EXHIBIT 4.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. A-1 Number of Shares 30,000
Series A Preferred Stock
StarRidge Networks, Inc.
Void after September 30, 2003
1. Issuance. This Warrant is issued to Lighthouse Capital Partners II,
L.P. by StarRidge Networks, Inc., a Delaware corporation (hereinafter with its
successors called the "Company").
2. Purchase Price; Number of Shares. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "Shares"): at a price per share of
$1.00 (the "Purchase Price"), 30,000 fully paid and nonassessable shares of
Series A Preferred Stock, $.0001 par value, of the Company (the "Preferred
Stock"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons on whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company,
with the net issue election notice annexed hereto duly executed, at the
principal office of the Company. Thereupon, the Company shall issue to the
Holder such number of fully paid and nonassessable shares of Preferred Stock as
is computed using the following formula:
X = Y(A-B)
------
where: X = the number of shares of Preferred Stock to be issued to the
Holder pursuant to this Section 4.
Y = the number of shares of Preferred Stock covered by this Warrant
in respect of which the net issue election is made pursuant to
this Section 4.
A = the fair market value of one share of Preferred Stock, as
determined in good faith by the Board, as at the time the net
issue election is made pursuant to this Section 4.
B = the Purchase Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 4.
5. Partial Exercise. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. Fractional Shares. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant as an entirety, the Holder would, except as provided in this
Section 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay the fair market value of such fractional share.
7. Expiration Date; Automatic Exercise. This Warrant shall expire at the
close of business on September 30, 2003, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of Section 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence or pursuant to
Section 11.
8. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $.0001 par
value, of the Company (the "Common Stock"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes (other than taxes on Holders income),
liens and charges with respect to the issuance thereof.
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9. Stock Splits and Dividends. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. Adjustments for Diluting Issuances. The antidilution rights
applicable to the Preferred Stock and the Common Stock of the Company are set
forth in the Restated Certificate of Incorporation, as amended from time to time
(the "Articles"), a true and complete copy in its current form which is attached
hereto as Exhibit A. Such rights shall not be restated, amended or modified in
any manner which effects the Holder differently than the holders of Series A
Preferred without such Holder's prior written consent. The Company shall
promptly provide the Holder hereof with any restatement, amendment or
modification to the Articles promptly after the same has been made.
11. Mergers and Reclassifications. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this Section 11, the term "Reorganization" shall include without limitation any
reclassification, capital reorganization or change of the Preferred Stock (other
than as a result of a subdivision, combination or stock dividend provided for in
Section 9 hereof), or any consolidation of the Company with, or merger of the
Company into, another corporation or other business organization (other than a
merger in which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding Preferred Stock), or
any sale or conveyance to another corporation or other business organization of
all or substantially all of the assets of the Company.
Notwithstanding the term of this Warrant fixed pursuant to Section 7 above
and the provisions of this Section 11, the right to purchase Preferred Stock as
granted herein shall expire, to the extent not previously exercised, immediately
upon the closing of a merger or consolidation
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of the Company with or into another corporation when the Company is not the
surviving corporation (other than a merger or consolidation for the principal
purpose of changing the domicile of the Company), or the sale of all or
substantially all of the Company's properties and assets to any other person, in
each case where the shareholders of the Company immediately prior to such
merger, consolidation or sale of assets own (directly or indirectly) less than
50% of the voting securities of the surviving entity or purchaser of assets in
such transaction (collectively, a "Merger"), provided, that the Holder realizes
a value per share for the Warrant equal to or greater than two times the
Purchase Price per share (as adjusted pursuant to this Warrant) (the "Minimum
Value").
The Company shall notify the Holder, in accordance with Section 13 below,
of any proposed Merger, and if the Company fails to deliver such notice, then
notwithstanding anything to the contrary in this Warrant, the rights to purchase
the Company's Preferred Stock (or the shares of stock and other securities and
property receivable upon such Merger by a holder of Preferred Stock (the "Other
Consideration")) shall not expire until the later of (i) the closing of the
Merger or (ii) ten (10) business days after actual receipt by Holder of such
notice; provided however, that notwithstanding the foregoing in no event shall
the right to purchase Preferred Stock (or Other Consideration) under this
Warrant expire under this Section 11 unless the Holder receives written notice
of the proposed Merger at least five (5) business days prior to the closing of
such Merger and the Holder realizes at least the Minimum Value. If the closing
of the Merger does not take place after such notice to the Holder, the Company
shall promptly notify the Holder that such proposed transaction has been
terminated, and the Holder may rescind any exercise of its purchase rights
promptly after such notice of termination of the proposed transaction if the
exercise of the Warrant occurred after the Company notified the Holder that the
Merger was proposed, or if the exercise was otherwise precipitated by such
proposed Merger. In the event of such rescission, the Warrant will continue to
be exercisable on the same terms and conditions contained herein.
12. Certificate of Adjustment. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the Company, or
sale or conveyance of all or substantially all of its assets; or
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(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) days prior to the date specified in such notice on which any such action is
to be taken.
14. Representations, Warranties and Covenants. This Warrant is issued and
delivered by the Company and accepted by the Holder on the basis of the
following representations, warranties and covenants made by the Company:
A. The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms except as limited by applicable bankruptcy, insolvency, fraudulent
conveyance and other laws affecting the enforcement of creditors' rights and
remedies generally and the availability of equitable remedies may be limited.
B. The shares of Preferred Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
C. The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Company's Articles or by-laws, or any law, statute, regulation, rule, judgment
or order applicable to the Company, (ii) violate, contravene or result in a
breach or default under any material contract, agreement or instrument to which
the Company is a party or by which the Company or any of its assets are bound or
(iii) require the consent or approval of or the filing of any notice or
registration with any person or entity, except for blue sky filings that will be
filed in a timely manner.
D. So long as this Warrant has not terminated, Holder shall be
entitled to receive such financial and other information as the Holder would be
entitled to receive under the Series A Preferred Stock Purchase Agreement if
Holder were a holder of that number of shares issuable upon full exercise of
this Warrant.
E. As of the date hereof, the authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock, of which 10,980,000
shares are issued and outstanding and 5,780,000 shares are reserved for issuance
upon the exercise of this Warrant and the conversion of the Preferred Stock, and
(ii) 6,000,000 shares of Series A Preferred Stock, of which 5,750,000 are issued
and outstanding shares and 30,000 shares are reserved for issuance upon the
exercise of this Warrant. Attached hereto as Exhibit B is a capitalization
table summarizing the capitalization of the Company, including, without
limitation, the current Conversion Price of the Series A Preferred Stock.
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15. Registration Rights. The Company grants to the Holder registration
rights contained in Sections 1.2, 1.3 and 1.12 of the Company's Investor Rights
Agreement dated as of June 6, 1996 (the "Registration Rights Agreement"), so
that (i) the shares of Common Stock issuable upon conversion of the shares of
Preferred Stock issuable upon exercise of this Warrant shall be "Registrable
Securities," and (ii) the Holder shall be a "Holder," for all purposes of such
Registration Rights Agreement, including, without limitation, the right of first
offer in Section 2.4 of the Registration Rights Agreement.
16. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder.
17. Representations and Covenants of the Holder. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its acceptance
hereof the Holder hereby confirms:
A. Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Holder's rights contained herein
will be acquired for investment and not with a view to the sale or distribution
of any part thereof, and the Holder has no present intention of selling or
engaging in any public distribution of the same except pursuant to a
registration or exemption.
B. Accredited Investor. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
C. Private Issue. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein is not
registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuance contemplated by this Warrant will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 17.
D. Financial Risk. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
18. Notices, Transfers, Etc.
A. Any notice or written communication required or permitted to be
given to the Holder may be given by certified mail or delivered to the Holder at
the address most recently provided by the Holder to the Company.
B. Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder, to a non-
competitor of the Company, with respect to any or all of the shares purchasable
hereunder. Upon surrender of this Warrant to the
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Company, together with the assignment notice annexed hereto duly executed, for
transfer of this Warrant as an entirety by the Holder, the Company shall issue a
new warrant of the same denomination to the assignee. Upon surrender of this
Warrant to the Company, together with the assignment hereof properly endorsed,
by the Holder for transfer with respect to a portion of the shares of Preferred
Stock purchasable hereunder, the Company shall issue a new warrant to the
assignee, in such denomination as shall be requested by the Holder hereof, and
shall issue to such Holder a new warrant covering the number of shares in
respect of which this Warrant shall not have been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit and/or bond of the Holder or
other evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant.
19. No Impairment. The Company will not, by amendment of its Articles or
through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
20. Governing Law. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
21. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
22. Business Days. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
23. Qualifying Public Offering. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Company's Articles in effect immediately prior to such offering, then, effective
upon such conversion, this Warrant shall change from the right to purchase
shares of Preferred Stock to the right to purchase shares of Common Stock, and
the Holder shall thereupon have the right to purchase, at a total price equal to
that payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common
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Stock, and in such event appropriate provisions shall be made with respect to
the rights and interest of the Holder to the end that the provisions hereof
(including, without limitation, the provisions for the adjustment of the
Purchase Price and of the number of shares purchasable upon exercise of this
Warrant and the provisions relating to the net issue election) shall thereafter
be applicable to any shares of Common Stock deliverable upon the exercise
hereof.
THIS SPACE IS INTENTIONALLY BLANK
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24. Value. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: October 9, 1996 STARRIDGE NETWORKS, INC.
[CORPORATE SEAL] By: /s/ Xxxxx X. Xxxxxxx, Xx.
-------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------
Title: President and CEO
----------------------------
Attest:
/s/ Xxxxx X. Xxxx III
_____________________________________________
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P., its general partner
By: LIGHTHOUSE CAPITAL
PARTNERS, INC., its general partner
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxxx
----------------------------------
Title: Managing Director
---------------------------------
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Subscription
To:___________________________________ Date:____________________________
The undersigned hereby subscribes for _____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below. The
undersigned hereby reconfirms the representations and warranties of Section 17
of the Preferred Stock Purchase Warrant.
_____________________________________
Signature
_____________________________________
Name for Registration
_____________________________________
Mailing Address
Net Issue Election Notice
To:___________________________________ Date_____________________________
The undersigned hereby elects under Section 4 to surrender the right to
purchase _____________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below. The
undersigned hereby reconfirms the representations and warranties of Section 17
of the Preferred Stock Purchase Warrant.
_____________________________________
Signature
_____________________________________
Name for Registration
_____________________________________
Mailing Address
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Assignment
For value received ____________________________________ hereby sells,
assigns and transfers unto _____________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint _________
_______________________ its attorney to transfer the within Warrant on the books
of the within named Company with full power of substitution on the premises.
Dated:_________________________
___________________________________
In the Presence of:
_______________________________
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Exhibit A
Restated Certificate of Incorporation
See attached pages.
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State of Delaware
Office of the Secretary of State
______________________
I, XXXXXX X. XXXXX, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"STARRIDGE NETWORKS, INC.", FILED IN THIS OFFICE ON THE EIGHTH DAY OF OCTOBER,
A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Xxxxxx X. Xxxxx
____________________________________________
Xxxxxx X. Xxxxx, Secretary of State
AUTHENTICATION: 8139916
DATE: 10-09-96
RESTATED CERTIFICATE OF INCORPORATION
OF
STARRIDGE NETWORKS, INC.
a Delaware Corporation
The undersigned, Xxxxx X. Xxxxxxx, Xx. and Xxxxx X. Xxxx III, hereby
certify that:
ONE: They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of said corporation.
TWO: The Certificate of Incorporation of said corporation was originally
filed on May 22, 1996.
THREE: That the Certificate of Incorporation of this corporation be
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is StarRidge Networks, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of Xxx Xxxxxx, Xxxxxxxx 00000.
The name of this corporation's registered agent at such address is Corporation
Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which this corporation is authorized to issue is Thirty-Six
Million (36,000,000) shares of capital stock.
B. Of such authorized shares, Thirty Million (30,000,000) shares shall be
designated "Common Stock," and have a par value of $.0001 per share.
C. Of such authorized shares, Six Million (6,000,000) shares shall be
designated "Series A Preferred Stock," and shall have a par value of $.0001 per
share. The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock, are as set forth below in this Article
IV.
1. Dividend Provisions.
-------------------
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock pursuant to an event causing the Conversion Price of the
Series A Preferred Stock to be adjusted pursuant to Section 3(d) hereof) on the
Common Stock of this corporation, at the rate of $0.07 per share (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) per annum, payable when, as and if declared by the
Board of Directors. Such dividends shall be non-cumulative.
(b) After payment of the dividend preference referred to above,
outstanding shares of Series A Preferred Stock shall participate with shares of
Common Stock as to any additional declaration or payment of any dividend
(payable other than in Common Stock or other securities and rights convertible
into or entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock including pursuant to an event causing the
Conversion Price of the Series A Preferred Stock to be adjusted pursuant to
Section 3(d) hereof), with the outstanding shares of Series A Preferred Stock
participating as if converted into Common Stock.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (i) $1.00 (the "Original Series A Issue Price") for
each outstanding share of Series A Preferred Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares), plus an amount equal to declared but unpaid dividends on such
shares. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of this corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, any remaining assets shall be distributed
ratably among the holders of the Common Stock.
(c) A consolidation, merger, sale, lease or other disposition of
all or substantially all of the Company's assets shall be deemed to be a
liquidation,
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dissolution or winding up of the Company for the purposes of the liquidation
preference contemplated by this Section 2.
3. Conversion. The holders of the Series A Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
----------------
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share (the "Issue Date") at the office of this
corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price by the Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price per share for shares of
Series A Preferred Stock shall be the Original Series A Issue Price; provided,
however, that the Conversion Price for the Series A Preferred Stock shall be
subject to adjustment as set forth in this Section 3.
(b) Automatic Conversion. Each share of Series A Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such Series A Preferred Stock immediately upon
the earliest of (i) the closing of a firm commitment underwritten public
offering of the Common Stock of this corporation pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended (the "Act")
having aggregate gross proceeds not less than $10,000,000, or (ii) the date
specified by written consent or agreement of the holders of a majority of the
then outstanding shares of Series A Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to voluntarily convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to this corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. This corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. In the event of an
automatic conversion pursuant to Sections 3(b), the outstanding shares of Series
A Preferred Stock shall be converted automatically without any further action by
the holder of such shares and whether or not the certificates representing such
shares are surrendered to the corporation or its transfer agent, and provided
further, that the corporation shall not be
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obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion, unless the certificates evidencing such shares
of Series A Preferred Stock are delivered to the corporation or its transfer
agent as provided herein. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Act, as
aforesaid, the conversion may, at the option of any holder tendering Series A
Preferred Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock upon conversion of the Series
A Preferred Stock shall not be deemed to have converted such Series A Preferred
Stock until immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments. The Conversion Price of the
----------------------------
Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) In the event this corporation should at any time or
from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase of
the aggregate number of shares of Common Stock outstanding and those issuable
with respect to such Common Stock Equivalents.
(ii) If the number of shares of Common Stock outstanding is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price for the
Series A Preferred Stock shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of Series A shall be
decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(d)(i), then, in
each such case for the purpose of this subsection 3(e), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of this corporation into which their shares of
-4-
Series A Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of this corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) the holders of the Series A Preferred Stock, respectively, shall
thereafter be entitled to receive upon conversion of the Series A Preferred
Stock the number of shares of stock or other securities or property of this
corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of the Series A
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series A Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(g) No Impairment. This corporation will not, by amendment of
-------------
this Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
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 this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 3,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth
-5-
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect, and (C) 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 a share of Series A Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
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 the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holders of such Series A Preferred Stock, this corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to this Restated Certificate of Incorporation, as it may be
amended or restated from time to time.
(k) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given five (5) days after having been deposited in the United States
mail, postage prepaid, return receipt requested, and addressed to each holder of
record at his address appearing on the books of this corporation, with written
verification of receipt.
4. Redemption.
----------
(a) This corporation shall redeem, from any source of funds
legally available therefor, the Series A Preferred Stock in four annual
installments beginning on June 30, 2003, and continuing thereafter on each June
30 until and including June 30, 2006, (each a "Series A Redemption Date"),
whereupon the remaining Series A Preferred Stock outstanding shall be redeemed.
The corporation shall effect such redemptions on the applicable Series A
Redemption Dates by paying in cash in exchange for the shares of Series A
Preferred Stock to be redeemed a sum equal to $1.00
-6-
per share of Series A Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all declared but unpaid
dividends on such shares (the "Redemption Price"). The number of shares of
Series A Preferred Stock that the corporation shall be required under this
Section 4(a) to redeem on any one Series A Redemption Date shall be equal to the
amount determined by dividing (i) the aggregate number of shares of Series A
Preferred Stock outstanding immediately prior to the Series A Redemption Date by
(ii) the number of remaining Series A Redemption Dates (including the Redemption
Date to which such calculation applies).
Any redemption effected pursuant to this Section 4(a) shall be
made on a pro-rata basis among the holders of the Series A Preferred Stock in
proportion to the shares of Series A Preferred Stock then held by them.
(b) At least 30 but no more than 60 days prior to each
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock to
be redeemed, at the address last shown on the records of the corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to the corporation, in the manner and at the place
designated, his certificate or certificates representing the shares to be
redeemed (the "Redemption Notice"). Except as provided in Section 4(d), on or
after the Redemption Date, each holder of a Series A Preferred Stock to be
redeemed shall surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
cancelled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(c) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Preferred Stock designated for redemption in the Redemption
Notice as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed based upon their holdings of Series A
Preferred Stock. The shares of Series A Preferred Stock not redeemed shall
remain outstanding and
-7-
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the corporation are legally available for
the redemption of shares of Series A Preferred Stock such funds will immediately
be used to redeem the balance of the shares which the corporation has become
obliged to redeem on any Redemption Date, but which it has not redeemed.
(d) On or prior to each Redemption Date, the corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock
designated for redemption in the Redemption Notice and not yet redeemed with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date upon surrender of their share certificates. As of the date of
such deposit (even if prior to the Redemption Date), the deposit shall
constitute full payment of the shares to their holders, and from and after the
date of the deposit the shares so called for redemption shall be redeemed and
shall be deemed to be no longer outstanding, and the holders thereof shall cease
to be stockholders with respect to such shares and shall have no rights with
respect thereto except the rights to receive from the bank or trust corporation
payment of the Redemption Price of the shares, without interest, upon surrender
of their certificates therefor, and the right to convert such shares as provided
in Section 3 hereof. Such instructions shall also provide that any moneys
deposited by the corporation pursuant to this Section 4(d) for the redemption of
shares thereafter converted into shares of the corporation's Common Stock
pursuant to Section 3 hereof prior to the Redemption Date shall be returned to
the corporation forthwith upon such conversion. The balance of any moneys
deposited by the corporation pursuant to this Section 4(d) remaining unclaimed
at the expiration of two (2) years following the Redemption Date shall
thereafter be returned to the corporation upon its request expressed in a
resolution of its Board of Directors.
5. Voting Rights. The holder of each share of Series A Preferred
-------------
Stock shall have the right to one vote for each share of Common Stock into which
such Series A Preferred Stock could be converted immediately after the close of
business on the record date fixed for a meeting or the effective date of a
written consent, 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, and shall be entitled, notwithstanding any provision hereof, to
notice of any stockholders' meeting in accordance with the Bylaws of this
corporation as amended or restated from time to time, 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. Fractional votes shall
not, however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregating all shares of Common Stock into which shares
of Series A Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
-8-
6. Protective Provisions.
---------------------
(a) So long as any shares of Series A Preferred Stock are
outstanding, this corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of a majority of
the then outstanding shares of Series A Preferred Stock:
(i) other than as set forth in Article IV.C.4 hereof,
purchase, redeem or otherwise acquire any shares of Series A Preferred Stock;
(ii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Preferred Stock with regard to redemption, voting,
dividends or upon liquidation;
(iii) except for repurchases of Common Stock from
directors, employees or consultants, take any action that results in the
redemption or repurchase of Common Stock in an amount greater than $25,000 in
any twelve (12) month period;
(iv) declare or pay dividends on or make any distribution
on account of Common Stock;
(v) make or permit any subsidiary to issue or sell stock
or other securities to any other corporation, partnership or other entity unless
such entity is wholly-owned by this corporation;
(vi) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporations (other than a wholly-owned subsidiary corporation)
or effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(vii) liquidate, dissolve or wind up the corporation;
(viii) adopt, alter, amend or repeal any provision of the
corporation's certificate of incorporation; or
(ix) increase the size of the Board of Directors.
(b) So long as at least 1,000,000 shares of Series A Preferred
Stock are outstanding, at any annual or special meeting called, or any other
action taken, for the purpose of electing directors to the Company's Board of
Directors:
(i) the holders of Series A Preferred, voting as a
separate class, shall be entitled to elect one (1) member of the Company's Board
of Directors and
-9-
to remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director;
(ii) the holders of Common Stock, voting as a separate
class, shall be entitled to elect one (1) member of the Company's Board of
Directors and to remove from office such director and to fill any vacancy caused
by the resignation, death or removal of such director; and
(iii) the holders of Common Stock and the holders of Series
A Preferred Stock, voting together as a class, shall be entitled to elect the
remaining members of the Board of Directors.
7. Status of Converted Stock. Any shares of Series A Preferred Stock
-------------------------
acquired by this corporation by redemption, purchase, conversion or otherwise
shall be canceled and shall not be issuable by this corporation. This Restated
Certificate of Incorporation shall be appropriately amended to effect the
corresponding reduction in this corporation's authorized capital stock.
8. Common Stock. Subject to all of the rights of Preferred Stock as
------------
expressly provided herein or by law, the Common Stock shall possess all such
rights and privileges as are afforded to capital stock by applicable law in the
absence of any express grant of rights or privileges in this Restated
Certificate of Incorporation.
ARTICLE V
To the fullest extent permitted by the General Corporation Law of Delaware
as the same exists or as may hereafter be amended, 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.
The corporation shall indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that,
he, his testator or intestate is or was a director or officer of this
corporation or any predecessor of this corporation or serves or served at any
other enterprise as a director, officer or employee at the request of this
corporation or any predecessor to this corporation.
Neither any amendment nor repeal of this Article V, nor the adoption of any
provision of this Restated Certificate of Incorporation inconsistent with this
Article V, shall eliminate or reduce the effect of this Article V, in respect of
any matter occurring, or any cause of action, suit, claim or proceeding that,
but for this Article V would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
-10-
ARTICLE VI
This corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of this corporation.
ARTICLE VIII
The number of directors which constitutes the Board of Directors of this
corporation shall be as specified in the Bylaws of this corporation. At each
annual meeting of stockholders, directors of this corporation shall be elected
to hold office until the expiration of the term for which they are elected and
until their successors have been duly elected and qualified, except that if any
such election shall not be so held, such election shall take place at a
stockholders' meeting called and held in accordance with the General Corporation
Law of Delaware.
ARTICLE IX
Elections of directors need not be by written ballot unless the Bylaws of
this corporation shall so provide.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE XI
This corporation is to have perpetual existence.
* * *
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FOUR: The amendment and restatement of the Restated Certificate of
Incorporation herein certified was duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned have executed this Restated Certificate
of Incorporation on October 4, 1996.
/s/ Xxxxx X. Xxxxxxx, Xx.
________________________________
Xxxxx X. Xxxxxxx, Xx.,
Chief Executive Officer
/s/ Xxxxx X. Xxxx III
________________________________
Xxxxx X. Xxxx III, Secretary
-12-
EXHIBIT B
Capitalization Table
See attached pages.
-00-
XXXXXXXXX XXXXXXXX, INC.
CAPITALIZATION TABLE
October 7, 1996
Preferred Stock:
Series A Preferred Stock Authorized: 6,000,000
Series A Preferred Stock Outstanding: 5,750,000
Series A Preferred Stock Warrant to Lighthouse: 30,000
Common Stock:
Common Stock Authorized: 30,000,000
Common Stock Outstanding: 10,980,000
Common Stock Reserved for Pool: 10,270,000
Total:
Authorized: 36,000,000
Outstanding or Reserved: 27,030,000
-29-
