock, been subject to the grant of options or otherwise
issued to officers, employees, directors or consultants of the Corporation or
its subsidiaries pursuant to stock option plans, stock purchase plans or
agreements approved by the Corporation's Board of Directors.
(d) Certificate of Adjustment. Upon the occurrence of each adjustment
-------------------------
or readjustment of a Conversion Price pursuant to this Article FOURTH, Section
5, the Corporation,
14
at its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, and/or Series F Preferred Stock
affected thereby a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(1) such adjustment or readjustment, (2) each Conversion Price at the time in
effect, and (3) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of his or
her shares.
6. Change of Control Repurchase Right. In the event a Change of Control
----------------------------------
(as defined above) shall occur, the holders of the Series D Preferred Stock
shall have the right to require that the Corporation repurchase, on the last day
of the fiscal quarter of the Corporation following the effective date of the
Change of Control (the "Change of Control Payment Date") all or any portion of
such holders' outstanding Series D Preferred Stock at the Change of Control
Purchase Price; provided that the foregoing repurchase right may be waived by
the holders of a majority of the outstanding Series D Preferred Stock.
(a) Change of Control Purchase Price. The Change of Control Purchase
--------------------------------
Price per share of the Series D Preferred Stock shall be the original purchase
price paid for the Series D Preferred Stock plus (i) an amount equal to 8% per
annum, compounded annually, of such purchase price from the date of issuance of
the series D Preferred Stock and less (ii) all cash dividends theretofore paid
in respect of such Series D Preferred Stock.
(b) Repurchase Offer. Not less than 20 business days before the
----------------
effective date of the Change of Control (the "Change of Control Effective
Date"), the Corporation shall mail to the holders of Series D Preferred Stock at
their last registered addresses, notice of an offer to purchase (the "Change of
Control Offer") . The Change of Control Offer shall remain open from the time of
mailing until the fifth business day preceding the Change of Control Effective
Date. The notice, which shall govern the terms of the Change of Control Offer,
shall state:
(i) that the Change of Control Offer is being made pursuant to
this Article FOURTH, Section 6 and that all shares of Series D Preferred Stock
duly tendered will be accepted for payment;
(ii) the purchase price for the Series D Preferred Stock and
the Change of Control Payment Date;
(iii) the name and address of the paying agent, if any;
(iv) whether or not any shares of Series D Preferred Stock not
tendered will continue to remain outstanding;
15
(v) that the holders electing to have their shares of Series D
Preferred Stock purchased pursuant to a Change of Control Offer will be required
to surrender their shares of Series D Preferred Stock to the Corporation prior
to the close of business on the Change of Control Effective Date;
(vi) that holders will be entitled to withdraw their election
with respect to any or all of the Series D Preferred Stock tendered if the
Corporation, not later than the close of business on the business day that is
three business days preceding the Change of Control Effective Date, receives a
telegram, telex, facsimile transmission or letter setting forth the name of the
holder, the number of shares of Series D Preferred Stock the holder had
previously delivered for purchase and a statement that such holder is
withdrawing this election to have some or all of such shares purchased;
(vii) that holders whose shares of Series D Preferred Stock are
purchased only in part will be issued shares representing the unpurchased
portion of the Series D Preferred Stock surrendered;
(viii) the instructions that holders must follow in order to
tender their shares of Series D Preferred Stock; and
(ix) the circumstances and relevant facts regarding such Change
of Control.
On the Change of Control Payment Date, the Corporation shall (i) accept for
payment shares of Series D Preferred Stock tendered pursuant to the Change of
Control Offer, and (ii) deposit with the paying agent, if any, money or
securities not subject to investment letter or other similar restriction on free
marketability and listed or approved for listing upon notice of issuance on a
national securities exchange or designated or approved for designation upon
issuance as a national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc., sufficient to pay the
purchase price of all securities so tendered, as the case may be. The
Corporation or the paying agent, if any, shall promptly mail to the holder of
shares of Series D Preferred Stock so accepted for payment an amount equal to
the Change of Control Purchase Price, and the transfer agent shall promptly
issue and mail to such holders a new certificate for any unpurchased portion of
the shares of Series D Preferred Stock surrendered.
7. Changes Affecting Preferred Stock.
----------------------------------
(a) Series A Preferred Stock, Series B Preferred Stock, Series C
------------------------------------------------------------
Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock. Except
-----------------------------------------------------------------------
where a separate series vote is required by law, so long as at least 3,000,000
shares of Series A Preferred Stock, or 2,000,000 shares of Series B Preferred
Stock, or 1,100,000 shares of Series C Preferred Stock, or 2,000,000 shares of
Series E Preferred Stock, or 2,750,000 shares of Series F Preferred Stock are
outstanding (in each case, as adjusted for any stock split, stock dividend,
reclassification or similar event), the Corporation shall not, without first
obtaining the approval by vote or written consent, in the manner provided by
law, of the holders of at least fifty percent (50%) of the total number of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series E
16
Preferred Stock, and Series F Preferred Stock outstanding, voting together as a
class, (1) alter or change any of the powers, preferences, privileges or rights
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock; (2) increase or
decrease the authorized number of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series E Preferred Stock, or Series F
Preferred Stock; (3) amend the provisions of this Article FOURTH, Section 7(a);
(4) create any new class or series of shares of preferred stock on a parity with
or prior to the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock with
respect to dividends or liquidation preference; (5) sell, lease, convey,
exchange, transfer or otherwise dispose of all or substantially all of its
assets (other than for the purposes of securing payment of any contract or
obligation); or (6) merge or consolidate with or into any other corporation
except into or with a wholly owned subsidiary.
(b) Series D Preferred Stock. So long as at least 1,000,000 shares of
------------------------
Series D Preferred Stock are outstanding (as adjusted for any stock split, stock
dividend, reclassification or similar event), the Series D Preferred Stock shall
be counted together with the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
entitled to vote thereon for purposes of determining whether there has been
approval by at least 50% of such Preferred Stock as required by Article FOURTH,
Section 7(a) above for any of the actions enumerated in clauses (1), (2) and (3)
thereof, provided that, insofar as any of the foregoing would adversely affect
the Series D Preferred Stock, so long as at least 1,000,000 shares of Series D
Preferred Stock are outstanding (as adjusted as aforesaid), the Corporation
shall take no such action without first obtaining the approval of the holders of
at least two-thirds (2/3rds) of such Series D Preferred Stock, voting as a
separate series, except that no such separate vote of the Series D Preferred
Stock shall be required (i) with respect to clause (3) unless the manner in
which the Series D Preferred Stock would be affected thereby would be different
from the manner in which the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock
would be affected or (ii) with respect to clause (1) if such separate vote would
not be required under clause (3) and if the only reason for such separate vote
(in the absence of this exception) would be the indirect effect of a new class
or series of Preferred Stock on the powers, preferences, privileges or rights of
any outstanding series of Preferred Stock.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to
the powers and authority expressly conferred upon them by statute
or by this Certificate of Incorporation or the Bylaws of the
Corporation, the directors are hereby empowered to exercise all
such powers and do all such acts and things as may be exercised
or done by the Corporation.
17
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
C. On and after the closing date of the first sale of the
Corporation's Common Stock pursuant to a firmly underwritten
registered public offering which results in the automatic
conversion of the Corporation's Preferred Stock (the "IPO"), any
action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders. Prior to
such sale, unless otherwise provided by law, any action which may
otherwise be taken at any meeting of the stockholders may be
taken without a meeting and without prior notice, if a written
consent describing such actions is signed by the holders of
outstanding shares having not less than the minimum number of
votes which would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were
present and voted.
D. Special meetings of stockholders of the Corporation may be called
only (1) by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is
presented to the Board for adoption) or (2) by the holders of not
less than ten percent (10%) of all of the shares entitled to cast
votes at the meeting.
SIXTH:
-----
A. The number of directors shall initially be set at five (5) and,
thereafter, shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority
of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption).
Upon the closing of the IPO, the directors shall be divided into
three classes with the term of office of the first class (Class
I) to expire at the first annual meeting of the stockholders
following the IPO; the term of office of the second class (Class
II) to expire at the second annual meeting of stockholders held
following the IPO; the term of office of the third class (Class
III) to expire at the third annual meeting of stockholders; and
thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election. Subject to
the rights of the holders of any series of Preferred Stock then
outstanding, a vacancy resulting from the removal of a director
by the stockholders as provided in Article SIXTH, Section C below
may be filled at a special meeting of the stockholders held for
that purpose. All directors shall hold office until the
expiration of the term for which elected, and until their
respective
18
successors are elected, except in the case of the
death, resignation, or removal of any director.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation or other cause (other than removal from office by a
vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and
directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders at which the term of office
of the class to which they have been elected expires, and until
their respective successors are elected, except in the case of
the death, resignation, or removal of any director. No decrease
in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or
without cause, but only by the affirmative vote of the holders of
at least a majority of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together
as a single class. Vacancies in the Board of Directors resulting
from such removal may be filled by a majority of the directors
then in office, though less than a quorum, or by the stockholders
as provided in Article SIXTH, Section A above. Directors so
chosen shall hold office for a term expiring at the next annual
meeting of stockholders at which the term of office of the class
to which they have been elected expires, and until their
respective successors are elected, except in the case of the
death, resignation, or removal of any director.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal Bylaws of the Corporation. Any adoption, amendment or
repeal of Bylaws of the Corporation by the Board of Directors
shall require the approval of a majority of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the
Board). The stockholders shall also have power to adopt, amend or
repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of Bylaws of the Corporation by the stockholders shall
require, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class .
19
EIGHTH: 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 which involved 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 hereafter amended to
authorize the further elimination or limitation of the liability
of a director, 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.
Any repeal or modification of the foregoing provisions of this
Article EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
NINTH: The Corporation reserves the right to amend or repeal any
-----
provision contained in this Certificate of Incorporation in the
manner prescribed by the laws of the State of Delaware and all
rights conferred upon stockholders are granted subject to this
reservation; provided, however, that, notwithstanding any other
-------- -------
provision of this Certificate of Incorporation or any provision
of law which might otherwise permit a lesser vote or no vote, but
in addition to any vote of the holders of any class or series of
the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least 66-2/3% of the voting power of all of the then
outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal
this Article NINTH, Article FIFTH, Article SIXTH, Article SEVENTH
or Article EIGHTH.
The Certificate of Incorporation of PI Delaware, as amended herein, shall
continue to be the Certificate of Incorporation of PI Delaware as the surviving
Corporation without change or amendment until further amended in accordance with
the provisions thereof and applicable laws. The Bylaws of PI Delaware, in
effect on the Effective Date, shall continue to be the Bylaws of PI Delaware as
the surviving Corporation without change or amendment until further amended in
accordance with the provisions thereof and applicable laws.
3. Directors and Officers. The directors and officers of PI California
----------------------
shall become the directors and officers of PI Delaware upon the Effective Date
and any committee of the Board of Directors of PI California shall become the
members of such committees for PI Delaware.
20
4. Succession. On the Effective Date, PI Delaware shall succeed to PI
----------
California in the manner of and as more fully set forth in Section 259 of the
General Corporation Law of the State of Delaware.
5. Further Assurances. From time to time, as and when required by PI
------------------
Delaware or by its successors and assigns, there shall be executed and delivered
on behalf of PI California such deeds and other instruments, and there shall be
taken or caused to be taken by it such further and other action, as shall be
appropriate or necessary in order to vest, perfect or confirm, of record or
otherwise, in PI Delaware the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of PI California, and otherwise to carry out the purposes of this
Merger Agreement and the officers and directors of PI Delaware are fully
authorized in the name and on behalf of PI California or otherwise to take any
and all such action and to execute and deliver any and all such deeds and other
instruments.
6. Stock of PI California.
----------------------
a. Common Stock. Upon the Effective Date, by virtue of the Merger
------------
and without any action on the part of the holder thereof, each share of PI
California Common Stock outstanding immediately prior thereto shall be changed
and converted into one fully paid and nonassessable share of PI Delaware Common
Stock.
b. Preferred Stock. Upon the Effective Date, by virtue of the
---------------
Merger and without any action on the part of the holder thereof, each share of
each series of PI California Preferred Stock outstanding immediately prior
thereto shall be changed and converted into one fully paid and nonassessable
share of PI Delaware Preferred Stock of an equivalent series.
7. Stock Certificates. On and after the Effective Date, all of the
------------------
outstanding certificates which prior to that time represented shares of PI
California stock shall be deemed for all purposes to evidence ownership of and
to represent the shares of PI Delaware stock into which the shares of PI
California stock represented by such certificates have been converted as herein
provided. The registered owner on the books and records of PI Delaware or its
transfer agent of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to PI Delaware or its transfer agent, have and be entitled to exercise any
voting and other rights with respect to and to receive any dividend and other
distributions upon the shares of PI Delaware stock evidenced by such outstanding
certificate as above provided.
8. Options and Warrants. Upon the Effective Date, each outstanding
--------------------
option, warrant or other right to purchase shares of PI California stock,
including those options granted under the 1988 Stock Option Plan, the 1997 Stock
Option Plan and the 1997 Outside Directors Stock Option Plan (the "Option
Plans") of PI California, shall be converted into and become an option, warrant,
or right to purchase the identical number of shares of PI Delaware stock at a
price per share equal to the exercise price of the option, warrant or right to
purchase PI California stock, and upon the same terms and subject to the same
conditions as set forth in the Option Plans and other agreements entered into by
PI California pertaining to such options, warrants, or rights. A number of
shares of PI Delaware stock shall be reserved for purposes of such options,
warrants,
21
and rights equal to the number of shares of PI California stock so reserved as
of the Effective Date. As of the Effective Date, PI Delaware shall assume all
obligations of PI California under agreements pertaining to such options,
warrants, and rights, including the Option Plans, and the outstanding options,
warrants, or other rights, or portions thereof, granted pursuant thereto.
9. Other Employee Benefit Plans. As of the Effective Date, PI Delaware
----------------------------
hereby assumes all obligations of PI California under any and all employee
benefit plans in effect as of said date or with respect to which employee rights
or accrued benefits are outstanding as of said date, including but not limited
to the 1997 Employee Stock Purchase Plan. A number of shares of PI Delaware
stock shall be reserved for purposes of such plans equal to the number of shares
of PI California stock so reserved as of the Effective Date. As of the
Effective Date, PI Delaware shall assume all obligations of PI California under
agreements pertaining to such plans, and the outstanding rights granted pursuant
thereto.
10. Outstanding Common Stock of PI Delaware. Forthwith upon the Effective
---------------------------------------
Date, the One Hundred (100) shares of PI Delaware Common Stock presently issued
and outstanding in the name of PI California shall be canceled and retired and
resume the status of authorized and unissued shares of PI Delaware Common Stock,
and no shares of PI Delaware Common Stock or other securities of PI Delaware
shall be issued in respect thereof.
11. Covenants of PI Delaware. PI Delaware covenants and agrees that it
------------------------
will, on or before the Effective Date:
a. Qualify to do business as a foreign corporation in the State of
California, and in all other states in which PI California is so qualified and
in which the failure so to qualify would have a material adverse impact on the
business or financial condition of PI Delaware. In connection therewith, PI
Delaware shall irrevocably appoint an agent for service of process as required
under the provisions of Section 2105 of the California Corporations Code and
under applicable provisions of state law in other states in which qualification
is required hereunder.
b. File any and all documents with the California Franchise Tax
Board necessary to the assumption by PI Delaware of all of the franchise tax
liabilities of PI California.
12. Amendment. At any time before or after approval and adoption by the
---------
stockholders of PI California, this Merger Agreement may be amended in any
manner as may be determined in the judgment of the respective Boards of
Directors of PI Delaware and PI California to be necessary, desirable or
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purposes and intent of this Merger Agreement.
13. Abandonment. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either PI California or PI Delaware or both, notwithstanding
approval of this Merger Agreement by the sole stockholder of PI Delaware and the
stockholders of PI California.
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14. Counterparts. In order to facilitate the filing and recording of this
------------
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by resolution of the Board of Directors of PI California and PI Delaware, is
hereby executed on behalf of each of said two corporations by their respective
officers thereunto duly authorized.
POWER INTEGRATIONS DELAWARE
CORPORATION, a Delaware corporation
By: ________________________________
Xxxxxx X. Xxxxxxx, President
POWER INTEGRATIONS, INC., a California
corporation
By: ________________________________
Xxxxxx X. Xxxxxxx, President
23
CERTIFICATE OF SECRETARY
OF
POWER INTEGRATIONS DELAWARE CORPORATION
(a Delaware corporation)
I, Xxxxxx Xxxxxxx, the Secretary of Power Integrations Delaware
Corporation, a Delaware corporation (the "Corporation"), hereby certify that the
Agreement and Plan of Merger to which this Certificate is attached was duly
signed on behalf of the Corporation by its President under the corporate seal of
the Corporation and was duly approved and adopted by a unanimous vote of the
outstanding stock entitled to vote thereon by written consent of the sole
stockholder of the Corporation dated ____________, 1997.
Executed effective on the ____________ day of _________, 1997.
____________________________________
Xxxxxx X. Xxxxxxx
24
CERTIFICATE OF APPROVAL OF
AGREEMENT AND PLAN OF MERGER OF
POWER INTEGRATIONS, INC.
(a California corporation)
Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Power Integrations, Inc., a California corporation (the
"Corporation").
2. This Certificate is attached to the Agreement and Plan of Merger dated
as of ____________, 1997, providing for the merger of the Corporation with and
into a Delaware corporation.
3. The Agreement and Plan of Merger in the form attached hereto (the
"Merger Agreement") was approved by the Board of Directors of the Corporation at
a meeting duly noticed and held on September __, 1997.
4. The total number of outstanding shares of the Corporation entitled to
vote on the merger was ____________ shares of Common Stock, 7,900,000 shares of
Series A Preferred Stock, 7,489,000 shares of Series B Preferred Stock,
11,170,400 shares of Series C Preferred Stock, 3,200,000 shares of Series D
Preferred Stock, 7,013,396 shares of Series E Preferred Stock and 9,091,000
shares of Series F Preferred Stock.
5. The principal terms of the Merger Agreement were approved by an
affirmative vote which exceeded the vote required, such vote being a majority of
the total number of outstanding shares of Common Stock and a majority of the
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock, voting separately as a class.
Dated: ____________, 1997.
___________________________________
Xxxxxx X. Xxxxxxx, President
____________________________________
Xxxxxx X. Xxxxxxx, Secretary
25
The undersigned, Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx, President and
Secretary, respectively, of Power Integrations, Inc., a California corporation,
declare under penalty of perjury under the laws of the State of California that
the matters set forth in this Certificate are true and correct of their own
knowledge.
Executed at San Jose, California, on ____________, 1997.
____________________________________
Xxxxxx X. Xxxxxxx, President
____________________________________
Xxxxxx X. Xxxxxxx, Secretary
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