EXHIBIT F
GOVERNANCE AGREEMENT
THIS GOVERNANCE AGREEMENT (this "Agreement"), dated as of
November 8, 1995, by and among American Communications Services,
Inc., a Delaware corporation (the "Company"), and certain holders
of the outstanding shares of 9% Series A-1 Convertible Preferred
Stock, $100 par value (the "Series A-1 Preferred Stock"), 9%
Series B-1 Convertible Preferred Stock, $1.00 par value, 9%
Series B-2 Convertible Preferred Stock, $1.00 par value and 9%
Series B-3 Convertible Preferred Stock, $1.00 par value
(collectively, the "Series B Preferred Stock" and together with
the Series A-1 Preferred Stock, the "Preferred Stock") of the
Company set forth in Schedule I hereto (collectively the "Voting
Shareholders").
R E C I T A L S
WHEREAS, the Company's Certificate of Designations of
the Board of Directors relating to the Series A-1 Preferred Stock
and the Series B Preferred Stock filed with the Secretary of
State of the State of Delaware on June 26, 1995 (the "Current
Certificate of Designations") contains provisions relating to the
size, composition, election and powers of the Board of Directors
of the Company (the "Board") and certain separate class voting
rights for the holders of the Series A-1 Preferred Stock and
Series B Preferred Stock (the "Preferred Veto Rights");
WHEREAS, The Nasdaq SmallCap Market ("NASDAQ") has
required that the foregoing provisions in the Current Certificate
be amended and restated in the manner set forth in Exhibit A (the
"Certificate of Designations Amendments") as a condition to the
Company's continued listing on NASDAQ; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company for the
Company's listing on NASDAQ to be maintained; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company to use all
reasonable efforts to cause the composition and election of the
Board and the Preferred Veto Rights to be consistent with the
Certificate of Designations Amendments until such time as such
amendments are approved by the stockholders of the Company,
notwithstanding any contrary provisions in the Current
Certificate of Designations; and
WHEREAS, pursuant to the Certificate of Designations of
the Board of Directors relating to the 9% Series A Convertible
Preferred Stock (the "Series A Certificate") which was filed with
the Secretary of State of the State of Delaware on October 19,
1994 it is deemed that a Triggering Event (as such term was
defined in the Series A Certificate) would have occurred on or
prior to June 26, 1995, the date a Certificate of Elimination
relating to the Series A Certificate was filed with the Secretary
of State of the State of Delaware; and
WHEREAS, pursuant to the Series A Certificate the
occurrence of a Triggering Event would have caused an increase in
the size of the Board of Directors from seven directors to 11
directors and result in the composition of the Board changing
from four directors elected by the holders of the Common Stock
and three directors elected by the holders of the Preferred Stock
to four directors elected by the holders of the Common Stock and
seven directors elected by the holders of the Preferred Stock;
and
WHEREAS, under the Series A Certificate the Board would
have remained at 11 directors, with four elected by the holders
of the Common Stock and seven elected by the holders of the
Preferred Stock, for one year after all Triggering Events had
been cured; and
WHEREAS, the aforementioned Triggering Event would have
been deemed to have been cured on June 26, 1995; and
WHEREAS, the provisions regarding the size and
composition of the Board including upon the occurrence of a
Triggering Event, contained in the Certificate of Designations
Amendments are substantially similar to those set forth in the
Series A Certificate.
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Triggering Event.
Until such time as the Certificate of Designations
Amendments are duly adopted by the stockholders of the Company
and filed with the Secretary of State of the State of Delaware
("Approval of the Certificate of Designations Amendments"),
notwithstanding any contrary provisions contained in the Current
Certificate of Designations, a Triggering Event shall be the
occurrence of any of the events or transactions set forth in
Section 2(e) of the Certificate of Designations Amendments,
rather than the occurrence of any of the events or transactions
set forth in Section 2(e) of the Current Certificate of
Designations.
2. Board of Directors.
Until Approval of the Certificate of Designations
Amendments, notwithstanding any contrary provisions in the
Current Certificate of Designations, the parties agree that
matters relating to the size, composition, election and powers of
the Board and the Committees of the Board shall be governed by
the terms and provisions set forth in Section 6 of the
Certificate of Designations Amendments, rather than Section 6 of
the Current Certificate of Designations; provided that, until
June 26, 1996 (unless another Triggering Event occurs prior
thereto, in which case the applicable provisions of the
Certificate of Designations Amendments shall apply with respect
thereto), the Board shall consist of 11 directors, four of whom
will be elected by the holders of the Common Stock (the "Common
Directors") and seven of whom will be elected by the holders of
the Preferred Stock (the "Preferred Directors"); and provided
further, that on June 26, 1996 (unless another Triggering Event
shall have occurred prior thereto) the Board shall revert to
seven directors, four of whom will be Common Directors and three
of whom will be Preferred Directors.
3. Preferred Stockholder Veto Rights.
Until approval of the Certificate of Designations
Amendments, notwithstanding any contrary provisions in the
Current Certificate of Designations, the parties agree that the
terms and provisions set forth in Section 7 of the Certificate of
Designations Amendments relating to the rights of the holders of
the Preferred Stock to vote as a separate class on certain
matters will govern the Company's obligation in this regard,
rather than the provisions of Section 7 of the Current
Certificate of Designations.
4. Further Assurances.
The Voting Shareholders will use all reasonable efforts
and take all reasonable actions to enable the Company to be
governed by the terms and provisions of this Agreement.
5. General Provisions.
5.1 Contents of Agreement, Parties in Interest,
Assignment. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof. Any
previous agreements or understandings between the parties
regarding the subject hereof are merged into and superseded by
this Agreement. All terms and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by
the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto. If any transferee of
any Voting Shareholder shall acquire any shares of Preferred
Stock or any shares of Common Stock from such Voting Shareholders
in any manner, whether by operation of law or otherwise, such
shares shall be held subject to all of the terms of this
Agreement, and by taking and holding such shares such transferee
shall be entitled to receive the benefits of and be conclusively
deemed to have agreed to be bound by and to comply with all of
the terms and provisions of this Agreement.
5.2 Severability. In the event that any one or more
of the provisions contained in this Agreement shall be invalid or
unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall
not be in any way impaired.
5.3 Headings. The headings of the Sections and the
subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
5.4 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in
writing and delivered personally or sent by telex or telecopy
(with such telex or telecopy confirmed promptly in writing sent
by first class mail), or first class mail, or other similar means
of communications, as follows:
(i) If to Xxxx, addressed to The Xxxx
Alternative Income Fund, L.P., 00 Xxxx
Xxxxx, 0xx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000, Attention: Xxxxxx Xxxxxxxx,
Telecopier Number (000) 000-0000;
(ii) If to ING, addressed to ING Equity Partners,
L.P., 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X.
Xxxxxxxxx, Telecopier Number (000) 000-0000;
(iii) If to the Company, addressed to American
Communications Services, Inc., 000
Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxxx Xxxxxxxx, XX 00000, Attention:
Xxxxxxx X. Xxxxx, Telecopier Number
(000) 000-0000; or
(iv) If to a Voting Shareholder other than Xxxx or
ING, to the address of such Voting
Shareholder set forth in the stock records of
the Company;
or, in each case, to such other address or telex or
telecopy number as such party may designate in writing to each
Voting Shareholder and the Company by written notice given in the
manner specified herein.
All such communications shall be deemed to have been
given, delivered or made when so delivered by hand or sent by
telex (answer back received) or telecopy, or five business days
after being so mailed.
5.5 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO ACKNOWLEDGES
AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE
NON-BREACHING PARTIES WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY,
THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE
RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF
NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 5.5 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
5.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be considered an original, but
all of which together shall constitute the same instrument.
5.7 Recapitalization, Exchanges, Etc., Affecting the
Stock; New Issuances. The provisions of this Agreement shall
apply, to the full extent set forth herein, with respect to the
Common Stock and the Preferred Stock now held or hereafter
acquired by the Voting Shareholders, and to any and all equity or
debt securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or
in substitution of, such equity or debt securities and shall be
appropriately adjusted for any stock dividends, splits, reverse
splits, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.
5.8 Termination. This Agreement shall terminate upon
the earliest of (i) a Qualifying Offering (as defined in the
Certificate of Designations Amendments), (ii) Approval of the
Certificate of Designations Amendments, or (iii) six months after
notice by The Xxxx Alternative Income Fund, L.P. ("Xxxx") and ING
Equity Partners, L.P. ("ING") to the other parties that Xxxx and
ING have agreed to terminate this Agreement; provided that the
Company shall file a Current Report on Form 8-K with the
Securities and Exchange Commission and NASDAQ promptly after
receiving any such termination notice from XXXX and ING.
5.9 Endorsement of Certificates.
(i) Upon the execution of this Agreement, in
addition to any other legend which the Company may deem advisable
under the Securities Act and certain state securities laws, all
certificates representing shares of issued and outstanding Common
Stock and Preferred Stock held by the Voting Shareholders shall
be endorsed at all times prior to termination of this Agreement
as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE
ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A GOVERNANCE
AGREEMENT, DATED AS OF NOVEMBER 8, 1995, AMONG THE COMPANY
AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF THE ABOVE
REFERENCED AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY
AT 000 XXXXXXXX XXXXXXXX XXXXXXX, XXXXX 000, XXXXXXXXX
XXXXXXXX, XX 00000 AND WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID
ACT.
(ii) Except as otherwise expressly provided in
this Agreement, all certificates representing shares Of stock
hereafter issued to or acquired by any of the Voting Shareholders
or their successors hereto (including, without limitation, all
certificates representing shares of Common Stock hereafter issued
upon conversion of shares of Preferred Stock) shall bear the
legends set forth above, and, the shares of such stock
represented by such certificates shall be subject to the
applicable provisions of this Agreement. The obligations of each
party hereto shall be binding upon each transferee to whom such
stock is transferred by any party hereto. Prior to consummation
of any transfer, such party shall cause the transferee to execute
an agreement in form and substance reasonably satisfactory to the
other parties hereto, providing that such transferee shall fully
comply, with the terms of this Agreement. Prompt notice shall be
given to the company and each Voting Shareholder by the
transferor of any transfer of any stock.
(iii) Any attempt to transfer or encumber any
shares of stock not in accordance with this Agreement shall be
null and void and neither the Company nor any transfer agent of
such securities shall give any effect to such attempted transfer
or encumbrance in its stock records.
Governance Agreement
5.10 Expenses. The Company will reimburse the Voting
Shareholders for the reasonable expenses, including reasonable
counsel fees, which they incur in connection with this Agreement.
5.11 Cost of Enforcement. The party which prevails in
any suit or proceeding against the other to enforce any provision
of this Agreement or to recover damages resulting from a breach
of this Agreement shall be entitled to receive from the
nonprevailing party the costs and reasonable attorneys' fees of
the prevailing party incurred in such suit or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President & COO
THE XXXX ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNER, L.L.C
general partner
By:
Name:
Title:
Governance Agreement
5.10 Expenses. The Company will reimburse the Voting
Shareholders for the reasonable expenses, including reasonable
counsel fees, which they incur in connection with this Agreement.
5.11 Cost of Enforcement. The party which prevails in
any suit or proceeding against the other to enforce any provision
of this Agreement or to recover damages resulting from a breach
of this Agreement shall be entitled to receive from the
nonprevailing party the costs and reasonable attorneys' fees of
the prevailing party incurred in such suit or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
Name:
Title:
THE XXXX ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNER, L.L.C
general partner
By: /s/Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title:
Governance Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Olivier Troveroy
Name: Olivier Trouveroy
Title: Managing Director
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: _________________________________
Xxxxxx X. Xxxxxxxxx
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: ___________________________________
Xxxxxx X. Xxxxxxxxx
General Partner
Governance Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: ___________________________
Name:
Title:
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
General Partner
Governance Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II,
its general partner
By: FIRST ANALYSIS CORPORATION
general partner
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Managing Director
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: __________________________
Name:
Title:
ENVIRONMENTAL PRIVATE EQUITY
FUND II, L.P.
By: Environmental Private Equity
Management II, L.P.
its general partner
By: First Analysis EPEF Management
COMPANY II, general partner
By: First Analysis Corporation,
general partner
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Managing Director
Governance Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II,
its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: _______________________________
Name:
Title:
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.
general partner
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Chairman
ENVIRONMENTAL PRIVATE EQUITY
FUND II, L.P.
By: Environmental Private Equity
Management II, L.P.
it general partner
By: First Analysis EPEF Management
Company II, general partner
By: First Analysis Corporation,
general partner
By: _________________________________
Name:
Title:
SCHEDULE I
VOTING SHAREHOLDERS
Voting Series A-1 Series B-1 Series-2 Series-3
Shareholder Preferred Preferred Preferred Preferred
The Xxxx 138,889 100,000
Alternative
Income Fund, L.P.
ING Equity 100,000
Partners, L.P. I
Apex 2,595 4,904.85
Investment
Fund I, L.P.
Apex 16,808 3,269.90
Investment
Fund II, L.P.
The Productivity 10,249 1,380.61
Fund II, L.P.
Argentum 4,000.00
Capital
Partners, L.P.
Environmental 6,056 11,444.64
Private Equity
Fund II, L.P.
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS
OF THE BOARD OF DIRECTORS
OF
AMERICAN COMMUNICATIONS SERVICES, INC.
RELATING TO 9% SERIES A-1 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-1 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-2 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-3 CONVERTIBLE PREFERRED STOCK,
AND 9% SERIES B-4 CONVERTIBLE PREFERRED STOCK
("Certificate of Designations")
________________________________
Pursuant to Sections 151(g), 141(f) and 242 of the
Delaware General Corporation Law ("DGCL")
_________________________________
Xxxxxxx X. Xxxxxxxxx, Chairman of the Board of
Directors of American Communications Services, Inc., a Delaware
corporation (the "Company"), certifies that the following
resolutions were (i) adopted by the Company's Board of Directors
by unanimous written consent dated November 7, 1995 pursuant to
DGCL 141 (f); (ii) approved by the holders of at least a majority
of the outstanding 9% Series A-1 Convertible Preferred Stock (the
"Series A-1 Preferred Stock"), voting as a separate class, at a
meeting duly called and held on _____________________; (iii)
approved by the holders of at least a majority of the outstanding
9% Series B-1 Convertible Preferred Stock (the "Series B-1
Preferred Stock"), voting as a separate class, at a meeting duly
called and held on _____________________; and (iv) approved by
the holders of at least a majority of the outstanding common
stock, $.01 par value (the "Common Stock"), voting as a separate
class pursuant to DGCL Section 242(b)(2), at a meeting duly
called and held on ____________________; and (v) approved by the
holders of at least a majority of the outstanding common stock,
Series A-1 Preferred Stock and Series B Preferred Stock (as
hereinafter defined), voting together as a single class, at a
meeting duly called and held on ____________________________:
WHEREAS, pursuant to the Certificate of Designations of
the Board of Directors relating to the 9% Series A Convertible
Preferred Stock (the "Series A Certificate") which was filed with
the Secretary of State of the State of Delaware on October 19,
1994 a Triggering Event (as such term was defined in the Series A
Certificate) would be deemed to have occurred on or prior to June
26, 1995, the date a Certificate of Elimination relating to the
Series A Certificate was filed with the Secretary of State of the
State of Delaware; and
WHEREAS, pursuant to the Series A Certificate the
occurrence of a Triggering Event would cause an increase in the
size of the Board of Directors from seven members to 11 members
and result in the composition of the Board changing from four
directors elected by the holders of the Common Stock and three
directors elected by the holders of the Preferred Stock to four
directors elected by the holders of the Common Stock and seven
directors elected by the holders of the Preferred Stock; and
WHEREAS, under the Series A Certificate the Board of
Directors would remain at 11 members, with four elected by the
holders of the Common Stock and seven elected by the holders of
the Preferred Stock, for one year after all Triggering Events
have been cured; and
WHEREAS, the aforementioned Triggering Event would be
deemed to have been cured on June 26, 1995; and
WHEREAS, the provisions set forth in this Certificate
of Designations regarding the size and composition of the Board
of Directors, including upon the occurrence of a Triggering
Event, are substantially similar to those set forth in the Series
A Certificate; and
WHEREAS, the Board of Directors will upon filing of
this Certificate of Designations be composed of 11 members, four
of whom were elected by the holders of the Common Stock or
designated by the directors elected by the holders of the Common
Stock and seven of whom were elected by the holders of Preferred
Stock; and
WHEREAS, unless another Triggering Event (as defined in
this Certificate of Designation) occurs prior thereto the Board
of Directors will revert to seven members on June 25, 1996 and
the individuals who are currently serving on the Board of
Directors as Expansion Preferred Directors (as defined in this
Certificate of Designations) will cease to serve on the Board as
Preferred Directors at that time.
RESOLVED, that the Company is authorized to issue
464,164 shares of convertible preferred stock, par value $1.00
per share, with such voting powers and such designations,
preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions
thereof, as follows:
1. Designation. Of the preferred stock authorized by
this resolution, 186,664 shares shall be known as "9% Series A-1
Convertible Preferred Stock" ("the Series A-1 Preferred Stock"),
100,000 shares shall be known as "9% Series B-1 Convertible
Preferred Stock" (the "Series B-1 Preferred Stock"), 102,500
shares shall be known as "9% Series B-2 Convertible Preferred
Stock" (the "Series B-2 Preferred Stock"), 25,000 shares shall be
known as "9% Series B-3 Convertible Preferred Stock" (the "Series
B-3 Preferred Stock") and 50,000 shares shall be known as "9%
Series B-4 Convertible Preferred Stock" (the "Series B-4
Preferred Stock"). The Series B-1 Preferred Stock, the Series B-
2 Preferred Stock, the Series B-3 Preferred Stock and the Series
B-4 Preferred Stock are referred to herein collectively as the
"Series B Preferred Stock." The Series A-1 Preferred Stock and
the Series B Preferred Stock are referred to herein collectively
as the "Preferred Stock".
2. Dividends.
(a) Amount. The holders of shares of the Preferred
Stock shall be entitled to receive, when and as declared payable
by the board of directors from funds legally available for that
purpose, dividends in cash at the annual rate of (i) 9%, except
as provided in the following clause (ii), at all times, and (ii)
18%, (A) from and after January 1, 2000 and (B) at any time after
the occurrence and before the cure of a Triggering Event (as
defined in section 2(e)), of the Series A-1 Liquidation Value (as
defined in section 5) or the Series B Liquidation Value (as
defined in section 5), as the case may be, of those shares as of
the immediately preceding Dividend Payment Date (as defined
below) (or the date of issue, in the case of the initial Dividend
Payment Date), and no more, payable in equal amounts quarterly on
the last day of December, March, June and September in each year
(unless that day is not a business day (as defined in section
3(d)), in which event on the next business day) (each a "Dividend
Payment Date") to holders of record as they appear on the
register for the Preferred Stock on the December 15, March 15,
June 15 or September 15, respectively, immediately preceding the
Dividend Payment Date.
(b) Dividend Periods; Accumulation of Dividend. A
quarterly dividend period shall begin on the day following each
Dividend Payment Date and end on the next succeeding Dividend
Payment Date. Notwithstanding the foregoing, the first quarterly
dividend period with respect to each series of Preferred Stock
shall commence on the initial date of issue of such series and
end on the first Dividend Payment Date thereafter, and the
dividend for that period shall be determined on the basis of the
actual number of days in that period. If dividends shall not
have been so paid upon all outstanding shares of Preferred Stock,
the deficiency shall be cumulative. Notwithstanding the
foregoing, the initial date of issue of all of the shares of
Series A-1 Preferred Stock shall be deemed to be October 21,
1994; and the initial date of issue of all of the shares of
Series B-1 Preferred Stock, Series B-2 Preferred Stock and Series
B-3 Preferred Stock shall be deemed to be June 26, 1995.
Accumulated dividends shall, subject to section 2(c), be payable
in cash at any subsequent Dividend Payment Date, or, if earlier,
(i) at the time of conversion in accordance with section 3 or 4
or (ii) at the time stated and in accordance with section 2(c).
(c) Special Payment Provisions. Notwithstanding
anything to the contrary in section 2(a) or 2(b), no dividends
shall be paid, or declared and set apart for payment, on or
before December 31, 1997, or, if earlier, at the time of
conversion in accordance with section 3 or 4. On January 1, 1998,
the Company shall, to the extent permitted by law, issue and
deliver to each holder a promissory note in the form of exhibit
2(c) hereto, executed by the Company and payable to the order of
the holder in the principal amount of that holder's accumulated
and accrued dividends.
(d) Dividend Priorities. As to dividends, the Series
A-1 Preferred Stock and Series B Preferred Stock shall rank pari
passu with each other and shall rank senior to the common stock
from time to time created. No dividend or distribution, whether
in cash, stock or other property, shall be paid, declared or set
apart for payment or made on or in respect of the common stock of
the Company, and, except pursuant to the agreements listed on
schedule 6.12(C) to the Series B Purchase Agreement (as defined
in section 2 (e)(iv)), no redemption, purchase or other
acquisition for value by the Company shall be made, or any funds
set apart for any sinking fund for such redemption, purchase or
other acquisition, of shares of common stock of the Company until
the earlier of a Qualifying Offering (as defined in section
4(a)(ii)) or January 1, 1998, and thereafter, unless all accrued
and unpaid dividends on all outstanding shares of Preferred
Stock, including without limitation any accrued and unpaid
dividends represented by any promissory note issued hereunder, to
the end of the quarterly dividend period coinciding with or next
preceding that date shall have been paid or declared and set
apart for payment; provided, however, that the foregoing
provisions of this sentence shall not prohibit a dividend on any
shares of any class or series of stock, which dividend is payable
in shares of any class or series of stock of the Company ranking
on a parity with or junior to the class or series of stock on
which the dividend is payable both as to dividends and as to any
distribution, including, without limitation, a distribution upon
liquidation, dissolution or winding-up of the Company.
(e) As used in this Certificate of Designations, the
term "Triggering Event" shall mean any of the following:
(i) the Company or any subsidiary shall have
failed to pay or prepay when due any principal, interest or
premium on any indebtedness for borrowed money after any
applicable cure period;
(ii) the Company or any subsidiary shall have
breached any of its other obligations in respect of any
indebtedness for borrowed money, or any condition shall have
existed, as a result of which any such indebtedness may, after
any applicable cure period, become or be declared due prior to
its stated maturity, and such breach or condition shall remain
uncured, unremedied or unwaived for 120 or more days after such
breach or condition;
(iii) there shall have been any material
misrepresentation or breach of warranty by the Company under the
investment agreement dated October 21, 1994 among the Company and
certain of the initial holders of the Company's 9% Series A
Convertible Preferred Stock, as amended by the Exchange Agreement
dated June 26, 1995 among the Company and the holders of the
Series A Preferred Stock as of such date (as may be amended from
time to time, the "Series A Investment Agreement");
(iv) there shall have been any material
misrepresentation or breach of warranty by the Company under the
(A) Series B Preferred Stock and Warrant Purchase Agreement dated
June 26, 1995 among the Company and the initial holders of the
Series B Preferred Stock, (as may be amended from time to time,
the "Series B Purchase Agreement"), (B) Stockholders Agreement
dated June 26, 1995 among the holders of the Series A-1 Preferred
Stock, the holders of the Series B Preferred Stock and certain
holders of common stock, (as may be amended from time to time,
the "Stockholders Agreement), (C) Registration Rights Agreement
dated June 26, 1995 among the Company, the holders of the Series
A-1 Preferred Stock, the holders of the Series B Preferred Stock,
certain holders of the common stock and certain holders of
options or warrants convertible into common stock, (as may be
amended from time to time, the "Registration Rights Agreement"),
and (D) Governance Agreement dated as of November 8, 1995 among
the Company and certain holders of the Series A-1 Preferred
Stock, Series B Preferred Stock and Common Stock, (as may be
amended from time to time, the "Governance Agreement") that
remains uncured, unremedied or unwaived for 30 or more days after
such misrepresentation or breach;
(v) there shall have been any material breach of
any agreement by the Company under any of the Transaction
Documents (as defined in the Series A Investment Agreement) that
remain uncured for 30 or more days after the Company first has or
should have had actual knowledge of the breach;
(vi) there shall have been any material breach of
any agreement by the Company under any of the Transaction
Documents (as defined in the Series B Purchase Agreement) that
remains uncured for 30 or more days after the Company first has
or should have had actual knowledge of the breach;
(vii) The Company shall have failed to pay any
dividends on any outstanding shares of Preferred Stock when
payable hereunder whether pursuant to a promissory note issued
hereunder or otherwise and such failure shall remain uncured,
unremedied or unwaived for 30 or more days;
(viii) the Company shall have failed to comply with
any provisions of this Certificate of Designations of any other
provisions of its certificate of incorporation or by-laws
relating to the Preferred Stock, or the Company shall have
materially failed to comply with any other provisions of its
certificate of incorporation or by-laws, and such failure shall
remain uncured, unremedied or unwaived for 30 or more days after
such failure;
(ix) the Company and its subsidiaries shall have
failed by 20% or more to meet the major business milestones set
forth in schedule 5.15 to the Series B Purchase Agreement;
(x) a court of governmental authority of
competent jurisdiction shall have entered an order appointing,
without consent by the Company, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with
respect to any substantial part of its property, or if an order
for relief shall have been entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of
any insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any
subsidiary, or if any petition for any such relief shall have
been filed against the Company or a subsidiary and such petition
shall not have been dismissed within 60 days; or
(xi) final judgment shall have been rendered
against the Company or any subsidiary for the payment of money in
excess of $250,000 and such judgment shall not have been
discharged or execution thereon shall not have been stayed
pending appeal, within 60 days after entry thereof or, in the
event of such a stay, such judgment is not discharged within 60
days after such stay expires.
3. Optional Conversion. The holder of each
outstanding share of Preferred Stock shall have the right at any
time, or from time to time, at the holder's option to convert
that share into common stock in accordance with this section 3.
(a) Conversion Price. (i) Except as otherwise
provided in this section 3, each share of Series A-1 Preferred
Stock shall be convertible (at the office or agency referred to
in section 3(b)(i)) into a number of fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/10,000
of a share) of common stock equal to the number obtained by
dividing $90.00 by $2.25 ($2.25 being the "Series A-1 Conversion
Price") or, if the Series A-1 Conversion Price shall have been
adjusted in accordance with this section 3, by dividing $90.00 by
the Series A-1 Conversion Price as last adjusted and in effect at
the date any share or shares of Series A-1 Preferred Stock are
surrendered for conversion. For purposes hereof the term "Series
A-1 Conversion Price" shall refer to the conversion price for the
Series A-1 Preferred Stock, as last adjusted pursuant to this
section 3.
(ii) Except as otherwise provided in this section
3, each share of Series B Preferred Stock shall be convertible
(at the office or agency referred to in section 3(b)(i)) into a
number of fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/10,000 of a share) of common
stock equal to the number obtained by dividing $100.00 by $2.80
($2.80 being the "Series B Conversion Price") or, if the Series B
Conversion Price shall have been adjusted in accordance with this
section 3, by dividing $100.00 by the Series B Conversion Price
as last adjusted and in effect at the date any share or shares of
Series B Preferred Stock are surrendered for conversion. For
purposes hereof the term "Series B Conversion Price" shall refer
to the conversion price for the Series B Preferred Stock, as last
adjusted pursuant to this section 3.
(b) Procedures.
(i) To exercise the right to convert shares of
Preferred Stock into shares of common stock, the holder of the
shares of the Preferred Stock to be converted shall present and
surrender the certificate(s) representing the shares during usual
business hours at any office or agency of the Company maintained
for the transfer of the Preferred Stock and shall deliver a
written notice of the election of the holder to convert the
shares represented by that certificate or any portion of those
shares specified in that notice. That notice also shall state
the name or names (with address(es)) in which the certificate or
certificates for shares of common stock issuable on conversion
shall be issued. If so required by the Company, any certificate
for shares of Preferred Stock surrendered for conversion shall be
accompanied by instruments of transfer, in form reasonably
satisfactory to the Company, duly executed by the holder of the
shares surrendered for conversion or the holder's duly authorized
representative. Each conversion of shares of Preferred Stock
shall be deemed to have been effected on the date (the
"conversion date") on which the certificate or certificates
representing the shares shall have been surrendered and that
written notice and any required instruments of transfer shall
have been so received, and the person or persons in whose name or
names any certificate or certificates for shares of common stock
shall be issuable on conversion shall be deemed to have become
the holder or holders of record of the shares of common stock
represented by the certificate or certificates immediately prior
to the close of business on the conversion date.
(ii) As promptly as practicable after the
presentation and surrender for conversion of any certificate for
shares of Preferred Stock, the Company shall issue and deliver to
or upon the written order of the holder of those shares a
certificate or certificates for the aggregate number of full
shares of common stock issuable upon conversion. In case any
certificate for shares of Preferred Stock shall be surrendered
for conversion of only a portion of the shares represented by
that certificate, the Company shall deliver to or upon the
written order of the holder of those shares a certificate or
certificates for the number of shares of Series A-1 Preferred
Stock or Series B Preferred Stock, as the case may be,
represented by the surrendered certificate that are not being
converted. The issuance of certificates for shares of common
stock issuable upon the conversion of shares of Preferred Stock
shall be made without charge to the converting holder for any tax
in respect of the issue of the shares of common stock. The
Company shall not, however, be required to pay any tax that may
be payable based on the issue and delivery of any certificate in
a name other than that of the holder of the shares of Preferred
Stock being converted, and the Company shall not be required to
issue or deliver any such certificate, unless and until the
person requesting the issue shall have paid the Company the
amount of that tax or established to the reasonable satisfaction
of the Company that such tax has been paid or that no tax is due.
(iii) Upon any conversion of shares of Preferred
Stock into shares of common stock in accordance with this section
3 at any time on or before December 31, 1997, the Company shall
deliver to the holder, within three (3) business days after the
conversion date, in lieu of all accrued and unpaid dividends
through the conversion date on all shares to be converted, a
promissory note in the form of exhibit 3(b)(iii) hereto, executed
by the Company and payable to the order of that holder in the
principal amount of that holder's accumulated and accrued
dividends only those dividends shall be payable on shares of
common stock issuable upon conversion as may be declared and may
be payable to those entitled to be holders of record of shares of
common stock after that conversion date in accordance with
section 3(b)(i).
(c) Adjustment of Conversion Price Upon Issuance of
Common Stock. Except as provided in section 3(c)(ix), if at any
time the Company shall issue, grant or sell, or is, in accordance
with section 3(c)(i) through (x), deemed to have issued, granted
or sold, any shares of common stock for a consideration per share
less than the Series A-1 Conversion Price or Series B Conversion
Price, as the case may be, in effect immediately prior to the
issuance, grant or sale (or, in the case of any pro rata
distribution to holders of the common stock of rights to
subscribe for the common stock or options, rights, warrants or
other securities convertible into or exchangeable or exercisable
for the common stock (a "Pro Rata Rights Offering"), the lesser
of such Conversion Price or the market price of the common stock
(as defined in section 3(d)) at that time), then, upon that
issuance, grant or sale, such Conversion Price shall be reduced
to the amount specified in the following clause (ww) (or, in the
case of Pro Rata Rights Offerings, the lesser of the following
clauses (ww) and (xx)):
(ww) in the case of the issuance, grant or
sale, or deemed issuance, grant or sale, by the
Company of shares of common stock for a
consideration per share less than such Conversion
Price, the price determined by dividing (1) an
amount equal to the sum of (A) the number of
shares of common stock outstanding immediately
prior to that issuance, grant or sale (including
as outstanding all shares of common stock issuable
upon conversion of all outstanding shares of
Preferred Stock for which the conversion price is
being adjusted) multiplied by such Conversion
Price then in effect, and (B) the consideration,
if any, received by the Company upon that
issuance, grant or sale, by (2) the total number
of shares of common stock outstanding immediately
after that issuance, grant or sale (including as
outstanding all shares of common stock issuable
upon conversion of all outstanding shares of
Preferred Stock for which the conversion price is
being adjusted); and
(xx) in the case of the issuance, grant or
sale, or deemed issuance, grant or sale, by the
Company of shares of common stock for a
consideration per share less than the market price
of the common stock, the price determined by
multiplying such Conversion Price in effect
immediately prior to that issuance, grant or sale
by a fraction, (1) the numerator of which shall be
the sum of (A) the number of shares of common
stock outstanding immediately prior to that
issuance, grant or sale (including as outstanding
all shares of common stock issuable upon
conversion of all outstanding shares of Preferred
Stock for which the conversion price is being
adjusted) multiplied by the market price of the
common stock immediately prior to that issuance,
grant or sale plus (B) the consideration, if any,
received by the Company upon that issuance, grant
or sale, and (2) the denominator of which shall be
the total number of shares of common stock
outstanding immediately after that issuance, grant
or sale (including as outstanding all shares of
common stock issuable upon conversion of all
outstanding shares of Preferred Stock for which
the conversion price is being adjusted) multiplied
by the market price of the common stock
immediately prior to that issuance, grant or sale.
For purposes of this section 3(c), the following also
shall be applicable:
(i) Issuance of Rights or Options. In case at
any time the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options or
warrants for the purchase of, common stock or any stock or
securities convertible into or exchangeable for common stock
(such rights, warrants or options being called "Options" and
such convertible or exchangeable stock or securities being
called "Convertible Securities"), whether or not such
Options or the right to convert or exchange such Convertible
Securities are immediately exercisable, and the price per
share for which common stock is issuable upon the exercise
of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such Options, plus, in
the case of Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
conversion or exchange of such Convertible Securities, by
(B) the total maximum number of shares of common stock
issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities) shall
be less than the Series A-1 Conversion Price or Series B
Conversion Price, as the case may be, immediately prior to
the granting of such Options, then the total maximum number
of shares of common stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum
number of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued
for such price per share as of the date of the granting of
such Options and thereafter shall be deemed to be
outstanding, Except as otherwise provided in section
3(c)(iii), no additional adjustment of such Conversion Price
shall be made upon the actual issuance of such common stock
upon exercise of such Options or upon conversion or exchange
of such Convertible Securities. Notwithstanding anything to
the contrary in this section 3(c), the issuance of the
Warrants (as defined in the Series A Investment Agreement)
and the Warrants (as defined in the Series B Purchase
Agreement) and any subsequent exercise of the Warrants (as
defined in the Series A Investment Agreement) or the
Warrants (as defined in the Series B Purchase Agreement)
shall not affect either the Series A-1 Conversion Price or
the Series B Conversion Price. If, upon the expiration of
such Options or rights to convert or exchange such
Convertible Securities, such Options remain unexercised or
such Convertible Securities remain unconverted or
unexchanged, as the case may be, such Conversion Price shall
again be adjusted as if such unexercised Options or
unconverted or unexchanged Convertible Securities had not
been granted.
(ii) Issuance of Convertible Securities. In case
the Company shall in any manner issue (whether directly or
by assumption in a merger or otherwise), grant or sell any
Convertible Securities, whether or not the rights to
exchange or convert such Convertible Securities are
immediately exercisable, and the price per share for which
common stock is issuable upon such conversion or exchange
(determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issuance,
grant or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange
of such Convertible Securities, by (B) the total maximum
number of shares of common stock issuable upon the
conversion or exchange of such Convertible Securities) shall
be less than the Series A-1 Conversion Price or the Series B
Conversion Price, as the case may be, immediately prior to
the issuance, grant or sale, then the total maximum number
of shares of common stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to
have been issued for such price per share as of the date of
the issuance or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding; provided,
however, that (Y) except as otherwise provided in section
3(c)(iii), no additional adjustment of such Conversion Price
shall be made upon the actual issuance of such common stock
upon conversion or exchange of such Convertible Securities
and (Z) if any such issuance, grant or sale of such
Convertible Securities is made upon exercise of any Option
to purchase any of the Convertible Securities for which
adjustments of such Conversion Price have been or are to be
made pursuant to other provisions of this section 3(c), no
further adjustment of such Conversion Price shall be made by
reason of the issuance, grant or sale. If, upon the
expiration of the right to convert or exchange such
Convertible Securities, such Convertible Securities remain
unconverted or unexchanged, as the case may be, such
Conversion Price shall again be adjusted as if such
unconverted or unexchanged Convertible Securities had not
been issued, granted or sold.
(iii) Change in Option Price or Conversion Rate.
If the purchase price provided for in any Option referred to
in section 3(c)(i), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in section 3(c)(i) or (ii) or the
rate at which any Convertible Securities referred to in
section 3(c)(i) or (ii) are convertible into or exchangeable
for common stock shall change at any time (other than under
or by reason of provisions designed to protect against
dilution), the Series A-1 Conversion Price or the Series B
Conversion Price in effect at the time of that event shall
be readjusted to the Series A-1 Conversion Price or the
Series B Conversion Price, as the case may be, that would
have been in effect at that time had such Options or
Convertible Securities still outstanding provided for that
changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially
granted, issued or sold.
(iv) Stock Dividends. In case the Company shall
declare a dividend or make any other distribution upon any
stock of the Company payable in common stock, Options or
Convertible Securities, any common stock, Options or
Convertible Securities, as the case may be, issuable in
payment of that dividend or distribution shall be deemed to
have been issued, granted or sold without consideration and
the Series A-1 Conversion Price and the Series B Conversion
Price shall be adjusted accordingly under the provisions of
this section 3(c).
(v) Consideration for Stock. In case any shares
of common stock, Options or Convertible Securities shall be
issued, granted or sold for cash, the consideration received
by the Company shall be deemed to be the amount received by
the Company, without deduction of any expenses incurred or
any underwriting commissions or concessions paid or allowed
in connection with the issuance, grant or sale. In case any
shares of common stock, Options or Convertible Securities
shall be issued, granted or sold for a consideration other
than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair
market value of that consideration as determined in good
faith by disinterested members of the board of directors of
the Company (which shall consider, if the transaction
involves, directly or indirectly, 2,000,000 or more shares
of common stock, the opinion of a leading firm of investment
bankers selected by a majority of the Preferred Directors
(as defined in section 6(d)) and reasonably acceptable to
the Company and whose reasonable fees and expenses shall be
paid by the Company), without deduction of any expenses
incurred or any underwriting commissions or concessions paid
or allowed in connection with the issuance, grant or sale.
In case any Options shall be issued in connection with the
issuance, grant or sale of other securities of the Company,
together comprising one integral transaction in which the
parties do not specifically allocate consideration to such
Options, such Options shall be deemed to have been issued
without consideration and the Conversion Price shall be
adjusted accordingly under the provisions of this section
3(c) .
(vi) Record Date. In case the Company shall take
a record of the holders of its common stock for the purpose
of entitling them (A) to receive a dividend or other
distribution payable in common stock, Options or Convertible
Securities, or (B) to subscribe for or purchase common
stock, Options or Convertible Securities, then, upon such
issuance, grant or sale, that record date shall be deemed to
be the date of the issuance, grant or sale of the shares of
common stock deemed to have been issued, granted or sold
upon the declaration of the dividend or the making of the
other distribution or the date of the granting of the right
of subscription or purchase, as the case may be.
(vii) Treasury Shares. The number of shares of
common stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company or
any of its subsidiaries, and the disposition (other than to
the Company or any of its subsidiaries) of any such shares
shall be considered an issuance, grant or sale of common
stock for purposes of this section 3(c).
(viii) Subdivision or Combination of Stock. In case
the Company shall at any time subdivide its outstanding
shares of common stock into a greater number of shares (by
way of dividend, split or otherwise), the Series A-1
Conversion Price and the Series B Conversion Price in effect
immediately prior to the subdivision shall be
proportionately reduced, and in case the outstanding shares
of common stock shall be combined into a smaller number of
shares (by way of reverse split or otherwise) the Series A-1
Conversion Price and the Series B Conversion Price in effect
immediately prior to the combination shall be
proportionately increased.
(ix) Certain Issues of Common Stock Excepted.
Notwithstanding anything to the contrary in this section
3(c), the Company shall not be required to make any
adjustment of the Series A-1 Conversion Price or Series B
Conversion Price in case of (A) the issuance of shares of
common stock upon conversion of shares of Preferred Stock,
(B) the issuance of shares of common stock pursuant to
Options and Convertible Securities outstanding on June 26,
1995 or issuable pursuant to agreements which are effective
on or before such date, and set forth on exhibit A to
schedule 3.2.7 to the Series B Purchase Agreement, or (C)
the issuance of up to an additional 750,000 shares of common
stock (or the issuance of Options to purchase such shares)
to employees or consultants of the Company and its
subsidiaries as management or employee incentives (as
approved by the board of directors to the extent so required
pursuant to sections 6(d) and 7).
(x) Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital
stock of the Company shall be effected in such a way
(including, without limitation, by way of consolidation or
merger or a sale of all or substantially all its assets)
that holders of common stock shall be entitled to receive
stock, securities or assets with respect to or in exchange
for common stock, then, as a condition of the reorganization
or reclassification, lawful and adequate provisions shall be
made whereby each holder of shares of Preferred Stock shall
thereafter have the right to receive, in lieu of the shares
of common stock of the Company theretofore receivable upon
the conversion of such shares, such shares of stock,
securities or assets as may be issued or payable with
respect to or in exchange for a number of shares of common
stock equal to the number of shares of common stock
theretofore so receivable had the reorganization or
reclassification not taken place, and in any such case
appropriate provision shall be made with respect to the
rights and interests of the holder to the end that the
provision of this section 3 (including, without limitation,
provisions for adjustment of the Series A-1 Conversion Price
and Series B Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon
the exercise of those conversion rights. In the event of a
merger or consolidation of the Company as a result of which
a greater or lesser number of shares of common stock of the
surviving corporation are issuable to holders of common
stock of the Company outstanding immediately prior to the
merger or consolidation, the Series A-1 Conversion Price and
Series B Conversion Price in effect immediately prior to the
merger or consolidation shall be adjusted in the same manner
as though there were a subdivision or combination of the
outstanding shares of common stock of the Company in
accordance with section 3(c)(viii).
(xi) Certain Distributions. In the event that the
Company shall make any distribution of its assets upon or
with respect to the common stock that does not constitute a
dividend payable out of earnings or any surplus legally
available for dividends under the Delaware General
Corporation Law and that distribution does not constitute a
liquidation under section 5, the holder of each outstanding
share of Preferred Stock shall, after the record date for
that distribution or, in the absence of a record date, after
the date of that distribution, receive, the amount of such
assets (or, at the option of the Company, a sum equal to the
value of such assets at the time of distribution as
determined in good faith by the board of directors of the
Company (which shall consider the opinion of a leading firm
of investment bankers selected by a majority of the
Preferred Directors and reasonably acceptable to the Company
and whose reasonable fees and expenses shall be paid by the
Company)) that would have been distributed to such holder if
the holder had converted that share of Preferred Stock into
common stock immediately prior to the record date for that
distribution or, in the absence of a record date,
immediately prior to the date of that distribution.
(d) Market Price of the Common Stock. For all
purposes of this section 3 and section 4, the "market price of
the common stock" at any date shall be determined as follows:
(i) if the common stock is publicly traded at the time of
determination, the average of the closing prices for the common
stock on all domestic securities exchanges on which such security
may at the time be listed (it being understood that, for these
purposes, the NASDAQ National Market System is deemed an
"exchange") or, if there have been no sales on any such exchange
on such day, the average of this highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ System
as of 4:00 p.m., New York time, on such day, or if on such day
such security is not quoted in the NASDAQ System, the average of
the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which "market
price of the common stock" is being determined and the twenty
(20) consecutive business days prior to such day (a "business
day" being a day that is not a legal holiday or other day on
which banking institutions or any national securities exchanges
are authorized by law or executive order to close); or (ii) if
the common stock is not publicly traded at the time of
determination then, solely for purposes of this section 3, the
fair value of the common stock as determined by the Company's
board of directors, taking into account their fiduciary duties
(including to the holders of the Preferred Stock as if
converted).
(e) Immaterial Adjustments. Notwithstanding the
foregoing provisions of this section 3, (i) no adjustment in the
number of shares of common stock into which any share of
Preferred Stock is convertible shall be required, unless the
adjustment would require an increase or decrease in the number of
shares of at least 1% and (ii) no adjustment in either the Series
A-1 Conversion Price or Series B Conversion Price shall be
required, unless the adjustment would require an increase or
decrease of at least $.001 per share; provided, however, that any
adjustments that, by reason of this section 3(e), are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. On any conversion date,
all adjustments so carried forward shall be made at the time of
such conversion. All calculations under this section 3 shall be
made to the nearest $.001 or the nearest 1/10,000 of a share, as
the case may be.
(f) Notice of Adjustment. Whenever any adjustment is
required in the shares into which any share of Preferred Stock is
convertible, the Company shall promptly (i) file with each office
or agency maintained by the Company for the transfer of Preferred
Stock a statement describing in reasonable detail the adjustment
and the method of calculation used (which, at the time of such
filing, shall be certified as correct by the Company's
independent accountants) and (ii) cause a notice of the
adjustment, setting forth the adjusted Series A-1 Conversion
Price or Series B Conversion Price, as the case may be, to be
mailed to the holders of record of shares of Preferred Stock at
their respective addresses on the books of the Company.
(g) No Rights After Conversion. All shares of
Preferred Stock that shall have been surrendered for conversion
in accordance with this section 3 or section 4 shall no longer be
deemed to be outstanding and all rights with respect to those
shares, including the rights, if any, to receive notices and to
vote, shall cease, except for the right of the holders, subject
to the provisions of this section 3, to receive shares of common
stock upon the conversion and any accumulated and accrued but
unpaid dividends.
(h) Certain Notices. In the event that:
(i) the Company shall take action to make any
distribution to the holders of its common stock;
(ii) the Company shall take action to effect a Pro
Rata Rights Offering;
(iii) the Company shall take action to accomplish
any capital reorganization, or reclassification of the
capital stock of the Company (other than a subdivision,
split or combination of its common stock), or a
consolidation or merger to which the Company is a party
and for which approval of any stockholders of the
Company is required, or the sale or transfer of all or
substantially all the assets of the Company; or
(iv) the Company shall take action or attempt to
take action to cause a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then the Company shall (A) in case of any such distribution or
Pro Rata Rights Offering, at least 30 days prior to the date or
expected date on which the books of the Company shall close or a
record shall be taken for the determination of holders entitled
to the distribution or rights, and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up, at least 30
days prior to the date or expected date when that event shall
take place (for the avoidance of doubt, it being understood that,
in each such case, the shares of Preferred Stock shall continue
to be convertible at any time during the applicable 30-day (or
longer) period), cause written notice thereof to be mailed to
each holder of shares of Preferred Stock at the holder's address
on the books of the Company. Any notice under clause (A) also
shall specify the date or expected date on which the holders of
common stock shall be entitled to the distribution or rights, and
any notice under clause (B) also shall specify the date or
expected date on which the holders of common stock shall be
entitled to exchange their common stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up.
(i) Common Stock. For purposes of this section 3, the
term "common stock" shall mean (i) the class of stock designated
as the common stock of the Company on the date of this
Certificate of Designations or (ii) any other class of stock
resulting from successive changes or reclassifications of such
common stock consisting solely of changes in par value, or from
no par value to par value, or from par value to no par value. If
at any time as a result of an adjustment pursuant to section 3(c)
a holder of shares of Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Company other than shares of common stock, thereafter the number
of such other shares so receivable upon conversion of shares of
Preferred Stock shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the common stock in section 3(c),
and the other provisions of this section 3 with respect to the
common stock shall apply on like terms to any such other shares.
(j) Fractions. No fractional share of common stock,
or scrip representing a fractional share, shall be issued upon
the conversion of any Preferred Stock. If more than one share of
Preferred Stock shall be surrendered for conversion at one time
by the same holder, the number of full shares of common stock
issuable upon conversion shall be computed on the basis of the
aggregate number of shares so surrendered. If any fractional
interest in a share of common stock would be deliverable upon the
conversion of any shares of Preferred Stock, the Company shall
pay, in lieu of the fractional share, in cash that fraction of
the market price of the common stock on the business day
immediately preceding the conversion.
(k) Reserved Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of
its authorized but unissued stock, for the purpose of effecting
the conversion of the shares of Preferred Stock, a number of its
authorized shares of common stock sufficient to effect the
conversion of all outstanding shares of Preferred Stock into
common stock at any time; provided, however, that nothing in this
section 3(k) shall preclude the Company from satisfying its
obligations in respect of the conversion of shares by delivery of
shares of common stock then held in the treasury of the Company.
The Company shall, from time to time, use its best efforts to
cause the authorized number of shares of common stock to be
increased, if the aggregate number of authorized shares of common
stock remaining unissued and the issued shares of common stock in
its treasury (other than any shares of common stock reserved for
issuance in any other connection) shall not be sufficient to
permit the conversion of all outstanding shares of Preferred
Stock into common stock.
4. Automatic Conversion
(a) General
(i) In the event the Company consummate a
Qualifying Offering, all outstanding shares of Preferred Stock
shall be converted into shares of common stock simultaneously
with the first closing of the Qualifying Offering, automatically
and without any further action by any person. The number of
shares of common stock into which each share of Series A-1
Preferred Stock shall be converted shall be the number obtained
by dividing $90.00 by the Series A-1 Conversion Price then in
effect and the number of shares of common stock into which each
share of Series B Preferred Stock shall be converted shall be the
number obtained by dividing $100.00 by the Series B Conversion
Price then in effect.
(ii) As used in this Certificate of Designations,
the term "Qualifying Offering" means a fully-distributed, firm
commitment underwritten public offering of shares of common stock
of the Company registered under the Securities Act of 1933, (A)
in which (y) the gross proceeds to the Company (i.e., gross
proceeds without any deduction for expenses or for underwriting
commissions or concessions) are at least $15,000,000 and (z) the
initial price to the public per share of common stock is at least
$5.00, as appropriately adjusted to reflect all subdivisions,
splits, share dividends or combinations of the common stock or
any Pro Rata Rights Offering (any such subdivision, split, share
dividend, combination or Pro Rata Rights Offering, a
Recapitalization Event") occurring after the date of this
Certificate of Designations and (B) the result of which is the
inclusion of the common stock in the NASDAQ National Market
System or listing of the common stock on the New York Stock
Exchange.
(iii) Immediately after the conversion under this
section 4, the Company shall give a written notice of the
conversion (the "Automatic Conversion Notice") to all the former
holders of record of shares of Preferred Stock at their
respective addresses on the books of the Company. The Automatic
Conversion Notice shall set forth the instructions for effecting
the exchange of certificates, which shall be as nearly the same
as practicable as under section 3, the terms of which (including,
without limitation, sections 3(g) and 3(j)) are, except as
otherwise expressly provided in this section 4, incorporated in
this section 4, mutatis mutandis.
(iv) Notwithstanding anything to the contrary in
this section 4(a) and except as provided in section 3(c)(xi), no
dividend or other distribution of any nature whatsoever payable
in respect of the common stock after the conversion under this
section 4 shall be paid (but shall accrue) to a holder of any
unsurrendered certificate evidencing shares of Preferred Stock,
unless the certificate or certificates evidencing the holder's
shares of Preferred Stock so converted are delivered to the
Company in accordance with the Automatic Conversion Notice or the
holder notifies the Company that the certificate or certificates
have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Company to indemnify the Company
against any resulting loss it incurs. Thereupon, (A) there shall
be issued and delivered to the holder, in the holder's name shown
on the certificate or certificates, a certificate or certificates
evidencing the number of shares of common stock into which the
holder's shares of Preferred Stock were converted (together with
any cash payment in lieu of a fractional share) and (B) the
holder shall be entitled to payment of the amount referred to in
the immediately preceding sentence.
(b) Notwithstanding anything to the contrary in this
Certificate of Designations, upon any conversion of shares of
Preferred Stock into shares of common stock pursuant to this
section 4, the Company shall pay, on the conversion date, all
accumulated and accrued but unpaid dividends in cash; provided,
however, that if, in connection with the Qualifying Offering, the
underwriter advises the Company in writing that such payment
would materially and adversely affect the Qualifying Offering, in
lieu of the immediate payment of such accumulated and accrued but
unpaid dividends to the holder, the Company shall, within 30 days
after delivering the Automatic Conversion Notice, (i) pay the
holder its pro rata share, based upon the aggregate amount of
accumulated and accrued but unpaid dividends owed by the Company
to all holders of Preferred Stock and the amount of such
dividends owed to such holder, the greatest of (A) the amount the
underwriter advises would not so affect the Qualifying Offering,
(B) 5% of the net proceeds to the Company of the Qualifying
Offering (i.e., gross proceeds less deductions for all expenses
and underwriting commissions and concessions), but not more than
all accumulated and accrued but unpaid dividends, or (C) 10% of
the then accumulated and accrued but unpaid dividends, and (ii)
issue and deliver to each holder a promissory note in the form of
exhibit 4(b) hereto, executed by the Company and payable to the
order of that holder in the principal amount of the balance of
that holder's accumulated and accrued dividends; provided that,
at the option of such holder and in lieu of the receipt of such a
promissory note in the form of exhibit 4(b) hereto, such holder
may elect, by written notice delivered to the Company no later
than 20 days after the Company's delivery of the Automatic
Conversion Notice, to receive the number of shares of common
stock equal to the principal amount of such note divided by the
initial price to the public per share of the common stock sold in
the Qualifying Offering. A certificate representing such shares
of common stock shall be delivered by the Company to such holder
as soon as practicable after the Company's receipt of such
holder's election to receive such shares of common stock, but in
no event later than 20 days after such receipt.
(c) Any note issued pursuant to sections 2(c),
3(b)(iii) or 4(b) may be converted at any time prior to payment
in full thereof, at the option of the holder of such note, by
written notice given to the Company by such holder, into the
number of shares of common stock equal to (i) the sum of the then
outstanding principal amount of such note and any accrued
interest thereon, divided by (ii) the market price of the common
stock as of the date notice of such election is given by such
holder; provided, however, that if such notice is given within 20
business days after consummation of the Qualifying Offering, the
number of shares of common stock to be issued hereunder shall be
determined by dividing the amount determined under clause (i) by
the initial price to the public per share of the common stock
sold in the Qualifying Offering. A certificate representing such
shares of common stock shall be delivered by the Company to such
holder as soon as practicable after the Company's receipt of such
holder's election to receive such shares of common stock and the
Company's receipt and cancellation of such note, but in no event
later than 20 days after receipt of such election and note.
5. Liquidation. In the event of any liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary, the holders of outstanding shares of Preferred Stock
shall be entitled to receive for each such share payment in cash
equal to the sum of (a) $90.00 in the case of Series A-1
Preferred Stock (the "Series A-1 Liquidation Value") and $100.00
in the case of the Series B Preferred Stock (the "Series B
Liquidation Value"), plus in each case an amount equal to all
accrued but unpaid dividends (but excluding accumulated
dividends) to the date of payment, or final payment, if there is
more than one payment (the "Series A-1 Liquidation Value", the
"Series B Liquidation Value", and the amount of such accrued and
unpaid dividends shall collectively constitute the "Liquidation
Value"), plus (b) an amount (the "Accumulated Dividend Amount")
equal to all accumulated but unpaid dividends to the Dividend
Payment Date immediately preceding the date of payment or final
payment, as the case may be, and no more. As to distribution
upon liquidation, dissolution or winding-up, the Series A-1
Preferred Stock and Series B Preferred Stock shall rank pari
passu with each other and shall rank senior to the common stock
of the Company. An amount equal to the sum of the Liquidation
Value plus the Accumulated Dividend Amount shall be paid to the
holders of Preferred Stock before any payment or distribution
shall be made to the holders of shares of common stock of the
Company. The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the assets of the Company
(unless, in connection therewith, the liquidation, dissolution or
winding-up of the Company is specifically approved), or the
merger or consolidation of the Company into or with any other
corporation, or the merger of any other corporation into it, or
any purchase or redemption of shares of stock of the Company of
any class or series, shall not be deemed to be a liquidation,
dissolution or winding-up of the Company for purposes of this
section 5. Nothing in this section 5 shall be deemed to limit in
any way the right of the holders of shares of Preferred Stock to
convert any or all of those shares at any time before or
simultaneously with the payment to all those holders in respect
of those shares of an amount equal to the Liquidation Value plus
the Accumulated Dividend Amount in respect of all those shares.
After the distributions described above have been paid, the
remaining assets of the Company available for distribution to
stockholders shall be distributed among the holders of the
Preferred Stock, any other series or class of preferred stock
entitled to a share of the remaining assets of the Company and
common stock pro rata based on the number of shares of common
stock held by each (assuming full conversion of all such
Preferred Stock or such other series or class of preferred
stock).
6. Voting; Governance.
(a) General. Except as otherwise provided in this
section 6 and in section 7 or as required by law, the holders of
Preferred Stock shall vote with the holders of common stock (and
any other series or class of preferred stock entitled to so vote)
as a single class and shall be entitled to one vote for each
share of common stock into which the shares of Preferred Stock so
held would be convertible on the record date for the vote of
stockholders.
(b) Board of Directors.
(i) Subject to section 6(b)(ii), the board of
directors of the Company shall have seven members, of which the
holders of shares of common stock shall have the right to elect
four and the holders of shares of Preferred Stock shall have the
right to elect three (the directors so elected by the holders of
the Preferred Stock, the "Elected Preferred Directors").
(ii) Upon the occurrence of a Triggering Event,
(A) the board of directors shall be increased to 11 members, (B)
the newly created directorships resulting from that increase
shall be filled by individuals elected by the holders of
Preferred Stock (those so elected, the "Expansion Preferred
Directors") and (C) the board of directors shall continue to have
11 members, of which holders of shares of common stock shall have
the right to elect four, and of which holders of shares of
Preferred Stock shall have the right to elect three Elected
Preferred Directors and, until the first anniversary of the cure
of the Triggering Event the occurrence of which gave rise to the
provisions of this subparagraph (ii), four Expansion Preferred
Directors. One year after all Triggering Events shall have been
cured, the board of directors shall be reduced to seven directors
and the Expansion Preferred Directors shall cease to be
directors. Notwithstanding the foregoing the occurrence of the
Triggering Events in Section 2(e)(iv) or 2(e)(vi) shall not cause
the increase in the size of the board of directors or the other
foregoing provisions of this Section 6(b)(ii) to be implemented.
(c) Procedures
(i) Each director of the Company shall hold
office for a term expiring at the next annual meeting of
stockholders. Any vacancy caused by the death or resignation of
a Preferred Director may be filled only by the holders of
Preferred Stock entitled to vote for such Preferred Director. A
special meeting of the holders of the Preferred Stock entitled to
vote with respect to filling the vacancy shall be called and held
as promptly as practicable after any such death or resignation at
the direction of a majority of the board of directors, and in any
event shall be called within ten days, to be held within 15 days,
after receipt of a written request by the holders of record of at
least 50% of the then outstanding shares of Preferred Stock so
entitled to vote. In connection with any special meeting to be
held for the purpose of electing a Preferred Director to fill a
vacancy, only such holders of the Preferred Stock entitled to
vote for such Preferred Director shall be notified and be
permitted to participate at such meeting. If any special meeting
of the holders of Preferred Stock required to be called for the
election of directors pursuant to this section 6(c) shall not
have been called within ten days after the request therefor has
been made upon the secretary of the Company, the holders of
record of at least 50% of the then outstanding shares of the
Preferred Stock so entitled to vote may designate in writing one
of their number to call the meeting, and the meeting may be
called by the person so designated upon notice in accordance with
the notice required for annual meetings of stockholders. Any
holder of shares of Preferred Stock so designated shall have
access to the stock record books of the Company for the purpose
of so calling a special meeting. The Company shall pay the
reasonable expenses of calling and holding any such meeting.
(ii) Any special meeting of the holders of shares
of Preferred Stock to vote for the election of directors pursuant
to this section 6(c) shall be held in the city in which the next
preceding annual meeting of stockholders of the Company was held.
At a special or annual meeting for the election of directors by
the holders of shares of Preferred Stock, the presence in person
or by proxy of the holders of 50% of the outstanding shares of
Preferred Stock entitled to vote thereon shall constitute a
quorum. In connection with any special meeting to be held for
the purpose of electing a Preferred Director to fill a vacancy,
only such holders of the Preferred Stock entitled to vote for
such Preferred Director shall be notified and be permitted to
participate at such meeting. A majority of the holders of the
shares of Preferred Stock entitled to vote thereon present in
person or by proxy shall have the power to adjourn the meeting
for the purpose of such election, from time to time without
notice, other than announcement at the meeting, until a quorum
shall be present.
(iii) In connection with any vote for the Preferred
Directors, each holder of Preferred Stock entitled to vote
thereon as provided herein shall be entitled to one vote per
share, and the nominees receiving a plurality of the votes
entitled to be cast shall be elected.
(d) Certain Major Decisions. The board of directors
of the Company shall act by majority vote of the directors with
any interested parties in affiliated transactions being recused
(that is, by a majority of the disinterested directors in
accordance with Section 144 of the DGCL). Each director shall
have one vote on all matters to be voted upon by the board of
directors. In determining the presence of a quorum at all
meetings of the board of directors, a quorum shall consist of a
majority of the total number of directors. Notwithstanding the
foregoing, the unanimous consent of the Elected Preferred
Directors and if there are any Expansion Preferred Directors then
on the Board, the consent of six-sevenths (6/7's) of the total
number of the Elected Preferred Directors and Expansion Preferred
Directors, if any (collectively, the "Preferred Directors"),
shall be required to approve any action specified in section 7
and, in addition, any of the following (it being understood that,
notwithstanding anything to the contrary in this certificate, no
such action may be approved at any time there is any vacancy
among the Elected Preferred Directors):
(i) disposition or encumbrance of a material
portion of the assets or business of the Company or any of its
subsidiaries, including, for these purposes, any sale of
securities of any of the Company's subsidiaries, affiliates or
joint ventures (by the Company or any such entities), except as
set forth in Schedule 3.2.7 to the Series B Purchase Agreement;
(ii) formation of any joint venture, partnership
or other business combination by the Company or any of its
subsidiaries;
(iii) expenditures by the Company or any subsidiary
in a single transaction or a series of related transactions in
excess of $500,000, or commitments to make any such expenditures;
(iv) dividends or distributions, whether in cash
or otherwise, in respect of the Company's common stock, or any
redemption, purchase or other acquisition of any capital stock of
the Company (or securities convertible into or exchangeable for
such capital stock) or authorization, issuance or grant of any
securities of the Company or any subsidiary, other than the put
rights referred to in Schedule 3.2.7 to the Series B Purchase
Agreement;
(v) selection of an underwriter or placement
agent of any financing involving the Company's or its
subsidiaries, securities;
(vi) establishment of any committees of the board
of directors (other than the compensation and audit committees);
(vii) any transaction with an affiliate or an
associate of the Company or any subsidiary (other than a direct
or indirect wholly-owned subsidiary of the Company) (it being
understood that the transactions contemplated by this clause
(vii) do not include compensation and benefit arrangements with
employees, subject to section 6(d)(ix)), except those
transactions contemplated by the Series B Purchase Agreement or
set forth on Schedule 3.2.20 to the Series B Purchase Agreement;
(viii) incurrence by the Company or any subsidiary
of any indebtedness for borrowed money (in addition to
indebtedness outstanding on the date of this certificate),
including obligations under capital leases, or guarantees of any
such indebtedness of another person or entity, or the issuance of
any securities of the Company or any subsidiary, except for the
financing referred to in Schedule 3.2.9 to the Series B Purchase
Agreement;
(ix) change the compensation or benefits to any
officer, director or employee of the Company or any subsidiary
from the amounts in effect at June 26, 1995;
(x) any amendment or other change in any
insurance policy covering the Company or any subsidiary on the
date of this certificate, or any change in the identity of any
insurer;
(xi) except as set forth on Schedule 3.2.11 to the
Series B Purchase Agreement any leasehold commitment involving
consideration or a liability, contingent or otherwise, in excess
of $50,000 in the aggregate;
(xii) any change in the accounting policies or
procedures of the Company or any subsidiary or any change in the
Company's independent accountants;
(xiii) any other transaction or series or related
transactions which any party's total commitments and obligations
exceed $50,000; and
(xiv) any change in the Business Plan (as defined
in the Series B Purchase Agreement), including, without
limitation, the Company or any subsidiary, directly or indirectly
through an affiliate or joint venture, entering into any line of
business other than as contemplated by the Business Plan, or the
acquisition or creation of any other business or entity.
(e) Certain Committees.
(i) the board of directors shall establish and
maintain a compensation committee comprised of three directors,
none of whom may be an employee of the Company or any of its
subsidiaries and two of whom shall be Preferred Directors
selected by a majority of the Preferred Directors. The
compensation committee shall be responsible for recommending to
the full board of directors all stock option grants, bonuses and
other compensation arrangements for executives and key employees
and loans and other non-salary payments and other benefits and
arrangements with employees and affiliates and associates of the
Company. The compensation committee shall have such additional
powers and duties as the board of directors from time to time
determines.
(ii) The board of directors shall establish and
maintain an audit committee comprised of three directors, one of
whom shall be a senior executive officer of the Company (but not
the chief financial or chief accounting officer) and two of whom
may not be employees of the Company or any of its subsidiaries,
and shall be Preferred Directors selected by a majority of the
Preferred Directors. The audit committee shall be responsible
for selecting the Company's independent auditors and reviewing
their audit, as well as reviewing and approving the Company's
internal controls and accounting systems. The audit committee
shall have such additional powers and duties as the board of
directors from time to time determines.
(iii) In the event that the group of directors of
the Company that are specified to select a committee member
pursuant to section 6(f)(i) or 6(f)(ii) is deadlocked over its
selection of such committee member for more than 30 days, the
full board of directors shall select such committee member from
among such group of directors.
(f) Certain Expenses. The Company shall from time to
time pay (i) all reasonable out-of-pocket expenses incurred by
directors in attending meetings of the board of directors and its
committees, and (ii) the reasonable fees and expenses of two
counsel(s) selected by the Preferred Directors from time to time
to represent them as such; that counsel may, at the Preferred
Directors' election, attend any meeting of the board of directors
or any committee that includes a Preferred Director.
7. Class Voting Upon Certain Events. In addition to
such other vote, if any, as may be required by law or provided by
this Certificate of Designations, the consent of the holders of
at least 75% of the shares of the Preferred Stock at the time
outstanding, voting together as a single class, given at a
meeting (or by a written consent in lieu of a meeting) shall be
necessary for effecting or validating each of the following:
(a) authorization or creation of any other class or
series of stock, if such class or series ranks, or any series
thereof could rank, prior to or on a parity with any of the
Preferred Stock;
(b) amendment, alteration, waiver or repeal of the
provisions of the certificate of incorporation of the Company
(including this certificate) or the by-laws of the Company (for
the avoidance of doubt, it being understood that holders of at
least 75% of the shares of Preferred Stock at the time
outstanding, voting together as a single class, may effect or
validate any amendment of this Certificate of Designations
(including any amendment that changes the provisions of section 3
or 4) and may waive any provision of this Certificate of
Designations and may consent to any action or inaction that
would, in the absence of such consent, violate this Certificate
of Designations or constitute a Triggering Event);
(c) merger, consolidation or other business
combination of the Company with or into any other corporation or
recapitalization of the Company; or
(d) sale of all or substantially all the assets of the
Company.
8. Preemptive Rights. If, at any time prior to a
Qualified Offering, the Company proposes to issue any securities
to any person or entity (other than pro rata issuances of
securities to all holders of common stock, issuances of Options
to employees and issuances of common stock pursuant to Options
and Convertible Securities described on schedule 3.2.7 to the
Series B Purchase Agreement) (a "Proposed Issuance"), each holder
of shares of Preferred Stock or common stock issued upon
conversion thereof shall have the right (which the holder may
exercise in whole or in part) to purchase, upon the same terms, a
proportionate quantity of those securities in the proportion that
the aggregate number of shares of common stock (assuming exercise
of all Warrants (as defined in the Series A Investment Agreement
and that certain Note Purchase Agreement (the "Note Purchase
Agreement") dated as of June 28, 1994 relating to the Company's
15% Convertible Notes due December 31, 1994) and Warrants (as
defined in the Series B Purchase Agreement) and conversion of all
Preferred Stock) then beneficially owned (as that term is used in
the rules and regulations under the Securities Exchange Act of
1934) and that were acquired under either the Series A Investment
Agreement, the Series B Purchase Agreement or the Exchange
Agreement by that party bears to the total number of shares of
common stock (assuming exercise of all Warrants (as defined in
the Series B Purchase Agreement, Series A Investment Agreement
and Note Purchase Agreement)) and conversion of all Preferred
Stock) of the Company then beneficially owned and that were
acquired under such Investment Agreement, Exchange Agreement and
Purchase Agreement by all holders of shares of Preferred Stock or
common stock issued upon conversion thereof. The Company shall
give notice to each holder setting forth the identity of the
proposed purchaser and the time, which shall not be fewer than 45
days and not more than 60 days, within which, and the terms upon
which, each holder may elect, by written notice given to the
Company in accordance with the Company's notice to each holder,
to purchase the securities, which terms shall be the same as the
terms upon which the proposed purchaser may purchase the
securities. If there is any change in any terms of the Proposed
Issuance, the holders shall have no further rights with respect
to that Proposed Issuance, and the provisions of this section 8
shall again apply to the Proposed Issuance, as so changed, as if
the Proposed Issuance, as so changed, were being proposed
initially as the Proposed Issuance. If any holder (a "Shortfall
Purchaser") wishes to purchase a quantity of securities greater
than the holder's proportionate quantity and any other holder
wishes to purchase fewer than that holder's proportionate
quantity of securities (a "Shortfall"), the Shortfall Purchaser
may (in accordance with an election that may be made pursuant to
the Company's notice to each holder) elect to purchase any or all
of the aggregate amount of all the Shortfalls in the proportion
that the amount of Shortfalls specified by the Shortfall
Purchaser in the election to purchase securities bears to the
aggregate amount of all the Shortfalls specified by all Shortfall
Purchasers in all the election to purchase securities. Any
securities not purchased by the holders of shares of Preferred
Stock under this section 8 may thereafter be sold to the proposed
purchaser at any time within 90 days after the expiration of that
45- or 60-day period on the same terms as those upon which
holders of shares of Preferred Stock were entitled to purchase
the securities.
9. Retirement of Shares. Shares of Preferred Stock
that are converted into shares of common stock as provided in
this Certificate of Designations or otherwise acquired by the
Company in any manner shall be permanently retired and shall not
under any circumstances be reissued. The Company shall from time
to time take such appropriate corporate action as may be
necessary to reduce the authorized Preferred Stock accordingly.
10. Increase or Decrease in Shares of the Series.
Subject to the provisions of sections 6 and 7, the board of
directors is authorized to adopt, from time to time, a resolution
or resolutions providing for an increase or decrease in the
number of shares constituting Series A-1 Preferred Stock or
Series B Preferred Stock, but no such decrease shall reduce at
any time the number of shares of Preferred Stock at the time
outstanding.
11. Transfer Agent, Conversion Agent and Registrar.
The Company shall, as long as any shares of Preferred Stock are
outstanding, maintain an office or agency where the shares may be
presented for registration of transfer and exchange and for
conversion.
12. Governmental Approvals; Listing. If any shares of
common stock that would be issuable upon conversion of shares of
Preferred Stock require registration with or approval of any
governmental authority before the shares may be issued upon
conversion, the Company shall use its best efforts as
expeditiously as possible to cause the shares to be duly
registered or approved, as the case may be. The Company shall
endeavor to list the shares of (or depository shares representing
interests in) common stock required to be delivered upon
conversion of shares of Preferred Stock prior to such delivery
upon the principal national securities exchange, if any, upon
which the outstanding common stock is listed at the time of
delivery.
13. Certain Conflicts. To the extent any provision of
this Certificate of Designations conflicts, or is otherwise
inconsistent, with a provision of the Company's by-laws, the
provision of this Certificate of Designations shall be given
effect, and the by-laws shall be deemed amended accordingly.
14. Action by Consent Without a Meeting. Any action
required or permitted to be taken by holders of shares of
Preferred Stock at any meeting of shareholders may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by holders of shares of Preferred Stock having not fewer
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares of
Preferred Stock entitled to vote were present and voted and such
consent bearing the date of the signature of each holder of
Preferred Stock Signing the consent is delivered to the
registered office of the Company in the State of Delaware, its
principal place of business or the Secretary of the Company. Such
consent if less than unanimous consent, shall be delivered to
those holders of shares of Preferred Stock who have not consented
in writing.
15. Notice. Any notice, request, claim, demand,
document or other communication hereunder to any party shall be
effective when delivered (or upon refusal of receipt) and shall
be in writing and delivered personally or sent by telex or
telecopy (with such telex or telecopy confirmed promptly in
writing sent by first class mail), or first class mail, or other
similar means of communication, as follows:
(i) if to the Company, addressed to American
Communications Services, Inc., 000 Xxxxxxxx Xxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxx Xxxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxx;
(ii) if to a holder of Preferred Stock, to the
address of such holder set forth in the stock records of the
Company.
All such communications shall be deemed to have been
delivered when so delivered by hand or sent by telex (answer back
received) or telecopy, or five business days after being so
mailed.
Date: __________________, 1995
/s/ Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman [and Chief Executive
Officer]
ATTEST:
/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Secretary
Exhibit 2(c)
PROMISSORY NOTE
Dated January 1, 1998
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[accumulated and accrued
dividends through December 31, 1997) and to pay simple interest
(computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as the case may be), on the unpaid
principal of this note from the date of this note until that
principal sum shall be paid in full at the rate of 9% per year
(except that, upon the occurrence and during the continuance of a
Triggering Event (as defined in the Amended and Restated
Certificate of Designation relating to the Borrower's Series A-1
Preferred Stock and Series B Preferred Stock (the "Certificate of
Designation")), the rate of simple interest shall be 18% per
year).
Payments of principal shall be made in eight equal
installments, together with all accrued interest on the principal
amount from time to time outstanding to the date of payment, on
the last day of each calendar quarter after the date of this
note. All payments shall be made in lawful money of the United
States to the Lender at its address on the books of the Borrower
at the date of payment or, at the Lender's election, by wire
transfer in immediately available funds to such account or
accounts as the Lender may designate in writing to the Borrower
from time to time.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs and is
continuing, holders of 25% or more of the then outstanding
principal amount of the promissory notes issued by the Borrower
pursuant to sections 2(c), 3(b) (iii) and 4(b) of the Certificate
of Designation (such promissory notes, including this note,
collectively, the "Notes"), by notice to the Borrower, may
declare the entire unpaid principal amount of all the Notes and
all accrued and unpaid interest on all the Notes immediately due
and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificate(s) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note shall be governed by and construed in
accordance with the law of the state of New York applicable to
agreements made and to be performed wholly in New York.
The Borrower irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the
Southern District of New York for the purposes of any suit,
action or other proceeding arising out of this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) shall be effective service of process for any
action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note in (a)
the Supreme Court of the State of New York, New York County, or
(b) the United States District Court for the Southern District of
New York, and further irrevocably and unconditionally waives and
agrees not to plead or claim in any such action, suit or
proceeding brought in any such court that such action, suit or
proceeding has been brought in an inconvenient forum.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: ________________________________
Name:
Title:
Exhibit 3(b)(iii)
PROMISSORY NOTE
Dated (conversion date)
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[accumulated and accrued
dividends through the conversion date] and to pay simple interest
(computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as the case may be), on the unpaid
principal of this note from the date of this note until that
principal sum shall be paid in full at the rate of 9% per year
(except that, upon the occurrence and during the continuance of a
Triggering Event (as defined in the Amended and Restated
Certificate of Designation relating to the Borrower's Series A-1
Preferred Stock and Series B Preferred Stock (the "Certificate of
Designation")), the rate of simple interest shall be 18% per
year).
Payments of principal, including, for these purposes,
all accrued interest through December 31, 1997 (the sum of such
principal and accrued interest, the "New Principal"), shall be
made in eight equal installments, together with all accrued
interest on the New Principal from time to time outstanding to
the date of payment, on the last day of each calendar quarter,
commencing March 31, 1988. All payments shall be made in lawful
money of the United States to the Lender at its address on the
books of the Borrower at the date of payment or, at the Lender's
election, by wire transfer in immediately available funds to such
account or accounts as the Lender may designate in writing to the
Borrower from time to time. For purposes of the following two
paragraphs, the term "principal amount" at any date means (a) at
all times on or before December 31, 1997, the original principal
amount, together with all accrued interest to that date, and (b)
thereafter, the New Principal.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs after
December 31, 1997 and is continuing, holders of 25% or more of
the then outstanding principal amount of the promissory notes
issued by the Borrower pursuant to sections 2(c), 3(b) (iii) and
4(b) of the Certificate of Designation (such promissory notes,
including this note, collectively, the "Notes"), by notice to the
Borrower, may declare the entire unpaid principal amount of all
the Notes and all accrued and unpaid interest on all the Notes
immediately due and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificate(s) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note shall be governed by and construed in
accordance with the law of the state of New York applicable to
agreements made and to be performed wholly in New York.
The Borrower irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the
Southern District of New York for the purposes of any suit,
action or other proceeding arising out of this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) shall be effective service of process for any
action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note in (a)
the Supreme Court of the State of New York, New York County, or
(b) the United States District Court for the Southern District of
New York, and further irrevocably and unconditionally waives and
agrees not to plead or claim in any such action, suit or
proceeding brought in any such court that such action, suit or
proceeding has been brought in an inconvenient forum.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: _________________________________
Name:
Title:
EXHIBIT 4(b)
PROMISSORY NOTE
Dated [conversion date]
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[balance of holder's accumulated
and accrued dividends through the conversion date] and to pay
simple interest (computed on the basis of the actual number of
days elapsed in a year of 365 or 366 days, as the case may be),
on the unpaid principal of this note from the date of this note
until that principal sum shall be paid in full at the rate of 9%
per year (except that, upon the occurrence and during the
continuance of a Triggering Event (as defined in the Amended and
Restated Certificate of Designation relating to the Borrower's
Series A-1 Preferred Stock and Series B Preferred Stock (the
"Certificate of Designation")), the rate of simple interest shall
be 18% per year).
Payments of principal shall be made in eight equal
installments, together with all accrued interest on the principal
amount from time to time outstanding to the date of payment, on
the last day of each calendar quarter after the date of this
note. All payments shall be made in lawful money of the United
States to the Lender at its address on the books of the Borrower
at the date of payment or, at the Lender's election, by wire
transfer in immediately available funds to such account or
accounts as the Lender may designate in writing to the Borrower
from time to time.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs and is
continuing, holders of 25% or more of the then outstanding
principal amount of the promissory notes issued by the Borrower
pursuant to sections 2(c), 3(b)(iii) and 4(b) of the Certificate
of Designation (such promissory notes, including this note,
collectively, the "Notes"), by notice to the Borrower, may
declare the entire unpaid principal amount of all the Notes and
all accrued and unpaid interest on all the Notes immediately due
and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificates) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note shall be governed by and construed in
accordance with the law of the state of New York applicable to
agreements made and to be performed wholly in New York.
The Borrower irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the
Southern District of New York for the purposes of any suit,
action or other proceeding arising out of this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) shall be effective service of process for any
action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note in (a)
the Supreme Court of the State of New York, New York County, or
(b) the United States District Court for the Southern District of
New York, and further irrevocably and unconditionally waives and
agrees not to plead or claim in any such action, suit or
proceeding brought in any such court that such action, suit or
proceeding has been brought in an inconvenient forum.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: ______________________________
Name:
Title:
