Exhibit 10.71
AMENDMENT NO. 1 TO AMENDED AND RESTATED SERIES A CONVERTIBLE REDEEMABLE STOCK
PURCHASE AGREEMENT
THIS AMENDMENT NO. 1, dated as of February 23, 1999 ("Amendment No.
1"), to Amended and Restated Series A Convertible Redeemable Stock Purchase
Agreement dated as of November 20, 1998 (the "Stock Purchase Agreement"), is
entered into by and among Intellisys Group, Inc., a Delaware corporation (the
"Company"), and Weston Presidio Capital III, L.P. and WPC Entrepreneur Fund,
L.P. (collectively, the "Investor"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Stock Purchase
Agreement.
WHEREAS, the Company and the Investor previously entered into the
Stock Purchase Agreement; and
WHEREAS, the Company and the Investor desire to amend the Stock
Purchase Agreement for the purposes of modifying Section 1.1(b), Schedule A and
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Exhibit A thereto.
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NOW, THEREFORE, in consideration of the foregoing premises and mutual
agreements set forth in this Amendment No. 1, the parties hereby amend the Stock
Purchase Agreement as follows:
1. Section 1.1(b) of the Stock Purchase Agreement is hereby amended
in its entirety to read as follows:
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at each Closing, and the Company agrees to sell
and issue to the Investor at each Closing, the number of shares of the
Company's Series A Convertible Redeemable Preferred Stock (the "Series A
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Preferred Stock") set forth opposite each Investor's name on Schedule A
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hereto for the purchase price of $6.9629 per share.
2. Schedule A of the Stock Purchase Agreement is hereby amended to
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read in full as set forth in Schedule A hereto.
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3. Investor previously paid the Company $10,000,000.41 of the total
consideration specified in Schedule A of the Stock Purchase Agreement.
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Concurrently herewith, Investor is delivering to the Company by check or wire
transfer the amount of $500,052.79 in payment of the balance of the total
consideration specified in Schedule A to the Stock Purchase Agreement, as
amended hereby.
4. Exhibit A to the Stock Purchase Agreement is hereby amended to
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read in full as set forth in Exhibit A hereto.
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5. The undersigned Weston Presidio Capital III, L.P. and WPC
Entrepreneur Fund, L.P., hereby represent and warrant to the Company that they
are the owners of all of the Series A Preferred Stock (as that term is defined
in the Stock Purchase Agreement) and hereby consent to the amendment of the
Certificate of Designation (as defined in the Stock Purchase Agreement) to read
in full as set forth in the Amended Certificate of Designation of Series A
Convertible Redeemable Preferred Stock attached hereto as Exhibit A.
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6. This Amendment No. 1 shall be effective as of the date hereof and,
except as expressly set forth herein, the Stock Purchase Agreement shall remain
in full force and effect and be otherwise unaffected hereby.
7. This Amendment No. 1 may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all such counterparts shall together constitute one and the same document.
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the date first written above.
INTELLISYS GROUP, INC.
/s/ Xxxxxx X. Xxxxxx
________________________________________
By: Don Esters
Its: Chairman and Chief Executive Officer
Address: 0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attn: Don Esters
WESTON PRESIDIO CAPITAL III, L.P.,
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, LLC,
its General Partner
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxxx
WPC ENTREPRENEUR FUND, L.P.,
By: WESTON PRESIDIO CAPITAL MANAGEMENT
III, LLC, its General Partner
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxxx
SIGNATURE XXXX TO AMENDMENT NO. 1 TO AMENDED STOCK PURCHASE AGREEMENT
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SCHEDULE A
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LIST OF INVESTORS
First Closing No. of Shares Purchase Price
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Weston Presidio Capital III, L.P. 459,413 $ 3,198,846.78
WPC Entrepreneur Fund, L.P. 22,869 159,234.56
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482,282 $ 3,358,081.34
Subsequent Closing
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Weston Presidio Capital III, L.P. 977,082 $ 6,803,324.26
WPC Entrepreneur Fund, L.P. 48,636 338,647.60
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1,025,718 $ 7,141,971.86
Total
Consideration: $10,500,053.20
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EXHIBIT A
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AMENDED CERTIFICATE OF DESIGNATION
of
SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK
of
INTELLISYS GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Intellisys Group, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in its Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors (the
"Board of Directors") has adopted the following resolution creating a series of
its Preferred Stock, par value $.01 per share, designated as Series A
Convertible Redeemable Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $.01 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
1. Designation and Number.
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A class of Preferred Stock, designated Series A Convertible Redeemable
Preferred Stock (the "Series A Preferred Stock"), is hereby established. The
number of shares of Series A Preferred Stock shall be 1,508,000. The rights,
preferences, privileges and restrictions granted to and imposed upon the Series
A Preferred Stock are as set forth below.
2. Dividend Provisions.
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The holders of shares of Series A Preferred Stock shall be entitled to
receive dividends, when and if declared by the Board of Directors, out of any
assets legally available therefor, in an amount equal to that paid on a share of
Common Stock into which such shares of Series A Preferred Stock could then be
converted. Dividends, if paid or declared, must be paid on all outstanding
shares of Series A Preferred Stock. No dividends shall be paid on any Common
Stock of the corporation during any fiscal year unless dividends in an amount
equal to or greater than any dividends to be paid on any Common Stock shall have
been or are concurrently paid on each share of the Series A Preferred Stock.
3. Liquidation Preference.
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a. Series A Preferred Stock. In the event of any liquidation,
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dissolution or winding up of this corporation, either
voluntary or
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involuntary, a holder of Series A Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the
holders of any other series of Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per
share equal to the greater of (A) the sum of (i) $6.9629 for
each outstanding share of Series A Preferred Stock (the
"Original Series A Issue Price") as adjusted to reflect any
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share split, share dividend, combination, reclassification
or similar event involving the Series A Preferred Stock,
plus any declared but unpaid dividends on such share, and
(ii) an amount equal to a ten percent (10%) annual rate of
return compounded annually, from the date of issuance of
such stock through the date on which such payment is made,
on the Original Series A Issue Price or (B) the value such
holder would receive if each outstanding share of the Series
A Preferred Stock had been converted into Common Stock
pursuant to Section 4 hereof immediately prior to such
liquidation, dissolution or winding up of this corporation
(treating the Series A Preferred Stock for purposes of this
Section as being fully convertible notwithstanding any
provision to the contrary contained herein). If upon the
occurrence of such event, the assets and funds to be
distributed among the holders of the Series A Preferred
Stock are insufficient to permit the payment to such holders
of the full aforesaid preferential amounts, then the entire
assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders
of the Series A Preferred Stock in proportion to the amount
of such stock then owned by each such holder.
b. No Further Right or Claim. After the completion of the
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distribution required by subparagraph (a) of this Section 3,
the holders of shares of Series A Preferred Stock will have
no right or claim to any of the remaining assets of this
corporation.
c. Property Distribution. Whenever the distribution provided
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for in this Section 3 shall be payable in property other
than cash, its value will be deemed its fair market value,
as determined in good faith by the Board of Directors of
this corporation. Any securities shall be valued as
follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed
to be the average of the closing prices of the
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securities on such exchange over the thirty-day
period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing
bid or sale prices (whichever is applicable) over
the thirty-day period ending three (3) days prior
to the closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as
mutually determined in good faith by the Board of
Directors of this corporation and the holders of
at least a majority of the voting power of all
then outstanding shares of Series A Preferred
Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free
marketability (other than restrictions arising solely
by virtue of a shareholder's status as an affiliate or
former affiliate) shall be to make an appropriate
discount from the market value determined as above in
(i)(A), (B) or (C) to reflect the approximate fair
market value thereof, as mutually determined in good
faith by the Board of Directors of this corporation and
the holders of at least a majority of the voting power
of all then outstanding shares of such Series A
Preferred Stock.
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d. Acquisitions. Any acquisition of the corporation by means
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of merger or other form of corporate reorganization in which
outstanding shares of the corporation are exchanged for
securities or other consideration issued by the acquiring
corporation or its subsidiary (including, without
limitation, any reorganization, merger or consolidation but,
excluding any merger effected exclusively for the purpose of
changing the domicile of the corporation), or a sale,
conveyance or disposition of all or substantially all of the
assets of this corporation or the effectuation by the
corporation or its stockholders of a transaction or series
of transactions in which more than 50% of the voting power
of the corporation is acquired by another person or entity
(collectively, an "Acquisition"), shall be deemed to be a
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liquidation, dissolution or winding up of the corporation
within the meaning of this Section 3.
4. Conversion. The holders of the Series A Preferred Stock shall
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have conversion rights as follows (the "Conversion Rights"):
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a. Right to Convert.
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(i) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at
any time or from time to time after the first
anniversary of the date of initial issuance of shares
of Series A Preferred Stock and on or prior to the
fifth day prior to any Redemption Date (as defined in
Section 5(a)), at the office of this corporation or
any transfer agent for the Series A Preferred Stock,
into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing
the Original Series A Issue Price for such share by
the Conversion Price at the time in effect for such
share; provided, however, that if the Company's
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registration statement (registration no. 333-65845)
covering shares of Common Stock to be issued in an
underwritten public offering (the "Registration") is
withdrawn by the Company from filing with the
Securities and Exchange Commission, the shares of
Series A Preferred Stock shall, immediately upon
filing of the notice of such withdrawal with the
Securities and Exchange Commission, become
convertible, at the option of the holder thereof, into
shares of Common Stock pursuant to the provisions of
this Section 4(a)(i); and provided, further, that the
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Conversion Price for the Series A Preferred Stock
shall be subject to adjustment as set forth in
subsection 4(c). The initial Conversion Price is the
Original Series A Issue Price.
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(ii) 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
immediately upon the consummation of the corporation's
sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a
registration statement on Form S-1 (or any successor
form) under the Securities Act of 1933, as amended,
where (x) the aggregate price at which such shares are
sold to the public (excluding shares sold by Don
Esters or persons related to or affiliated with him)
is not less than $20,000,000, and (y) the price per
share to the public is at least two times the Original
Series A Issue Price (as adjusted to reflect any stock
split, dividend, combination, reclassification or
similar event occurring after the date hereof). If the
consummation of the foregoing public offering occurs
prior to the first anniversary of the date of initial
issuance of shares of Series A Preferred Stock and the
Registration is consummated, the conversion shall take
place automatically on the first anniversary of the
date of initial issuance of the Series A Preferred
Stock at the Conversion Price in effect at the time of
such anniversary.
(iii) Should the corporation consummate a sale of the
corporation's Common Stock pursuant to an initial
underwritten public offering, but such offering fails
to meet the requirements of subsection (ii) above, the
rights and privileges of the holders of Series A
Preferred Stock shall remain and each share of Series
A Preferred Stock shall not be automatically converted
into shares of Common Stock as described in subsection
(ii) above. If (A) the corporation subsequently
consummates a sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a
registration statement filed under the Securities Act
of 1933, as amended, in which (x) the aggregate market
value of the publicly-traded shares of the
corporation's Common Stock following completion of the
offering is greater than $35.0 million, and (y) the
per share price to the public of the Common Stock sold
in the offering is at least two times the Original
Series A Issue Price (as adjusted to reflect any stock
split, dividend, combination, reclassification or
similar event occurring after the date hereof), and
(B) the Series A Preferred Stock is then convertible
into Common Stock pursuant to the provisions of
Section 4(a)(i) hereof, then each share of Series A
Preferred Stock shall automatically be converted upon
the consummation of such offering, into
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shares of Common Stock at the Conversion Price at the
time in effect for such series.
(iv) The Series A Preferred Stock shall also automatically
be converted into shares of Common Stock at the
Conversion Price at the time in effect, if (x) the
publicly-traded shares of the corporation's Common
Stock have had a closing trading price on the market
on which such shares are listed (the "Trading Market")
of not less than two times the Original Series A Issue
Price (as adjusted to reflect any stock split,
dividend, combination, reclassification or similar
event occurring after the date hereof) for thirty (30)
of the forty (40) most recent trading days on the
Trading Market, (y) the Average Daily Market Value (as
defined below) of the shares of Common Stock trading
during the forty (40) day period described above
exceeds $750,000 and (z) the Series A Preferred Stock
is then convertible into Common Stock pursuant to the
provisions of Section 4(a)(i) hereof. For purposes of
this subsection (iv), the three week period prior to
or after an underwritten secondary public offering
(such offering not otherwise satisfying the
requirements of subsection (iii) above) shall not be
included in the calculation of the forty (40) day
period described herein. The Average Daily Market
Value shall be an amount determined by dividing the
sum of the Daily Market Values for the trading days in
the 40 trading day period by 40. The Daily Market
Value on any day shall be determined by multiplying
the number of shares of Common Stock sold during that
day by the closing sale price on the Trading Market
for a share of Common Stock on that day.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to 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 by mail,
postage prepaid, 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
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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. If
the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities
Act of 1933, as amended, the conversion may, at the option
of any holder tendering Series A Preferred Stock for
conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive
the Common Stock issuable upon such 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.
c. Conversion Price Adjustments of Series A Preferred Stock.
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(i) The Conversion Price of the Series A Preferred Stock
shall be subject to adjustment from time to time as
follows:
(A) If the corporation shall issue, at any time after
the Purchase Date (as defined below), any
Additional Stock (as defined below) for
consideration per share less than the Conversion
Price with respect to the Series A Preferred Stock
in effect immediately prior to such issuance, then
the Conversion Price in effect immediately prior
to each such issuance shall forthwith be reduced
concurrently with such issue to the price
(calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction,
the numerator of which shall be the number of
shares of Common Stock outstanding immediately
prior to such issue (treating as outstanding for
such purposes the Common Stock issuable upon
conversion of the Series A Preferred Stock) plus
the number of shares of Common Stock which the
aggregate consideration received by the
corporation for the total number of shares of
Additional Stock (as defined hereafter) so issued
would purchase at such Conversion Price, and the
denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to
such issue (treating as outstanding for such
purposes the Common Stock issuable upon
conversion of the
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Series A Preferred Stock) plus the number of
shares of Additional Stock so issued.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an
amount less than one cent per share, provided that
any adjustments which are not required to be made
by reason of this sentence shall be carried
forward and shall be either taken into account in
any subsequent adjustment made prior to 3 years
from the date of the event giving rise to the
adjustment being carried forward, or shall be made
at the end of 3 years from the date of the event
giving rise to the adjustment being carried
forward. Except to the limited extent provided
for in subsections (E)(3) and (E)(4), no
adjustment of such Conversion Price pursuant to
this subsection 4(c)(i) shall have the effect of
increasing the Conversion Price above the
Conversion Price in effect immediately prior to
such adjustment.
(C) In the case of the issuance of Additional Stock
for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting
any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this
corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(D) In the case of the issuance of the Additional
Stock for a consideration in whole or in part
other than cash, the consideration other than cash
shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors
irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase
or rights to subscribe for Additional Stock,
securities by their terms convertible into or
exchangeable for Additional Stock or options to
purchase or rights to subscribe for such
convertible or exchangeable securities, the
following provisions shall apply for all purposes
of this subsection 4(c)(i) and subsection
4(c)(ii):
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1. The aggregate maximum number of shares of Additional Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Additional Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
subsections 4(c)(i)(C) and (c)(i)(D)), if any, received by the
corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights for the
Additional Stock covered thereby.
2. The aggregate maximum number of shares of Additional Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration,
if any, received by the corporation for any such securities and
related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(c)(i)(C) and
(c)(i)(D)).
3. In the event of any change in the number of shares of
Additional Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
other than a change resulting from the antidilution provisions
thereof, the applicable Conversion Price of the Series A Preferred
Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual
issuance of Additional Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or
exchange of such securities.
4. Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of
only the number of shares of Additional Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
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5. The number of shares of Additional Stock deemed issued and
the consideration deemed paid therefor pursuant to subsections
4(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subsection 4(c)(i)(E)(3) or (4).
(F) Notwithstanding any of the provisions of this
Section 4(c), the Conversion Price of the Series A
Preferred Stock shall never be adjusted to a price
below eighty percent (80%) of the Original Series
A Issue Price.
(ii) "Additional Stock" shall mean any shares of Common
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Stock issued (or deemed to have been issued pursuant to
subsection 4(c)(i)(E)), by this corporation after the
issuance date of the Series A Preferred Stock (the
"Purchase Date") other than (x) shares of Common Stock
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issued or issuable upon conversion of shares of the
Series A Preferred Stock or pursuant to a transaction
described in subsection 4(c)(iii) or (iv) hereof, (y)
up to 400,000 shares of the corporation's Common Stock
(which number shall be appropriately adjusted to
reflect any stock split, dividend, combination,
reclassification or similar event occurring after the
date hereof) reserved for issuance under the
corporation's stock plans approved by the corporation's
Board of Directors, and (z) up to 457,058 shares of
Common Stock (which number shall be appropriately
adjusted to reflect any stock split, dividend,
combination, reclassification or similar event
occurring after the date hereof) issued upon exercise
of outstanding warrants and stock options.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date 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
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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
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subdivision if no record date is fixed), the applicable
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 of shares
of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the
number of shares issuable with respect to Common Stock
Equivalents determined from time to time in the manner
provided for deemed issuances in subsection 4(c)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock,
then, following the record date of such combination,
the applicable Conversion Price for the Preferred
Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion
of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
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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 4(c)(iii) other than in connection with the
redemption of any such security provided for in Section 5 or
in connection with Excluded Redemptions as such term is
defined in Section 5, then, in each such case for the
purpose of this subsection 4(d), 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 the corporation into
which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the
determination of the holders of Common Stock of the
corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
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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 4)
provision shall be made so that the holders of the Series A
Preferred Stock 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 the
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Company 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 4 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 4 (including
adjustment of the applicable 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.
f. No Impairment. This corporation will not, by amendment of
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its 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 4 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.
g. No Fractional Shares and Certificate as to Adjustments.
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(i) No fractional shares shall be issued upon 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 determined by rounding to the nearest whole
share. Such conversion shall be determined on the
basis of the total number of shares of the Series A
Preferred Stock the holder is at the time converting
into Common Stock and such rounding shall apply to 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 any of the Series A
Preferred Stock, pursuant to this Section 4, 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
the 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 the Series
A Preferred Stock, furnish or cause to be furnished to
such holder a
16
like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price 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
h. 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 the Series A Preferred Stock, at least 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.
i. 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
holder 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.
j. Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A
Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of
this corporation.
5. Redemption.
----------
a. Series A Preferred Stock. At any time beginning November
------------------------
10, 2003, but subject to the provisions of Section 5(b)
below, if the
17
Series A Preferred Stock has not been converted to Common
Stock pursuant to Section 4(a)(ii), (iii) or (iv) on or
before November 10, 2003, upon election (a "Redemption
----------
Election") by the holders of 100% of the then outstanding
--------
Series A Preferred Stock, the corporation shall redeem each
share of Series A Preferred Stock by paying for every share
of such Series A Preferred Stock, the Redemption Price (as
defined below). On the 30th day after the date of the
Redemption Election (the "Initial Redemption Date"), but
-----------------------
subject to Section 5(b) below, the corporation shall redeem
one-sixteenth of the outstanding shares of Series A
Preferred Stock by paying to each holder of shares of Series
A Preferred Stock, a per share sum equal to the Original
Series A Issue Price of such shares of Series A Preferred
Stock plus an amount equal to a ten percent (10%) annual
rate of return (the "ARR") compounded annually from the date
of issuance of such shares through the date on which such
shares are redeemed (the "Redemption Price"). Following the
----------------
Initial Redemption Date and payment, the remaining shares of
Series A Preferred Stock shall be redeemed in fifteen (15)
equal quarterly installments, at the Redemption Price,
commencing on the 90th day following the Initial Redemption
Date and then on every 90th day thereafter, unless such day
falls on a day which is not a business day in San Francisco,
California, in which case the applicable redemption
installment shall be due and payable on the next business
day (each such date, and the Initial Redemption Date, are
sometimes referred to herein as a "Redemption Date").
---------------
b. The Redemption Price with respect to all shares of Series A
Preferred Stock shall be paid before any redemption payment
is made in respect of any other capital stock of the
corporation (or any securities convertible into or
exercisable or exchangeable into capital stock of the
corporation), other than Excluded Redemptions. "Excluded
--------
Redemptions" shall mean any repurchases of the corporation's
-----------
capital stock pursuant to employee stock plans approved by
the corporation's Board of Directors.
c. At least fifteen (15) days prior to the Initial Redemption
Date, written notice shall be mailed by the corporation,
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 at the address last shown on the records of this
corporation for such holder or given by the holder to this
corporation for the purpose of notice or if no such address
appears or is given at the place where the principal
executive office of this corporation is located, notifying
such holder of the redemption to be effected, specifying the
Redemption Date, the
18
Redemption Price, the place at which payments may be
obtained and the date on which such holder's Conversion
Rights as to such shares terminate and calling upon such
holder to surrender to this corporation, in the manner and
at the place designated, his certificate or certificates
representing the shares to be redeemed (the "Redemption
----------
Notice"). Each holder of Series A Preferred Stock being
------
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.
d. 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 such shares of the Series A
Preferred Stock that are to be redeemed on the Redemption
Date (except the right to receive the Redemption Price)
shall cease with respect to such shares, and such shares
shall not thereafter be transferred on the books of this
corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the corporation legally
available for redemption of shares of the Series A Preferred
Stock on any Redemption Date, are insufficient to pay in
full the cash portion of the Redemption Price for 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 Series A
Preferred Stock first, ratably among the holders of those
shares to be redeemed based on the number of such shares
required to be redeemed that are then outstanding. The
shares of Series A Preferred Stock not redeemed shall remain
outstanding and 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 obligated to redeem on any
Redemption Date, but which it has not redeemed.
e. Three (3) days prior to the Redemption Date, this
corporation shall deposit the cash Redemption Price of all
outstanding shares of Series A Preferred Stock designated
for redemption in the Redemption Notice, and not yet
redeemed or converted, with a bank or trust company having
aggregate capital and surplus in excess of $50,000,000 as a
trust fund for the benefit of the
19
respective holders of the shares designated for redemption
and not yet redeemed. Simultaneously, this corporation shall
deposit irrevocable instruction and authority to such bank
or trust company to publish the notice of redemption thereof
(or to complete such publication if theretofore commenced)
and to pay, on and after the date fixed for redemption, the
Redemption Price of the Series A Preferred Stock to be
redeemed to the holders thereof upon surrender of their
certificates. Any moneys deposited by the corporation
pursuant to this subsection (e) remaining unclaimed at the
expiration of six months following the applicable Redemption
Date, shall thereafter be returned to the corporation upon
its request expressed in a resolution of its Board of
Directors; provided, however, that the corporation's
obligations to pay the Redemption Price shall continue.
f. Notwithstanding the provisions of this Section 5, in the
event that the Series A Preferred Stock has been redeemed in
accordance herewith but the holders thereof have not
received on each Redemption Date the full Redemption Price
payable thereon and if there shall at the time be at least
four directors of this corporation in office, the holders of
a majority of the outstanding Series A Preferred Stock shall
be entitled to elect one additional individual to the Board
of Directors (the "Additional Director"), who will be
elected for a one-year term (or until the Additional
Director's right to hold office terminates as provided
herein, whichever occurs earlier), at a special meeting
called by the holders of at least 25% of the outstanding
shares of Series A Preferred Stock or, if the request for a
special meeting is received by this corporation less than 90
days before the date fixed for the next annual or special
meeting of stockholders of this corporation, at the next
annual or special meeting, and at each subsequent annual
meeting until the payment in full of the due and unpaid
portion of the Redemption Price. When the due and unpaid
portion of the Redemption Price has been paid in full, the
holders of the Series A Preferred Stock shall be divested of
the right to elect the Additional Director and the term of
office of the Additional Director shall terminate. In
addition to the foregoing, in the event the Series A
Preferred Stock has been redeemed in accordance herewith but
the holders have not received on a Redemption Date the full
Redemption Price payable on that date, then the ARR used to
compute the portion of the Redemption Price which has not
been paid when due (but not any other portion of the
Redemption Price paid when due) shall be increased by two
percent (2%) and shall be increased by an additional two
percent (2%) on the last day of the first 90-day period
following the respective Redemption Date if the portion of
20
the Redemption Price which had not been paid when due
remains unpaid on that date and by an additional one percent
(1%) on the last day of the second 90-day period following
the respective Redemption Date if the portion of the
Redemption Price which had not been paid when due remains
unpaid on that date.
g. This corporation will not, by amendment of its 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 5 and in taking all action as may be necessary
or appropriate to protect the redemption rights of the
holders of the Preferred Stock against impairment.
6. Voting Rights.
-------------
a. 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 share of Series A Preferred Stock could be
converted at the close of business on the record date for
such vote, 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 shareholders' meeting in accordance with the bylaws
of this corporation, and shall be entitled to vote, together
with holders of Common Stock as a single class and not as a
separate class, 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 into which shares of Series A
Preferred Stock held by such holder could be converted)
shall be rounded to the nearest whole number (with one-half
being rounded upward).
b. Except as set forth in Section 5(f) hereof, the Board of
Directors of the corporation shall consist of not less than
five (5) nor more than seven (7) members. Except as set
forth in Section 5(f) hereof, the holders of the Series A
Preferred Stock shall have the right to elect one director
voting as a separate class. Except as set forth in Section
5(f) hereof, the remaining directors shall be elected by the
holders of the outstanding shares of the Common Stock and
the Series A Preferred Stock, voting together as a class.
Election of
21
directors need not be by written ballot, unless the bylaws
of the corporation shall so provide. Any director who is
elected to the Board of Directors may be removed from the
Board only upon the request of the holders who elected such
director by vote of at least the number of shares required
to elect such director. In the event that a director so
elected resigns, is removed from, or otherwise ceases to
serve on, the Board of Directors of the corporation, for
whatever reason (other than as a result of the cessation of
the term of office of the Additional Director as provided in
Section 5(f) hereof), the vacancy shall be filled, in
accordance with applicable law, with an individual elected
by the holders who initially elected such director, as
described above.
7. Protective Provisions.
---------------------
This corporation shall not, without first obtaining the approval of
the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, voting together as a single class:
(i) increase or decrease the authorized number of shares
of Series A Preferred Stock, issue any additional
shares of Series A Preferred Stock after the initial
issuance thereof or alter the rights, preferences or
privileges of the Series A Preferred Stock;
(ii) authorize or designate any new class or series of
stock or any other securities convertible into equity
securities of this corporation, in either case ranking
senior to the Series A Preferred Stock in rights of
redemption, liquidation preference, voting or
dividends or increase the authorized or designated
number of any such existing class or series;
(iii) effect an Acquisition;
(iv) declare or pay any dividends on the corporation's
capital stock or repurchase any of the corporation's
capital stock (except under employee stock plans
approved by the corporation's Board of Directors or as
permitted herein);
(v) amend its Certificate of Incorporation or Bylaws in a
manner that adversely affects the voting powers,
preferences or other rights or privileges of the
Series A Preferred Stock (provided that any amendment
to this Amended Certificate of Designation shall
require the consent of the holders of a majority of
the outstanding Series A Preferred Stock);
22
(vi) make or permit any subsidiary of the corporation to
make loans or advances in an aggregate amount
outstanding in excess of $250,000 (excluding a
$100,000 loan currently outstanding to Xxxxxx Group,
L.L.C. and a $60,000 loan currently outstanding to
Xxxxxx Communications, Inc.), except loans or
advances to employees in the ordinary course of
business as part of compensation or travel related
advances;
(vii) own, or permit any subsidiary of the corporation to
own, any stock or other securities of any person in
which Xxxxxx Xxxxxx, any officer or director of the
corporation or any person affiliated or related to
Xxxxxx Xxxxxx or such persons holds, directly or
indirectly, any interest;
(viii) pay any cash compensation to the six most highly
compensated employees of the corporation in excess of
an aggregate of $1,500,000 per year (with such amount
increased by 10% annually commencing on January 1,
2000);
(ix) approve or make capital expenditures in any year in
excess of $2,500,000 with such amount increased each
fiscal year by the same percentage that the
corporation's revenues increase in such fiscal year
as compared to the corporation's revenues for the
prior fiscal year;
(x) incur indebtedness, enter into any loan agreement or
otherwise pledge, hypothecate or mortgage the assets
or stock of the corporation in any manner, or
otherwise guarantee any indebtedness of any kind,
other than indebtedness of up to (aa) 5.0 times the
Pro Forma Trailing 12-Month EBITDA (as defined below)
through December 31, 1998, and (bb) 4.0 times the Pro
Forma Trailing 12-Month EBITDA subsequent to December
31, 1998 (for purposes of the foregoing, the term
"Pro Forma Trailing 12-Month EBITDA" shall mean the
Company's earnings before interest, taxes,
depreciation and amortization for the 12-month period
ended on the last day of the most recently completed
month, as adjusted to include throughout the 12-month
period the earnings before interest, taxes,
depreciation and amortization for that 12-month
period of any business acquired by the Company); or
23
(xi) do any act or thing which would result in taxation of
the holders of shares of the Series A Preferred Stock
under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal
Revenue Code as hereafter from time to time amended).
8. Status of Converted or Redeemed Stock. In the event any shares of
-------------------------------------
Series A Preferred Stock shall be converted or redeemed pursuant to Section 4 or
5 hereof or otherwise, the shares of Series A Preferred Stock so converted or
redeemed shall be cancelled and shall not be issuable by the corporation, and
this corporation.
24
IN WITNESS WHEREOF, the corporation has caused this Amended
Certificate of Designation of Series A Convertible Redeemable Preferred Stock to
be duly executed by its Vice President, Operations and Secretary this _________
day of February, 1999.
INTELLISYS GROUP, INC.
By:__________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President, Operations and Secretary
25
