Exhibit 10.11
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
SATELLITE ONLINE SOLUTIONS CORPORATION
WARRANT TO PURCHASE 5,500 SHARES
OF SERIES D PREFERRED STOCK
THIS CERTIFIES THAT, for value received, FIRSTCORP and its assignees
are entitled to subscribe for and purchase 5,500 shares of the fully paid and
nonassessable Series D Preferred Stock (as adjusted pursuant to Section 4
hereof, the "Shares") of ZAPME! CORPORATION, a California corporation (the
"Company"), at the price of $5.00 per share (such price and such other price
as shall result, from time to time, from the adjustments specified in Section
4 hereof is herein referred to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used
herein, (a) the term "Series D Preferred" shall mean the Company's presently
authorized Series D Preferred Stock, and any stock into or for which such
Series D Preferred Stock may hereafter be converted or exchanged and (b) the
term "Date of Grant" shall mean November 30, 1998.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the earlier of (i) seven (7) years after the Date of
Grant or (ii) the closing of the Company's initial public offering of its
Common Stock effected pursuant to a Registration Statement on Form S-1 (or
any successor form thereto) filed under the Securities Act of 1933, as
amended (the "Act").
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as EXHIBIT A
duly completed and executed) at the principal office of the Company and by
the payment to the Company, by certified or bank check, or by wire transfer
to an account designated by the Company (a "Wire Transfer") of an amount
equal to the then applicable Warrant Price multiplied by the number of Shares
then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as EXHIBIT A-1 duly completed and
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the
Company either by certified or bank check or by Wire Transfer from the
proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased or (c) exercise of
the Conversion Right provided for in Section 10.2 hereof. The person or
persons in whose name(s) any certificate(s) representing shares of Series D
Preferred shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the shares represented thereby (and such shares
shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which
this Warrant is exercised. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in
any event within thirty (30) days after such exercise and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such thirty-day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will,
upon issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series D
Preferred to provide for the exercise of the rights represented by this
Warrant and a sufficient number of shares of its Common Stock to provide for
the conversion of the Series D Preferred into Common Stock.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of securities of the class issuable upon exercise
of this Warrant (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is the acquiring and the surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable
upon exercise of this Warrant) or in case of any sale of all or substantially
all of the assets of the Company, the Company, or such successor or
purchasing corporation, as the case may be, shall duly execute and deliver to
the holder of this Warrant a new Warrant (in form and substance satisfactory
to the holder of this Warrant), so that the holder of this Warrant shall have
the right to receive, at a total purchase price not to exceed that payable
upon the exercise of the unexercised portion of this Warrant, and in lieu of
the shares of Series D Preferred theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change or merger by a holder
of the number of shares of Series D Preferred then purchasable under this
Warrant. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this subparagraph (a) shall similarly apply
to successive reclassifications, changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Series D Preferred, the
Warrant Price shall be proportionately decreased in the case of a subdivision
or increased in the case of a combination, effective at the close of business
on the date the subdivision or combination becomes effective.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to Series D Preferred payable in Series D
Preferred, or (ii) make any other distribution with respect to Series D
Preferred (except any distribution specifically provided for in Sections 4(a)
and 4(b)), of Series D Preferred, then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Series D Preferred outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
shares of Series D Preferred outstanding immediately after such dividend or
distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment
in the Warrant Price, the number of Shares of Series D Preferred purchasable
hereunder shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Shares purchasable immediately prior to
such adjustment in the Warrant Price by a fraction, the numerator of which
shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to Section
4 hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Shares purchasable
hereunder after giving effect to such adjustment, and shall cause copies of
such certificate to be mailed (without regard to Section 13 hereof, by first
class mail, postage prepaid) to the holder of this Warrant. In addition,
whenever the conversion price or conversion ratio of the Series D Preferred
shall be adjusted, the Company shall make a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series D
Preferred after giving effect to such adjustment, and shall cause copies of
such certificate to be mailed (without regard to Section 13 hereof, by first
class mail, postage prepaid) to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Series D Preferred
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series D Preferred on the date of exercise as
reasonably determined in good faith by the Company's Board of Directors.
7. COMPLIANCE WITH ACT; DISPOSITION OF WARRANTOR SHARES OF
SERIES C PREFERRED.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series D
Preferred to be issued upon exercise hereof and any Common Stock issued upon
conversion thereof are being acquired for investment and that such holder
will not offer, sell or otherwise dispose of this Warrant, or any shares of
Series D Preferred to be issued upon exercise hereof or any Common Stock
issued upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state securities
laws. Upon exercise of this Warrant, unless the Shares being acquired are
registered under the Act and any applicable state securities laws or an
exemption from such registration is available, the holder hereof shall
confirm in writing that
the shares of Series D Preferred so purchased (and any shares of Common Stock
issued upon conversion thereof) are being acquired for investment and not
with a view toward distribution or resale in violation of the Act and shall
confirm such other matters related thereto as may be reasonably requested by
the Company. This Warrant and all shares of Series D Preferred issued upon
exercise of this Warrant and all shares of Common Stock issued upon
conversion thereof (unless registered under the Act and any applicable state
securities laws) shall be stamped or imprinted with a legend in substantially
the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THE TO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT
UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance
of this Warrant, the holder specifically represents to the Company by
acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business
affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof in violation of the Act.
(2) The holder understands that this Warrant has
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
(3) The holder further understands that this
Warrant must be held indefinitely unless subsequently registered under the
Act and qualified under any applicable state securities laws, or unless
exemptions from registration and qualification are otherwise available. The
holder is aware of the provisions of Rule 144, promulgated under the Act.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Series D
Preferred acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or shares, the holder hereof agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, or other
evidence, if reasonably requested by the Company, to the effect that such
offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state
securities law then in effect) of this Warrant or such shares of Series D
Preferred or Common Stock and indicating whether or not under the Act
certificates for this Warrant or
such shares of Series D Preferred to be sold or otherwise disposed of require
any restrictive legend as to applicable restrictions on transferability in
order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion or Other evidence, if so
requested, the Company, as promptly as practicable but no later than twenty
(20) days after receipt of the written notice, shall notify such holder that
such holder may sell or otherwise dispose of this Warrant or such shares of
Series D Preferred or Common Stock, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this Section 7(b) that the opinion of counsel for the holder or other
evidence is not reasonably satisfactory to the Company, the Company shall so
notify the holder promptly with details thereof after such determination has
been made. Notwithstanding the foregoing, this Warrant or such shares of
Series D Preferred or Common Stock may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 or 144A under the
Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series D Preferred
thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear
a legend as to the applicable restrictions on transferability in order to
ensure compliance with such laws, unless in the aforesaid opinion of counsel
for the holder, such legend is not required in order to ensure compliance
with such laws. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(c) APPLICABILITY OF RESTRICTIONS. Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 7(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Series D Preferred or Common Stock
obtainable upon exercise thereof) or any part hereof (i) to a partner of the
holder if the holder is a partnership, (ii) to a partnership of which the
holder is a partner, or (iii) to any affiliate of the holder if the holder is
a corporation; PROVIDED, HOWEVER, in any such transfer, if applicable, the
transferee shall on the Company's request agree in writing to be bound by the
terms of this Warrant as if an original signatory hereto.
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Series D Preferred or any other securities of the Company which
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant
shall have been exercised and the Shares purchasable upon the exercise hereof
shall have become deliverable, as provided herein.
9. REGISTRATION RIGHTS. The Company hereby agrees to grant
piggyback registration rights to the holder of this Warrant pursuant to
Section 1.4 of the Amended and Restated Investors' Rights Agreement dated
September 29, 1998, by and among the Company and the Investors set forth on
Exhibit A thereto (the "Investors' Rights Agreement"), for any Common Stock
of the Company obtained upon conversion of the Series D Preferred. The
Company will add the holder of this Warrant as a party to the Investors'
Rights Agreement and the shares of Common Stock issued or issuable upon
conversion of the Series D Preferred issued pursuant to the exercise of this
Warrant shall be deemed "Registrable Securities" for purposes of Section 1.4
thereof.
10. ADDITIONAL RIGHTS.
10.1 MERGERS. The Company shall provide the holder of this Warrant
with at least five (5) business days' notice of the terms and conditions of
any of the following potential transactions: (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of.
10.2 RIGHT TO CONVERT WARRANT INTO STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting
the rights of the holder under the terms of this Warrant, the holder shall
have the right to convert this Warrant (the "Conversion Right") into shares
of Series D Preferred (or Common Stock if the Series D Preferred has been
automatically converted into Common Stock) as provided in this Section 10.2
at any time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to the number of shares subject to this Warrant (the
"Convened Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable
Series C Preferred (or Common Stock if the Series D Preferred has been
automatically convened into Common Stock) equal to the quotient obtained by
dividing the value of this Warrant on the Conversion Date (as defined in
subsection (b) hereof), which value shall be determined by subtracting (A)
the aggregate Warrant Price of the Converted Warrant Shares immediately prior
to the exercise of the Conversion Right from (B) the aggregate fair market
value of the Converted Warrant Shares issuable upon exercise of this Warrant
on the Conversion Date (as herein defined) by (Y) the fair market value of
one share of Series D Preferred (or Common Stock if the Series D Preferred
has been automatically converted into Common Stock) on the Conversion Date
(as herein defined).
Expressed as a formula, such conversion (assuming the Series D
Preferred has been automatically converted into Common Stock) shall be
computed as follows:
X = B - A
-------
Y
Where: X = the number of shares of Common Stock that may
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Convened
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair market value x
Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance
with the foregoing formula is other than a whole number, the Company shall
pay to the holder an amount in cash equal to the fair market value of the
resulting fractional share on the Conversion Date (as hereinafter defined).
For purposes of Section 9 of this Warrant, shares issued pursuant to the
Conversion Right shall be treated as if they were issued upon the exercise of
this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal
office of the Company together with a written statement specifying that the
holder thereby intends to exercise the Conversion Right and indicating the
number of shares subject to this Warrant which are being surrendered
(referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in
exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"), and, at the election of the holder hereof, may be made contingent
upon the closing of the sale of the Company's Common Stock to the public in a
public offering pursuant to a Registration Statement under the Act (a "Public
Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of
the shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30) days
following the Conversion Date. Any conversion from Series C Preferred to
Common Stock shall be in the ratio of one (1) share of Common Stock for each
share of Series D Preferred (as adjusted herein and in the Charter). On the
Date of Grant, each share of the Series D Preferred represented by this
Warrant is convertible into one share of Common Stock.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 10.2, "fair market value" of a share of Series D Preferred (or
Common Stock if the Series D Preferred has been automatically convened into
Common Stock) as of a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent upon a Public Offering, and if the Company's
Registration Statement relating to such Public Offering has
been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in
connection with and contingent upon a Public Offering, then the fair market
value shall be as determined in good faith by the Board of Directors of the
Company.
10.3 EXERCISE PRIOR TO EXPIRATION. To the extent this Warrant is
not previously exercised as to all of the Shares subject hereto, and if the
fair market value of one share of the Series D Preferred is greater than the
Warrant Price then in effect, this Warrant shall be deemed automatically
exercised pursuant to Section 10.2 above (even if not surrendered)
immediately before its expiration. For purposes of such automatic exercise,
the fair market value of one share of the Series D Preferred upon such
expiration shall be determined pursuant to Section 10.2(c). To the extent
this Warrant or any portion thereof is deemed automatically exercised
pursuant to this Section 10.3, the Company agrees to promptly notify the
holder hereof of the number of Shares, if any, the holder hereof is to
receive by reason of such automatic exercise.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable
in accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and the rules of law or
principles a equity governing specific performance, injunctive relief and
other equitable remedies;
(b) The Shares 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 non-assessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Series D Preferred and the holders thereof are
as set forth in the Company's Articles of Incorporation, as amended to the
Date of the Grant, a true and complete copy of which has been delivered to
the original holder of this Warrant and is attached hereto as EXHIBIT B;
(d) The shares of Common Stock issuable upon conversion
of the Shares have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof and of the
Company's Articles of Incorporation will be validly issued, fully paid and
nonassessable;
(e) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in accordance
with the terms hereof will not be, inconsistent with the Company's Articles
of Incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any
Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities
laws, which filings will be effected by the time required thereby; and
(f) There are no actions, suits, audits, investigations
or proceedings pending or, to the knowledge of the Company, threatened
against the Company in any court or before any governmental commission, board
or authority which, if adversely determined, will have a material adverse
effect on the ability of the Company to perform its obligations under this
Warrant.
12. MODIFICATION AND WAIVER. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is
sought.
13. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of
the obligations of the Company relating to the Series C Preferred issuable
upon the exercise or conversion of this Warrant shall survive the exercise,
conversion and termination of this Warrant and all of the covenants and
agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity satisfactory to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of California.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained
herein shall survive indefinitely until, by their respective terms, they are
no longer operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case
of a breach by a holder), may proceed to protect and enforce their or its
rights either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained
in this Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment
of its Articles of Incorporation or through any other means, avoid or seek to
avoid the observance or 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 of this Warrant against impairment.
21. SEVERABILITY. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity
or enforceability of such provision in any other jurisdiction, or affect any
other provision of this Warrant, which shall remain in full force and effect.
22. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Warrant, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other relief
to which it or they may be entitled.
[Remainder of Page Intentionally Left Blank]
23. ENTIRE AGREEMENT; MODIFICATION. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, and undertakings of the parties, whether oral or written,
with respect to such subject matter.
ZAPME! CORPORATION
By /s/ Xxxxx X. Xxxxx
--------------------------------
Title CFO & Secretary
-----------------------------
Address: 0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
EXHIBIT A
NOTICE OF EXERCISE
To: ZAPME! CORPORATION
1. The undersigned hereby:
/ / elects to purchase __________ shares of Series C
Preferred Stock of Satellite Online Solutions
Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
/ / elects to exercise its net issuance rights pursuant
to Section 10.2 of the attached Warrant with respect
to __________ Shares of Series C Preferred Stock.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
_______________________________
(Name)
_______________________________
_______________________________
(Address)
3. The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment and not with
a view to, or for resale in connection with the distribution thereof and
that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.
_______________________________
(Signature)
_______________
(Date)
EXHIBIT A-1
NOTICE OF EXERCISE
To: ZAPME! CORPORATION (the "Company")
1. Contingent upon and effective immediately prior to the
closing (the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S_____, filed _______________, 19____, the
undersigned hereby:
/ / elects to purchase __________ shares of Series C
Preferred Stock of the Company (or such lesser number
of shares as may be sold on behalf of the undersigned
at the Closing) pursuant to the terms of the attached
Warrant, or
/ / elects to exercise its net issuance rights pursuant
to Section 10.3 of the attached Warrant with respect
to __________ Shares of Series C Preferred Stock.
2. Please deliver to the custodian for the selling shareholders
a stock certificate representing such __________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $ __________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior
to the Closing.
_______________________________
(Signature)
_______________
(Date)
EXHIBIT B
Articles of Incorporation
STATE OF CALIFORNIA
SECRETARY OF STATE
I, XXXX XXXXX, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 13 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it
is full, true and correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California
this day of
Aug. 05 1998
--------------------------------------
/s/ Xxxx Xxxxx
Secretary of State
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RESTATED
ARTICLES OF INCORPORATION
OF
ZAPME! CORPORATION
Xxxxx X. Xxxxx and Xxxxx X. Xxxxx hereby certify that:
1. They are the President and Secretary, respectively, of ZapMe!
Corporation, a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read as follows:
ARTICLE I
The name of this corporation is ZapMe! Corporation.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the Corporations Code) through bylaws provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section
317 of the Corporations Code, subject only to the limits on such excess
indemnification set forth in Section 204 of the Corporations Code.
ARTICLE V
A. The corporation is authorized to issue two classes of shares, to
be designated respectively Common Stock ("Common") and Preferred Stock
("Preferred"). The total number of shares of Common the corporation shall
have authority to issue is 50,000,000 and the total number of shares of
Preferred the corporation shall have authority to issue is 12,857,671. The
par value of the Common shall be $0.01 per share, and the par value of the
Preferred shall be $0.01 per share.
The corporation from time to time in accordance with the laws of the
State of California shall increase the authorized amount of its Common if at
any time the number of shares of Common remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred.
The Preferred may be issued from time to time in one or more series. The
Board of Directors is hereby authorized to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption price or prices,
and the liquidation preferences of any wholly unissued series of Preferred,
and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of
any series subsequent to the issuance of shares of that series, but not below
the number of shares of such series then outstanding. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
B. The Preferred authorized by these Articles of Incorporation shall
be issued in series as set forth herein. The first series of Preferred shall
be designated Series A Preferred Stock ("Series A Preferred") and shall
consist of 9,097,671 authorized shares. The second series of Preferred shall
be designated Series B Preferred Stock ("Series B Preferred") and shall
consist of 660,000 authorized shares. The third series of Preferred shall be
designated Series C Preferred Stock ("Series C Preferred") and shall consist
of 600,000 authorized shares. The fourth series of Preferred Stock shall be
designated Series D Preferred Stock ("Series D Preferred") and shall consist
of 2,500,000 authorized shares. The shares of each series of Preferred have
the rights, preferences, privileges and restrictions set forth below.
SECTION 1. GENERAL DEFINITIONS. For purposes of this Article the
following definitions shall apply:
(a) "LIQUIDATION EVENT" shall be deemed to be occasioned by
and to include a liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, other than a liquidation, dissolution or
winding up effected in connection with a Merger Event.
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(b) "MERGER EVENT" shall be deemed to be occasioned by and
to include the consolidation or merger of the corporation with or into any
other corporation or the sale or other transfer in a single transaction or a
series of related transactions of all or substantially all of the assets of
the corporation.
(c) "PREFERRED LIQUIDATION AMOUNT" initially shall mean: (i)
$0.10016827 per share of Series A Preferred, (ii) $2.50 per share of Series B
Preferred, (iii) $5.00 per share of Series C Preferred, and (iv) $5.00 per
share of Series D Preferred, plus, in each case, an amount equal to all
declared and unpaid dividends. The Preferred Liquidation Amount of each
series of Preferred Stock shall be appropriately adjusted in each case for
stock splits, reverse stock splits, stock dividends, stock combinations,
recapitalizations, and similar events that are effected with respect to such
shares. The Preferred Liquidation Amount of the Series C Preferred shall be
subject to further adjustment from time to time upon the payment of PIK
Dividends pursuant to Section 2(b) hereof. The Preferred Liquidation Amount
of the Series C Preferred shall also be deemed to include an amount equal to
a prorated PIK Dividend pursuant to Section 2(b) hereof for the interim
period from the most recent Dividend Payment Date.
(d) "SUBSIDIARY" shall mean any corporation at least 50% of
whose outstanding voting shares shall at the time be owned by the corporation
or by one or more of such subsidiaries.
(e) "DIVIDEND PAYMENT DATE(S)" shall mean April 1, July 1,
October 1 and January 1 of each year.
(f) "JUNIOR PREFERRED" shall mean the Series A Preferred,
Series B Preferred, and Series D Preferred.
SECTION 2. DIVIDEND RIGHTS.
(a) PREFERENCE ON DIVIDENDS. The holders of Preferred shall
be entitled to receive, when, as and if declared by the Board of Directors of
the corporation, dividends prior and in preference to payment of any dividend
with respect to the Common (other than dividends payable solely in Common);
PROVIDED that the Cash Dividends or PIK Dividends paid to the holders of
Series C Preferred pursuant to paragraph (b) below shall be mandatory. No
dividend or distribution shall be declared or paid on any shares of Common
(other than dividends payable solely in Common) unless at the same time an
equivalent dividend or distribution is paid or declared and set aside for
payment on the Preferred (on an as converted to Common basis) and all accrued
but unpaid dividends on the Preferred have been paid. No dividend or
distribution shall be declared or paid on any shares of Junior Preferred
unless all accrued but unpaid dividends on the Series C Preferred have been
paid.
(b) MANDATORY DIVIDENDS FOR SERIES C PREFERRED. On each
Dividend Payment Date, the corporation shall pay, and the holders of shares
of Series C Preferred shall be entitled to receive, out of the assets of the
corporation legally available therefor, a dividend on each share of
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Series C Preferred at a rate per annum equal to ten percent (10%) of the
Preferred Liquidation Amount of such share (as may be increased from time to
time pursuant to this paragraph (b)), which amount (the "Dividend Amount")
may be paid to the holder of such share in cash (a "Cash Dividend"). In the
event the corporation does not pay a Cash Dividend on a Dividend Payment Date
with respect to any shares of Series C Preferred, the Preferred Liquidation
Value of each such share automatically shall be increased in an amount equal
to the Dividend Amount (such increase is referred to in this Article V as a
("PIK Dividend"), which increase shall be in lieu of the payment of a Cash
Dividend. The Board of Directors shall declare such dividends on each
Dividend Payment Date.
SECTION 3. LIQUIDATION PREFERENCE.
(a) PREFERRED STOCK PREFERENCE. Upon the occurrence of a
Liquidation Event, the holders of Preferred shall be entitled to receive, out
of the assets of the corporation available for distribution to its
shareholders, by reason of their ownership thereof (prior, and in preference,
to any distribution of any of the assets of the corporation to the holders of
the Common or any other capital stock which the corporation may issue), an
amount equal to the Preferred Liquidation Amount for each share of Preferred
then held by them. If, upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Preferred shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the holders of Series C Preferred shall be
entitled to receive, prior and in preference to any distribution of any of
the assets or surplus funds of the corporation to the holders of the Junior
Preferred and the Common by reason of their ownership thereof, their
Preferred Liquidation Amount per share together with accrued unpaid dividends
relating thereto (or, if sufficient funds are not available therefor, the
remaining assets and funds shall be distributed ratably among the holders of
Series C Preferred in proportion to their respective holdings) after which the
entire remaining assets and funds of the corporation legally available for
distribution, if any, shall be distributed ratably among the holders of the
Junior Preferred in proportion to the full aforesaid preferential amounts to
which each such holder is entitled; in no event in the case of a Liquidation
Event shall any payments or distributions be made to the holders of Junior
Preferred or any other capital stock of the corporation until the Preferred
Liquidation Amount has been received by the holders of Series C Preferred.
(b) PAYMENT TO COMMON. All of the preferential amounts to
be paid to the holders of the Preferred under Section 3(a) shall be paid or
set apart for payment prior to payment or setting apart for payment of any
amount for, or the distribution of any amounts to, the holders of any Common
in connection with such Liquidation Event. If the corporation has assets or
funds remaining after payment of the preferential amounts so payable to the
holders of the Preferred pursuant to Section 3(a), the remaining assets of
the corporation available for distribution to shareholders shall be
distributed among the holders of Common pro rata based on the number of
shares of Common held by each.
(c) VALUATION. For purposes of this Section 3, if the
distributions or consideration received by the shareholders of the
corporation is other than cash or publicly traded securities listed on an
exchange or transaction reporting system, its fair market value will be
determined in good faith by the Board of Directors of the corporation. In the
ease of publicly
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traded securities listed on an exchange, fair market value shall mean the
average last closing sale price as reported by such exchange or by a
consolidated transaction reporting system for the five trading-day period
immediately preceding the date such sale, merger, consolidation or other
reorganization is consummated. In the case of publicly traded securities not
listed on an exchange, fair market value shall mean the average last closing
bid price as reported by the National Association of Securities Dealers
Automatic Quotation System, Inc. or such successor or similar organization,
for the five trading-day period immediately preceding the date on which such
sale, merger, consolidation or other reorganization is consummated.
(d) RANK. The Series C Preferred shall rank senior in all
respects to the Junior Preferred and any future series of Preferred Stock.
The Junior Preferred shall be pari passu.
SECTION 4. CONVERSION. The holders of the Preferred shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Preferred shall be
convertible, at the option of the holder thereof, at any time after the date
of issuance of such share at the office of the corporation of any transfer
agent for the Preferred, into such number of fully paid and nonassessable
shares of Common, as is determined by dividing (i) the applicable Preferred
Liquidation Amount for each share of Preferred in effect at the time of
conversion, by (ii) the applicable Conversion Price (determined as
hereinafter provided) in effect at the time of conversion. The price at which
shares of Common shall be deliverable upon conversion (the "Conversion
Price") initially shall be $0.10016827 for each share of Series A Preferred,
$2.50 for each share of Series B Preferred, $5.00 for each share of Series C
Preferred, and $5.00 for each share of Series D Preferred in each case per
share of Common. Such Conversion Price shall be subject to adjustment as
hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Preferred
automatically shall be converted into shares of Common at the then effective
and applicable Conversion Price upon the earlier to occur of: (i) the closing
date of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, coveting the offer and sale of Common for the account of the
corporation to the public at an aggregate offering price of not less than
twenty five million dollars ($25,000,000) (before deducting underwriter's
discounts and commissions) at a share price to the public of at least $8 per
share (as adjusted for any stock split, combination, recapitalization or
similar event with respect to the Common) (hereinafter, a "Public Offering"),
and (ii) the date specified in a written consent signed by the holders of a
majority of the shares of Preferred then outstanding.
(c) MECHANICS OF CONVERSION. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of any
share of Preferred. If, upon conversion of all of the shares of Preferred
held by a registered holder which are being converted, except for the
provisions of this Section 4(c), the registered holder would be entitled to
receive a fractional share of Common, then an amount equal to such fractional
share multiplied by the then
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fair market value (as determined in good faith by the corporation's Board of
Directors) of a share of the corporation's Common shall be paid by the
corporation in cash to such registered holder. Before any holder of Preferred
shall be entitled to convert the same into shares of Common, the holder shall
surrender the certificate or certificates therefor, duly endorsed, at the
office of the corporation or of any transfer agent for the Preferred, and
shall give written notice to the corporation at such office that the holder
elects to convert the same. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred, a
certificate or certificates for the number of shares of Common to which the
holder shall be entitled as aforesaid and a check payable to the holder in
the amount of any cash amounts payable as the result of a conversion into
fractional shares of Common. 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 Preferred to be converted, or in the case of automatic
conversion as provided in Section 4(b)(i), on the closing date of the
offering, and the person or persons entitled to receive the shares of Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common on such date.
(d) ADJUSTED FOR SUBDIVISIONS AND COMBINATIONS. If the
corporation at any time or from time to time after the filing of these
Restated Articles of Incorporation effects a subdivision of the outstanding
Common, without a corresponding subdivision with respect to the Preferred,
the Conversion Price of each series of Preferred then in effect immediately
before that subdivision shall be proportionately decreased, and, conversely,
if the corporation at any time or from time to time combines the outstanding
shares of Common, without a corresponding combination with respect to the
Preferred, the Conversion Price of each series of preferred then in effect
immediately before the combination shall be proportionately increased. Any
adjustment of the Conversion Price of any series of Preferred under this
Section 4(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(e) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In
the event the corporation at any time or for time after the filing of these
Restated Articles of Incorporation makes, or fixes a record date for the
determination of holders of Common entitled to receive, a dividend or other
distribution payable in additional shares of Common or in options or other
convertible securities, without a corresponding dividend with respect to the
Preferred, then and in each such event the Conversion Price then in effect
for each series of Preferred shall be decreased as of the time of such
issuance or, in the event such a record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in
effect by a fraction (i) the numerator of which is the total number of shares
of Common issued and outstanding immediately prior to the time of such
issuance on the close of business on such record date, and (ii) the
denominator of which shall be the total number of shares of Common issued and
outstanding immediately prior to the time of such issuance on the close of
business on such record date PLUS the number of shares of Common issuable in
payment of such dividend or distribution; PROVIDED, HOWEVER, that if such
record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion
Price shall be recomputed accordingly as of the close of business on such
record date and thereafter the Conversion Price
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shall be adjusted pursuant to this Section 4(e) as of the time of actual
payment of such dividends or distributions.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS OR DISTRIBUTIONS. In the
event the corporation at any time or from time to time makes or fixes a
record date for the determination of holders of shares of Common entitled to
receive a dividend or other distribution payable in securities or other
property of the corporation (other than shares of Common or options or other
convertible securities and other than as otherwise adjusted in this Section
4) without a corresponding dividend or distribution with respect to the
Preferred, then, and in each such event, provision shall be made so that the
holders of shares of Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common receivable thereupon, the amount
of securities and other property of the corporation which they would have
received had their shares of Preferred been converted into shares of Common
on the date of such event and had they thereafter, during the period from the
date of such event to and including the date of conversion, retained such
securities and other property receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 4 with respect to the rights of the holders of shares of
Preferred.
(g) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the shares of Common issuable upon conversion of the
Preferred shall be changed into the same or a different number of shares of
any other class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of
shares, stock dividend, reorganization, merger, consolidation or sale of
assets as provided for elsewhere in this Section 4), then and in any such
event each holder of Preferred thereafter shall have the right to convert
such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other
change, by holders of the number of shares of Common into which such shares
of Preferred might have been converted immediately prior to such
recapitalization, reclassification or change, all subject to such further
adjustments applicable as specified herein.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time there is a capital reorganization
of the Common (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section
4) or a merger or consolidation of the corporation with or into another
corporation, or the sale of all or substantially all of the corporation's
properties and assets to any other person (except an event which is governed
under Section 3), then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the holders of the
Preferred thereafter shall be entitled to receive, upon conversion of the
Preferred, the number of shares of stock or other securities or property of
the corporation, or of such successor corporation resulting from such
reorganization, merger, consolidation or sale, to which a holder of Common
deliverable upon conversion would have been entitled on such capital
reorganization, merger, consolidation or sale. 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
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Preferred after the reorganization, merger, consolidation or sale to the end
that the provisions of this Section 4 (including adjustment of the Conversion
Price then in effect and number of shares issuable upon conversion of the
Preferred) shall be applicable after that event and be as nearly equivalent
to the provisions hereof as may be practicable. This Section 4(h) shall
similarly apply to successive reorganizations, mergers, consolidations and
sales.
(i) RESERVATION OF COMMON ISSUABLE UPON CONVERSION. The
corporation shall at all times reserve and keep available out of its
authorized but unissuable shares of Common solely for the purpose of
effecting the conversion of the shares of the Preferred such number of its
shares of Common as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred; and if at any time the
number of authorized but unissued shares of Common shall not be sufficient to
effect the conversion of all outstanding shares of the Preferred, in addition
to such other remedies as shall be available to the holder of such Preferred,
this corporation will take such corporate action as may, in the option of its
counsel, be necessary to increase its authorized but unissued shares of
Common to such number of shares of Common to such number of shares as shall
be sufficient for such purposes.
(j) NO IMPAIRMENT. The corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, 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 the
corporation, and will at all times in good faith assist in carrying out of
all provisions hereof, including without limitation 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 Preferred against
impairment, or dilution in accordance with the provisions hereof.
(k) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of any Conversion Price for any series of
Preferred pursuant to this Section 4, the 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 Preferred a certificate
executed by the corporation's president or chief financial officer setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The corporation shall, upon
the written request at any time of any holder of Preferred, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the conversion price for such series of
Preferred at such time in effect, and (iii) the number of share of Common
Stock which at the time would be received upon the conversion of such series
of Preferred.
SECTION 5. ADDITIONAL RIGHTS OF SERIES C PREFERRED
(a) REDEMPTION RIGHTS.
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(i) On August 27, 2000 (the "First Redemption Date"),
and on each six month anniversary of the First Redemption Date (the First
Redemption Date and each such additional date, a "Redemption Date"), at the
individual option of each holder of shares of Series C Preferred, the
corporation shall redeem for cash the number of shares of Series C Preferred
held by such holder that is specified in a request for redemption delivered
to the corporation by the holder at least ten (10) days prior to the
applicable Redemption Date, out of any funds legally available therefor, at a
price per share equal to twice the Preferred Liquidation Amount for each such
share.
(ii) If the funds of the corporation legally
available for redemption of shares of Series C Preferred at the applicable
Redemption Date are insufficient to redeem the total number shares of Series
C Preferred 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 such shares to be redeemed based upon the total
number of shares then requested to be redeemed by each such holder.
(iii) The shares of Series C Preferred not redeemed
upon an applicable Redemption Date because of the failure of the holder
thereof to so elect and the shares of Series C Preferred not redeemed upon an
applicable Redemption Date became of an insufficiency as described in
paragraph (ii) above shall remain outstanding and entitled to all the rights
and preferences provided herein, including the right to receive mandatory
dividends as provided in Section 2(b).
(b) ISSUANCE OF ADDITIONAL SHARES OF COMMON UPON PUBLIC
OFFERING. In the event of a Public Offering contemplated by Section 4(b)(i)
hereof, where the offering price (the "IPO Price") is to be less than $15.00
per share of Common (as appropriately adjusted for stock splits, reverse
stock splits, stock dividends, stock combinations, recapitalization, and
similar events that are effected with respect to the Common), then each
holder of Series C Preferred will be immediately issued additional shares of
Common as determined by the following formula:
AS = ($15.00-X)Y
-----------
X
where:
(i) AS = the number of additional shares of Common to be issued to such
holder in connection with the Public Offering
(ii) X = the IPO Price; and
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(iii) Y = the number of shares of Common into which such holder's shares
of Series C Preferred were convertible pursuant to Section 4(a)
hereof immediately prior to the Public Offering.
SECTION 6. SPECIAL PROVISIONS FOR MERGER EVENTS.
(a) DISTRIBUTIONS ON MERGER EVENTS.
(i) Upon the occurrence of a Merger Event, each
holder of outstanding shares of Series C Preferred shall first receive in
cash or in securities received from the acquiring corporation, or in a
combination thereof, at the closing of any such transaction constituting a
Merger Event, an amount equal to the aggregate Series C Merger Amount, as
defined in Section 6(b), of the shares of Series C Preferred then held by
such holder. In the event the full Series C Merger Amount for the outstanding
shares of Series C Preferred is not paid to the holders of the Series C
Preferred in accordance herewith, then the entire amount payable in respect of
the Merger Event shall be distributed among the holders of the Series C
Preferred in proportion to the number of shares of Series C Preferred held by
each such holder.
(ii) If, after payment of the Series C Merger Amount
to the holders of Series C Preferred pursuant to Section 6(a)(i), any
proceeds remain available for distribution in respect of the Merger Event,
the holders of Junior Preferred shall be entitled to receive in cash or in
securities received from the acquiring corporation, or in a combination
thereof, at the closing of any such transaction constituting a Merger Event,
an amount equal to the aggregate Preferred Liquidation Amount of the shares
of Junior Preferred held by each such holder. In the event the full Preferred
Liquidation Amount for the outstanding shares of Junior Preferred is not paid
in accordance herewith, then the entire remaining amount payable in respect
of the Merger Event shall be distributed ratably among the holders of the
Junior Preferred in proportion to the aggregate Preferred Liquidation Amount
of the shares of Junior Preferred held by each such holder.
(iii) Following the payments to the holders of
Preferred as set forth above, the remaining proceeds of the Merger Event (if
any) shall be distributed to the holders of Common ratably in proportion to
the number of shares of Common held by each such holder.
(b) "SERIES C MERGER AMOUNT" DEFINED. For purposes of this
Section 6, "Series C Merger Amount" for each share of Series C Preferred
shall mean the Preferred Liquidation Amount of such share, multiplied by
three (3).
(c) VALUATION. Any Securities to be delivered to the holders
of Preferred pursuant to Section 6(a) above shall be valued as follows:
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(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
(A) If traded on a securities exchange, the
value shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3) days
prior to the closing;
(B) If traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices of the securities
over the 30-day period ending three (3) days prior to the closing; and
(C) If there is no public market, the fair
market value shall be determined in good faith by the corporation's Board of
Directors.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability 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
determined in good faith by the Board of Directors of the corporation.
SECTION 7. VOTING RIGHTS.
(a) GENERAL. Except as otherwise expressly provided herein or
as required by law, the holders of issued and outstanding Common and the
holders of issued and outstanding Preferred shall have one vote for each
share of Common then held or deemed to be held (assuming the conversion into
Common of all then-outstanding shares of Preferred), voting together as a
single class, at the record date for determination of the stockholders
entitled to vote on such matters, or, if no such record date is established,
at the date such vote is taken or any written consent of stockholders is
solicited, such votes to be counted together with all other shares of stock
of the corporation having general voting power and not separately as a class.
Holders of shares of Common and Preferred shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the corporation. No
fractional votes shall be permitted, and any fractional voting rights
resulting from the above formula (after aggregating all shares of Common into
which shares of Preferred held by each holder could be convened) shall be
rounded to the nearest whole number (with one-half being rounded upward).
(b) VOTING FOR THE ELECTION OF DIRECTORS. All directors shall
be elected by the holders of Preferred and Common, voting together as a
single class.
SECTION 8. COVENANTS. In addition to any other rights provided by
law, the corporation shall not, without first obtaining the affirmative vote
or written consent of (i) the holders of Preferred constituting not less than
a majority of the outstanding Preferred, voting together as a single class,
and (ii) the holders of the Series C Preferred constituting not less than a
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majority of the outstanding Series C Preferred, voting together as a separate
class, in each case determined on an as-converted into Common basis.
(a) increase or decrease the authorized number of shares of
the Preferred or any series of Preferred;
(b) authorize or issue shares of any class or series having
any preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of any series of Preferred;
(c) reclassify any Common or other shares of the corporation
which do not have a preference or priority over or with any series of
Preferred into shares having any preference or priority as to dividends,
liquidation rights or voting rights superior to or on a parity with any such
preference or priority of any series of Preferred;
(d) pay or declare any dividend on any Common (except
dividends payable solely in shares of Common) or repurchase or redeem any
outstanding common;
(e) effect any Merger Event or permit any recapitalization;
or
(f) take action which would have a material and adverse
alteration or change of the rights, preferences or privileges of the
Preferred.
SECTION 9. CONSENT FOR CERTAIN REPURCHASES OF COMMON STOCK DEEMED TO
BE DISTRIBUTIONS. Each holder of an outstanding share of Preferred shall be
deemed to have consented, for purposes of Sections 502, 503 and 506 of the
General Corporation Law, to distributions made by the corporation in
connection with the repurchase at cost of shares of Common issued to or held
by employees, officers, directors, consultants or other persons performing
services for the corporation or any Subsidiary upon termination of their
employment or services pursuant to agreements providing for the right of said
repurchase between the corporation and such persons; PROVIDED, HOWEVER, that
the amount of such repurchases does not exceed $50,000 in the aggregate in any
one fiscal year.
SECTION 10. RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of the corporation not expressly provided for to the contrary herein
shall be vested in the Common.
SECTION 11. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any
shares of Preferred shall be redeemed or converted, the shares so converted
or redeemed shall be canceled and shall not have the status of authorized but
unissued shares of Preferred and shall not be issuable by the corporation and
the Articles of Incorporation of this corporation shall be amended to effect
the corresponding reduction in the corporation's capital stock.
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3. The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the Board of Directors of the
corporation.
4. The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the Corporations Code. The number of
shares of voting in favor of the amendment equaled or exceeded the vote
required, such required vote being a majority of the outstanding shares of
Common Stock and Preferred Stock, voting together as a single class, a
majority of the outstanding shares of Preferred Stock, voting together as a
single class, a majority of the outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, each voting as
a separate series, and a majority of the outstanding shares of Common Stock,
voting as a separate class. The total number of outstanding shares of the
corporation is 14,208,730 shares of Common Stock, 9,097,671 shares of Series
A Preferred Stock, 160,000 shares of Series B Preferred Stock and 600,000
shares of Series C Preferred Stock.
/s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx
President
/s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx
Secretary
The undersigned further declare under penalty of perjury that the
matters set forth in the foregoing certificate are true of their own
knowledge.
Executed at San Ramon, California on November 20, 1998.
/s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx
President
/s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx
Secretary
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