EXHIBIT 10.9
PHASECOM, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
entered into as of August 13, 1999, by and between PHASECOM, INC., a Delaware
corporation (hereinafter the "Corporation"), and ADC TELECOMMUNICATIONS, INC., a
Minnesota corporation (hereinafter the "Investor").
RECITALS
A. The Corporation desires to raise money by the sale of Series C
Convertible Preferred Stock to the Investor.
B. The Investor desires to purchase from the Corporation, and the
Corporation desires to sell to the Investor, that number of shares of Series C
Convertible Preferred Stock as set forth in Section 1.a. herein, on the terms
and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties agree as
follows:
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
a. AUTHORIZATION. The Corporation will authorize on or before the
Closing (see, Section 2.1 (below)) the sale and issuance of its Series C
Convertible Preferred Stock (hereinafter the "Series C Preferred Stock")
constituting ten percent (10%) of the issued and outstanding equity of the
Corporation (the "Purchased Shares"), taking into account as of Closing (as
defined below)(i) the issued and outstanding Common Stock, Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, debt convertible into
equity of the Corporation, options and warrants of the Corporation; and (ii)
issuance of Series C Preferred Stock as contemplated by this Agreement, which
Series C Preferred Stock shall have the rights, privileges and preferences as
set forth in the Amended and Restated Certificate of Incorporation, attached
hereto as Exhibit A (hereinafter, the "Certificate of Incorporation").
b. SALE OF SERIES C PREFERRED STOCK. Subject to the terms and
conditions hereof, the Corporation will issue and sell to the Investor, and the
Investor will purchase from the Corporation the Purchased Shares, for an
aggregate price of Four
Million Nine Hundred Fifty Thousand Dollars ($4,950,000)(the "Purchase
Price").
2. ISSUANCE AND PAYMENT.
a. CLOSING. Subject to the terms and conditions hereof, the
closing of the purchase and sale of the Purchased Shares (hereinafter the
"Closing") shall be held (via facsimile transmittal and wire transfers or
delivery of a cashier's check of a California domiciled bank) at the offices of
the Corporation's counsel, Bay Venture Counsel, LLP, located at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, on, or about, August 31, 1999, at 10:00
a.m., local time, or at such other time and place upon which the Corporation and
the Investor shall agree (the date of the Closing is hereinafter referred to as
the "Closing Date").
b. DELIVERY. At Closing, the Corporation and Investor shall
deliver to each other an executed copy of (i) this Agreement; and (ii) the
Registration Rights Agreement, substantially in the form of Exhibit B attached
hereto (the "Registration Rights Agreement"). At Closing, Investor shall deliver
to the Corporation the Purchase Price by cashier's check payable to the
Corporation, or by wire transfer pursuant to the Corporation's instructions. At
Closing, the Corporation will deliver to the Investor a copy of a certificate
representing the Purchased Shares, registered in the name of Investor, or its
nominee (the "Certificate"), against payment of the Purchase Price therefor, and
as within five (5) days after Closing, the Corporation shall deliver to Investor
the original Certificate.
c. CONDITIONS TO CLOSING. Notwithstanding anything to the
contrary contained in this Agreement, the Corporation's obligation to consummate
the transaction contemplated herein shall be contingent upon (i) the acceptance
by Investor of the Disclosure Schedule as defined in Section 3 herein; and (ii)
the Collaboration Agreement between the parties signed on an even date herewith
(the "Collaboration Agreement") being in effect, with no material default by
Investor thereunder, on the Closing Date. The Investor's obligation to
consummate the transaction contemplated herein shall be contingent upon (i) the
approval by Investor of the contents set forth in the Disclosure Schedule; (ii)
the execution of the Voting Agreement in the form attached hereto as Exhibit E;
and (iii) in the event that the Closing does not occur by August 31, 1999,
receipt of a representation by the Corporation certified by an officer of the
Corporation that since the August 31, 1999, there has been no material adverse
effect or change in the prospects, properties, financial condition, operations,
results of operations or business of the Corporation ("Material Adverse
Effect").
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3. CORPORATION'S WARRANTIES. The Corporation hereby represents and
warrants effective as of the Closing, subject to such exceptions as are
specifically disclosed in the disclosure schedules supplied by the Corporation
to Investor and dated as of the Closing Date (collectively, the "Disclosure
Schedule"), as follows:
a. CORPORATE ORGANIZATION AND STANDING. The Corporation is a
corporation duly organized, existing and in good standing under the laws of the
State of Delaware. The Corporation has the requisite corporate power to carry on
its business as presently conducted, and as proposed or contemplated to be
conducted in the future, and to enter into and carry out the provisions of the
Transaction Documents and the transactions contemplated thereby. The Corporation
is presently qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would materially and adversely
affect the Corporation's business. The Corporation has one (1) wholly-owned
subsidiary: PhaseCom, Ltd. ("Subsidiary"). Subsidiary is an entity that is duly
organized, existing and in good standing under the laws of Israel. Subsidiary
has the requisite power to carry on its business as presently conducted, and as
proposed or contemplated to be conducted in the future. Subsidiary is presently
qualified to do business in each jurisdiction where the failure to be so
qualified would materially and adversely affect its business.
b. CORPORATE CAPITALIZATION.
i. Immediately prior to, or simultaneously with, the
Closing, the Corporation's authorized capital stock shall include only two (2)
authorized classes of capital stock consisting of thirty-five million
(35,000,000) shares of Preferred Stock, six million (6,000,000) shares of which
have been designated as Series A Preferred Stock, and fifteen million
(15,000,000) shares of which have been designated as Series B Preferred Stock,
and one hundred million (100,000,000) shares of Common Stock. The Corporation's
stockholders have approved an amendment to the Corporation's Amended and
Restated Certificate of Incorporation to authorize the issuance of Series C
Preferred Stock at least equal to the number of Purchased Shares, with the
rights, designations, powers, preferences, rights, qualifications, limitations
and restrictions as set forth in the Certificate of Incorporation. Except as set
forth in Schedule 3.b.i. attached hereto, (i) no person owns of record or is
known to the Corporation to own beneficially any share of Common Stock, Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock or Series C
Preferred Stock; (ii) no subscription, warrant, option, convertible security, or
other
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right (contingent or otherwise) to purchase or otherwise acquire equity
securities of the Corporation is authorized or outstanding; and (iii) there
is no commitment by the Corporation to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or
asset. Except as provided for in Schedule 3.b.i., the Corporation has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any
of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. All of the outstanding
securities of the Corporation were issued in compliance with all applicable
Federal and state securities laws. As of the Closing, each Share of Series A
Convertible Preferred Stock is convertible into two (2) Shares of Common
Stock, and each share of Series B Convertible Preferred Stock is convertible
into one (1) share of Common Stock. As of the Closing, the Certificate of
Incorporation attached hereto as Exhibit A will be in force and effect,
without further modification or amendments, except for the necessary
information noted therein in brackets.
ii. As of Closing, the Corporation does not have any
declared and unpaid dividends (whether payable in cash, securities or other
consideration).
iii. As of Closing, Investor shall receive that number of
Series C Stock equal to ten percent (10%) of the issued and outstanding equity
of the Corporation, taking into account as of Closing the issued and outstanding
Common Stock, Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, debt convertible into equity of the Corporation, options and
warrants of the Corporation and after giving effect to the recapitalization
described in Section 4.i., below.
c. AUTHORIZATION. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance of the Transaction Documents by the
Corporation, the authorization, sale, issuance and delivery of the Series C
Preferred Stock and the performance of all of the Corporation's obligations
thereunder has been taken or will be taken prior to the Closing, and none of
such actions will violate any provision of law, any order of any court or other
agency of government, the Certificate of Incorporation, or the Bylaws of the
Corporation or any provision of any indenture, agreement or other instrument to
which the Corporation or Subsidiary or any of their respective properties or
assets is bound. The Transaction Documents, when executed and delivered by the
Corporation, shall constitute the valid and binding obligations of the
Corporation,
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enforceable in accordance with their respective terms, except as may be
limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Purchased Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, will be fully paid and
nonassessable, and will have the rights, preferences and privileges described
in the Certificate of Incorporation. The issuance, sale and delivery of the
Purchased Shares (and any shares of Common Stock issuable pursuant to the
conversion of the Purchased Shares) is not subject to any preemptive right of
stockholders of the Corporation or to any right of first refusal or other
right in favor of any person, other that such rights which have been duly,
validly and irrevocably waived in writing. As of the Closing, the corporation
shall have authorized a sufficient number of shares of Common Stock available
for issuance upon conversion of the Purchased Shares. If at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series
C Preferred Stock, the Corporation shall request the shareholders to take
such action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such a number of shares
as shall be sufficient for such purpose. The Purchased Shares and such Common
Stock will be free of any liens or encumbrances, assuming the Investor takes
the Purchased Shares with no notice thereof, other than any liens or
encumbrances created by or imposed upon the Purchased Shares hereunder;
PROVIDED, HOWEVER, that the Purchased Shares (and the Common Stock issuable
upon conversion thereof) may be subject to restrictions on transfer under
state and/or federal securities laws.
d. LITIGATION. There are no actions, proceedings or, to the
Corporation's best knowledge, investigations pending, or any threat thereof,
against or affecting the Corporation which, either individually or in the
aggregate, might result in any Material Adverse Effect or change in the
business, prospects, condition, affairs or operations of the Corporation or in
any of its properties or assets, or in any material impairment of the right or
ability of the Corporation to carry on its business as proposed to be conducted,
and none which questions the validity of any Transaction Document or any action
taken or to be taken in connection therewith, and there is no known basis for
any of the foregoing. The Corporation is not in default with respect to any
order, writ, injunction or decree known to or served upon the Corporation of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign. There
is no
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action or suit by the Corporation pending or threatened against others that
would have a material adverse effect ("Material Adverse Effect") upon the
Corporation. To the best knowledge of the Corporation, the Corporation has
complied in all material respects with all laws, rules, regulations and
orders applicable to its business, operations, properties, assets, products
and services.
e. GOVERNMENTAL CONSENTS; LAWS. To the Corporation's knowledge,
no consent, approval, order, authorization or registration, qualifications,
designation, license, declarations or filings with any Federal or state
governmental authority is required on the part of the Corporation in connection
with the consummation of the transactions contemplated herein, except for
security law filings. There is no existing law, rule, regulation or order, and
the Corporation is not aware of any proposed law, rule, regulation or order,
whether Federal or state, which would prohibit or materially restrict the
Corporation from, or otherwise materially adversely affect the Corporation in,
conducting its business or pursuing its business plan in any jurisdiction in
which it is now conducting business or in which it currently proposes to conduct
business.
f. FINANCIAL STATEMENTS. Attached hereto as Exhibit D is a copy
of the Corporation's audited Consolidated Financial Statements for the fiscal
years ended December 31, 1997 and 1996, the preliminary and unaudited Eight
Quarters Ended December 31, 1998 Consolidated Balance Sheet and the preliminary
and unaudited Consolidated Income Statement for the quarter ended March 31 1999.
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial position of the
Corporation as of each such date and the results of operations for each such
period then ended.
g. PROPRIETARY INFORMATION OF THIRD PARTIES. To the best of the
Corporation's knowledge, no third party has claimed or has reason to claim that
any employee of the Corporation has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or non-disclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Corporation in a
manner such that the Corporation would reasonably expect that such a claim might
be contemplated. To the best of the Corporation's knowledge, no employee of the
Corporation has employed or
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proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to the best of the Corporation's
knowledge, no employee of the Corporation has violated any confidential
relationship which such person may have had with any third party, in
connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed
service of the Corporation, and the Corporation does not believe there will
be any such employment or violation. To the best of the Corporation's
knowledge, none of the execution or delivery or performance of this
Agreement, or the carrying on of the business of the Corporation as officers,
employees or agents by any officer or director of the Corporation, or the
conduct or proposed conduct of the business of the Corporation, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which
any such person is obligated.
h. TAXES. The Corporation has filed all tax returns, Federal,
state, county and local, required to be filed by it, and the Corporation has
paid all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Corporation is obligated to withhold from
amounts owing to employees, consultants, creditors and third parties. All such
taxes with respect to which the Corporation has become obligated pursuant to
elections made by the Corporation in accordance with generally accepted practice
have been paid and adequate reserves have been established for all taxes accrued
but not yet payable. The Federal income tax returns of the Corporation have
never been audited by the Internal Revenue Service or any state revenue or tax
agency. No deficiency or assessment with respect to or proposed adjustment of
the Corporation's Federal, state, county or local taxes is pending or, to the
best of the Corporation's knowledge, threatened. There is no tax lien, whether
imposed by any Federal, state, county or local taxing authority, outstanding
against the assets, properties or business of the Corporation. Neither the
Corporation nor any of its stockholders has ever filed (a) an election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
that the Corporation be taxed as an S Corporation or (b) consent pursuant to
Section 341(f) of the Code, relating to collapsible corporations.
i. CHANGES, DIVIDENDS, ETC. Except for the transactions
contemplated by this Agreement, and except as set forth on Schedule 3.i. hereto,
since the date of the Financial Statements the Corporation has not: (a) incurred
any debts, obligations or
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liabilities, absolute, accrued or contingent and whether due or to become
due, except current liabilities incurred in the ordinary course of business,
which (individually or in the aggregate) will not materially and adversely
affect the business, properties or prospects of the Corporation; (b) paid any
obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing current liabilities, in each case in
the ordinary course of business; (c) declared or made any payment or
distribution to its stockholders as such, or purchased or redeemed any of its
shares of capital stock or other securities, or obligated itself to do so;
(d) mortgaged, pledged or subjected to lien, charge, security interest or
other encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business; (e) sold, transferred or leased any of its
assets except in the ordinary course of business; (f) canceled or compromised
any debt owed to the Corporation, or claim, or waived or released any right
of material value; (g) suffered any physical damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
properties, business or prospects of the Corporation; (h) entered into any
transaction other than in the ordinary course of business; (i) encountered
any labor difficulties or labor union organizing activities; (j) issued or
sold any shares of capital stock or other securities or granted any options,
warrants or other purchase rights with respect thereto other than as
contemplated by or disclosed pursuant to this Agreement; (k) made any
acquisition or disposition of any material assets or become involved in any
other material transaction, other than for fair value in the ordinary course
of business; (l) increased the compensation payable, or to become payable, to
any of its directors or employees, or made any bonus payment or similar
arrangement with any directors or employees or increased the scope or nature
of any fringe benefits provided for its employees or directors; or (m) agreed
to do any of the foregoing other than pursuant hereto. There has been no
Material Adverse Effect since the date of the Financial Statements.
j. TITLE TO PROPERTIES AND ENCUMBRANCES. The Corporation has good
and marketable title to all of its owned properties and assets used in the
conduct of its business, except for property disposed of in the ordinary course
of business since the date of the Financial Statements, and a valid leasehold
interest in all of its leased properties and assets, none of which properties
and assets are subject to any mortgage, pledge, lease, lien, charge, security
interest, encumbrance or restriction, except (a) those which are shown and
described in Schedule 3.j. hereto or the notes thereto, and (b) Permitted Liens
(as hereinafter defined). For purposes of this Section 3,j. "Permitted Liens"
shall mean liens for taxes or other governmental charges not yet due
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and owing, and those being contested in good faith by appropriate proceedings
and as to which adequate reserves have been made on the books of the
Corporation; (ii) mechanics', materialmans', carriers', landlords', and other
similar liens arising in the ordinary course of business for sums not yet due
and owing, and those being contested in good faith by appropriate
proceedings; and (iii) deposits or pledges to secure the performance of bids,
tenders, contracts (other than for borrowed money), leases, statutory
obligations, surety, fidelity, and appeal bonds, or other deposits or pledges
for purposes of a general nature incurred in the ordinary course of business.
k. GOOD CONDITION OF REAL ESTATE. The plant, offices and
equipment owned, leased or used by the Corporation have been kept in good
condition and repair in the ordinary course of business.
l. SCHEDULE OF ASSETS AND CONTRACTS. Attached hereto as Schedule
3.k. is a schedule containing:
i. Annex i: a listing of all real properties owned by
the Corporation;
ii. Annex ii: a listing of each indenture, lease,
sublease, license or other instrument under which the Corporation
claims or holds a leasehold interest in real property;
iii. Annex iii: a listing of all written and oral
contracts, agreements, subcontracts, purchase orders, commitments and
arrangements involving payments remaining to or from the Corporation in
excess of Fifty Thousand Dollars ($50,000) and other agreements
material to the Corporation's business to which the Corporation is a
party or by which it is bound, under which full performance (including
payment) has not been rendered by any party thereto;
iv. Annex iv: a listing of all collective bargaining
agreements, employment agreements, consulting agreements,
noncompetition agreements, nondisclosure agreements, executive
compensation plans, profit sharing plans, bonus plans, deferred
compensation agreements, employee pension retirement plans and employee
benefit stock option or stock purchase plans and other employee benefit
plans, entered into or adopted by the Corporation;
v. Annex v: a listing of all deeds of trust, mortgages,
security agreements, pledge agreements and other agreements or
arrangements whereby any of the material assets or properties of the
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Corporation are subject to any lien, encumbrance, security interest or
charge;
vi. Annex vi: a listing of all leases of personal
property involving payment remaining to or from the Corporation in
excess of Fifty Thousand Dollars ($50,000);
vii. Annex vii: the name of each employee of the
Corporation whose annual compensation is in excess of Fifty Thousand
Dollars ($50,000) and the remuneration currently payable to each such
employee; and
viii. Annex viii: a listing of all patents (including
applications therefor), royalty and license agreements, trademarks,
trade names, service marks and copyrights relating to Corporation
products.
Prior to the Closing Date, the Corporation shall make available to the Investor
or its representative a true and complete copy of each document referred to
above which the Investor requests to examine.
m. CONTRACTUAL RELATIONSHIPS. Except as set forth on Schedule
3.m. hereto, the Corporation has substantially performed all obligations
required to be performed by it to date and is not in default in any material
respect under any of the contracts, agreements, leases, documents, commitments
or other arrangements to which it is a party or by which it is otherwise bound
involving payment terms, to or from the Corporation in excess of Fifty Thousand
Dollars ($50,000) ("Material Contracts"). All Material Contracts are in effect
and enforceable according to their respective terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally, and except for judicial limitations on the enforcement of the remedy
of specific performance and other equitable remedies), and to the best of the
Corporation's knowledge, there is not under any of such Material Contracts any
existing material default or event of default resulting in a Material Adverse
Effect, or event which, with notice or lapse of time or both, would constitute
an event of default thereunder. All plans or arrangements listed pursuant to
Section 3.k.iv. (above) are fully funded to the extent that such funding is
required by generally accepted accounting principles.
n. CONFLICTS OF INTEREST. To the best of the Corporation's
knowledge, except as set forth on Schedule 3.m.
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hereto, no officer, director or stockholder of the Corporation or any
affiliate (as such term is defined in Rule 405 under the Securities Act) of
any such person has any direct or indirect interest (a) in any entity which
does business with the Corporation, or (b) in any property, asset or right
which is used by the Corporation in the conduct of its business, or (c) in
any contractual relationship with the Corporation other than as an employee.
For the purpose of this Section 3.m., there shall be disregarded any interest
which arises solely from the ownership of less than a one percent (1%) equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.
o. REGISTRATION RIGHTS. Other than as contemplated by this
Agreement and as set forth on Schedule 3.n. hereto, the Corporation has not
agreed to register any of its authorized or outstanding securities under the
Securities Act.
p. DISCLOSURE. The Corporation has not knowingly withheld from
the Investor any material facts relating to the assets, business, operations or
financial condition of the Corporation. Neither this Agreement nor any
certificate, schedule, statement or other document furnished or to be furnished
to the Investor pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
herein or therein or necessary to make the statements herein or therein not
misleading.
4. INVESTOR REPRESENTATIONS AND WARRANTIES. The Investor represents and
warrants to the Corporation that:
a. ACCREDITED INVESTOR. Investor is an "accredited investor" (as
defined in Regulation D, which definition is set out in Exhibit C attached
hereto).
b. INVESTMENT. The Investor is acquiring the Purchased Shares and
any shares of Common Stock issuable pursuant to conversion of the Shares
(hereinafter collectively the "Securities") for investment for its own account,
and not with a view to, or resale in connection with, any distribution thereof,
and it has no present intention of selling or distributing any such Securities.
It understands that the Securities have not been registered under the Securities
Act by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment as expressed herein.
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c. RULE 144. The Investor acknowledges that because the
Securities have not been registered under the Securities Act, the Securities
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available. It is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement under certain
circumstances.
d. NO PUBLIC MARKET. The Investor understands that no public
market now exists for any securities issued by the Corporation and that it is
uncertain whether a public market will ever exist for any such securities.
e. ACCESS TO DATA. The Investor has had an opportunity to discuss
the Corporation's business, management and financial affairs with its management
and to obtain any additional information given to it necessary or appropriate
for deciding whether or not to purchase the Securities. The Investor
acknowledges that no representations or warranties have been made by the
Corporation or any agent thereof except as set forth in this Agreement.
f. PREVIOUS INVESTMENTS. The Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
herein.
g. RISKS. The Investor understands that an investment in the
Corporation involves a high degree of risk and is suitable only for investors
who can afford a loss of their entire investment and who have no need for
liquidity from their investment.
h. GOVERNMENTAL CONSENTS. To the Investor's knowledge, no
consent, approval, order, authorization or registration, qualifications,
designation, license, declarations or filings with any governmental authority is
required on the part of the Investor in connection with the consummation of the
transactions contemplated herein.
i. RESTRICTIVE LEGENDS. Each certificate or other written
documentation representing any of the Securities which the Investor is
purchasing or may purchase hereunder and any other securities issued upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event (unless no longer required in the opinion of the counsel for the
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Corporation) shall be stamped or otherwise imprinted with legends
substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, OR THE HOLDER
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE QUALIFICATION
REQUIREMENTS UNDER STATE LAW."
The Corporation shall be entitled to enter stop transfer notices on its
stock books with respect to the Securities.
The parties hereto hereby acknowledge and agree that (i) the Corporation will be
undergoing a recapitalization of the Series B Convertible Preferred Stock issued
by the Corporation on May 31, 1999 and a restructuring of its remaining issued
and outstanding convertible debt, each into the issuance of Common Stock at a
per share price of $0.25 per share (collectively referred to herein as the
"Recapitalization"); and (ii) the calculation of the number of Purchased Shares
to be purchased hereunder shall take into account the Recapitalization. The
Corporation will provide to Investor, on or before the Closing, a final schedule
of equity after giving effect to the Recapitalization.
5. AFFIRMATIVE COVENANTS. For so long as Investor owns more than seven and
5/10ths percent (7.5%) of the issued and outstanding equity of the Corporation
calculated on a fully diluted basis, and the Collaboration Agreement is in
effect, the Corporation covenants and agrees that:
a. CORPORATE EXISTENCE. The Corporation will maintain and cause
each Subsidiary (as hereinafter defined) to maintain its corporate existence in
good standing and comply with all applicable laws and regulations of the United
States or of any state or states thereof or of any political subdivision thereof
and of any governmental authority where failure to so comply would have a
material adverse impact on the Corporation or its business, properties,
prospects or operations.
b. BOOKS OF ACCOUNT AND RESERVES. The Corporation will, and will
cause each of its Subsidiaries to, keep books of record
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and account in which full, true and correct entries are made of all of its
and their respective dealings, business and affairs, in accordance with
generally accepted accounting principles. The Corporation will employ
certified public accountants selected by the Board of Directors of the
Corporation who are "independent" within the meaning of applicable the
accounting regulations and who are one of the so-called "Big Five" accounting
firms, and have annual audits made by such independent public accountants in
the course of which such accountants shall make such examinations, in
accordance with generally accepted auditing standards, as will enable them to
give such reports or opinions with respect to the financial statements of the
Corporation and its Subsidiaries as will satisfy the applicable requirements
in effect at such time with respect to certificates and opinions of
accountants.
c. FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION.
i. The Corporation will deliver to Investor as soon as
practicable, but in any event within one hundred twenty (120) days
after the end of each fiscal year, a consolidated balance sheet of the
Corporation and its Subsidiaries, as of the end of such fiscal year,
together with the related consolidated statements of operations,
stockholders' equity and cash flow for such fiscal year, setting forth
in comparative form figures for the previous fiscal year, all in
reasonable detail and duly certified by the Corporation's independent
public accountants, which accountants shall have given the Corporation
an opinion, unqualified as to the scope of the audit, regarding such
statements.
ii. The Corporation will also deliver to the Investor:
(a) as soon as practicable, but in any event
within forty-five (45) days after the close of each calendar quarter (except for
the last month of the Corporation's fiscal year), unaudited consolidated balance
sheets of the Corporation and its Subsidiaries as of the end of such calendar
quarter, together with the related consolidated statements of operations and
cash flow for such calendar quarter, setting forth in comparative form figures
for the corresponding calendar quarter of the previous fiscal year, all in
reasonable detail and certified by an authorized accounting officer of the
Corporation, subject to year-end adjustments;
(b) within ninety (90) days after the end of
each fiscal year, and if there has been an adjustment to the Conversion Price
(as defined in the
14
Certificate of Incorporation) since the date of the last such notice, written
notice of the current Conversion Price for the Series C Preferred Stock,
including a brief statement indicating any adjustments reasonably anticipated;
(c) promptly upon transmission thereof, copies
of all reports, proxy statements, registration statements and notifications
filed by it with the Commission pursuant to any act administered by the
Commission or furnished to stockholders of the Corporation or to any national
securities exchange.
d. PATENTS AND OTHER INTANGIBLE RIGHTS. The Corporation will
apply for, or obtain assignments of, or licenses to use, all patents,
trademarks, trademark rights, trade names, trade name rights and copyrights
which in the opinion of the Corporation's Board of Directors are desirable or
necessary for the conduct and protection of the business of the Corporation.
e. VESTING OF STOCK AWARDS. Unless otherwise determined by the
Board of Directors of the Corporation, all stock and stock equivalents issued to
employees, directors and consultants of the Corporation on or after the date of
this Agreement shall be subject to vesting as follows: twenty-five percent (25%)
to vest at the end of the first year following the earlier of the date of such
issuance or employment, with the remaining seventy-five percent (75%) to vest
monthly over the next three (3) years.
f. INDEMNIFICATION. The Company shall maintain as part of its
Certificate of Incorporation or Bylaws a provision for the indemnification of
its directors to the full extent permitted by law.
g. APPLICATION OF PROCEEDS. The proceeds from the issuance and
sale of the Purchased Shares pursuant to this Agreement shall be used to fund
marketing efforts, product development and other working capital requirements.
h. NEGATIVE COVENANTS. For so long as Investor is the record
holder of fifty percent (50%) of the Purchased Shares (on a fully converted
basis), the Corporation will not, without the prior approval of the Investor,
which approval shall not be unreasonably withheld, agree with the holders of any
securities issued or to be issued by the Corporation to register such securities
under the Securities Act nor will it grant any incidental registration rights
unless, in either case, such agreement or incidental registration rights is
equal or subordinated to and will not interfere in any manner with the
15
rights granted to the Investor pursuant to the Registration Rights Agreement.
i. EVENTS OF DEFAULT. Each of the following events shall be an
event of default (an "Event of Default") for purposes of this Agreement:
i. if the Corporation or any Subsidiary becomes
insolvent or bankrupt, or admits in writing its inability to pay its debts as
they mature, or makes an assignment for the benefit of creditors, or ceases
doing business as a going concern, or the Corporation or any Subsidiary applies
for or consents to the appointment of a trustee or receiver for the Corporation
or any Subsidiary, or for the major part of the property of either; or
ii. if a trustee or receiver is appointed for the
Corporation or any Subsidiary or for the major part of the property of either
and the order of such appointment is not discharged, vacated or stayed within
thirty (30) days after such appointment; or
iii. if any judgment, writ or warrant of attachment or of
any similar process in an amount in excess of Twenty-five Thousand Dollars
($25,000) shall be entered or filed against the Corporation or any Subsidiary or
against any of the property or assets of either and remains unpaid, unvacated,
unbonded or unstayed for a period of 30 days; or
iv. if an order for relief shall be entered in any
Federal bankruptcy proceeding in which the Corporation or any Subsidiary is the
debtor; or if bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against the
Corporation or any Subsidiary and, if instituted against the Corporation or any
Subsidiary, are consented to or, if contested by the Corporation or the
Subsidiary, are not dismissed by the adverse parties or by an order, decree or
judgment within thirty (30) days after such institution; or
v. if the Corporation or any Subsidiary shall default in
any material respect in the due and punctual performance of any covenant or
agreement in any note, bond, indenture, loan agreement, note agreement,
mortgage, security agreement or other instrument evidencing or related to
Indebtedness for Borrowed Money, and such default shall continue for more than
the period of notice and/or grace, if any, therein specified and shall not have
been waived or the lender shall not have otherwise agreed to forebear any
exercise of any remedies available to such lender; or
16
vi. if any of the following apply:
(A) if any representation or warranty made by or
on behalf of the Corporation in this Agreement or in any certificate, report or
other instrument delivered under or pursuant to any term hereof or thereof shall
prove to have been untrue or incorrect in any material respect as of the date of
this Agreement or as of the Closing Date (PROVIDED, HOWEVER, that any Event of
Default based on a breach of any such representation or warranty must be
asserted on or before the date which is eighteen (18) months after the Closing
Date and, if not so asserted by such date, a breach or alleged breach of any
such representation or warranty shall not thereafter be the basis for an Event
of Default), or (ii) if any report, certificate, financial statement or
financial schedule or other instrument prepared or purported to be prepared by
the Corporation or any officer of the Corporation furnished or delivered under
or pursuant to this Agreement after the Closing Date shall prove to be knowingly
untrue or incorrect in any material respect as of the date it was made,
furnished or delivered; or(H) if default shall be made in the due and punctual
performance or observance of any other term contained in this Agreement, and
such default shall have continued for a period of thirty (30) days after written
notice thereof to the Corporation by the holder of any Purchased Shares.
k. NOTICE OF DEFAULTS. When, to its knowledge, any Event of
Default has occurred or exists, the Corporation agrees to give written notice
within five (5) business days of such Event of Default to the holders of all
outstanding Purchased Shares. If the holder of any Purchased Shares shall give
any notice or take any other actions in respect of a claimed Event of Default,
the Corporation will forthwith give written notice thereof to all other holders
of Purchased Shares at the time outstanding, describing such notice or action
and the nature of the claimed Event of Default.
l. SUITS FOR ENFORCEMENT. In case any one or more Events of
Default shall have occurred and be continuing, the holders of a majority of the
Purchased Shares may proceed to protect and enforce their rights under this
Section by suit in equity for specific performance. It is agreed that in the
event of such action such holders of Purchased Shares shall, if such action is
successful, be entitled to receive all reasonable fees, costs and expenses
incurred, including without limitation such reasonable fees and expenses of
attorneys and reasonable fees, costs and expenses of appeals. No right, power or
remedy conferred upon any holder of Purchased Shares shall be exclusive, and
each such right, power or remedy shall be
17
cumulative and in addition to every other right, power or remedy, whether
conferred hereby or by any such security or now or hereafter available at law
or in equity or by statute or otherwise.
m. REMEDIES NOT WAIVED. No course of dealing between the
Corporation and any Investor or the holder of any Purchased Shares, and no delay
in exercising any right, power or remedy conferred hereby or by any such
security or now or hereafter existing at law or in equity or by statute or
otherwise, shall operate as a waiver of or otherwise prejudice any such right,
power or remedy; PROVIDED, HOWEVER, that this Section shall not be construed or
applied so as to negate the provisions and intent of any statute which is
otherwise applicable.
6. PREEMPTIVE RIGHT. Pursuant to the terms and conditions set forth
herein, the Corporation hereby grants to Investor the right of first refusal to
purchase that portion of all new securities issued by the Corporation (the "New
Securities" as defined below) as the number of shares (on an "as-converted"
basis) held by Investor on the date that it receives the "Offer" (as defined
below) bears to the total number of shares of the Corporation issued and
outstanding on the date of the Offer on the following terms and conditions:
a. DEFINITION. "New Securities" shall mean any capital stock of
the Corporation issued after the Closing Date, whether now authorized or not,
and rights, options, or warrants to purchase said capital stock, and securities
of any type whatsoever that are, or may become, convertible into said common
stock or preferred stock issued after the Closing Date; provided, however, that
"New Securities" do not include (i) the issuance of any common stock shares or
options or warrants to purchase common stock shares to the Corporation's or the
Subsidiary's employees, consultants or Directors, and the issuance of common
stock upon exercise of the foregoing, as applicable; (ii) shares of the
Corporation's common stock issued in connection with any stock split, stock
dividend, or recapitalization of the Corporation; (iii) any shares issued by the
Corporation in connection with an initial public offering with a per share
purchase price of at least 75/100ths Dollars ($0.75) and aggregate gross
proceeds to the Corporation are in excess of Twelve Million Five Hundred
Thousand Dollars ($12,500,000), which is declared effective by the Securities
and Exchange Commission (the "IPO"); (iv) the issuance of common stock upon
conversion of the current issued and outstanding Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, warrants or convertible debt; (v)
the issuance of common stock upon exercise of any options or warrants issued
18
to the Corporation's or the Subsidiary's employees, consultants or Directors;
(vi) the issuance of Common Stock in connection with the Recapitalization;
and (vii) any common stock shares, preferred stock shares or options or
warrants to purchase any capital stock of the Corporation, each issued for
purposes of technology alliances, acquisition of technology or other
strategic alliance ventures, obtaining commercial credit, equipment financing
or similar arrangements or transactions, each at fair market value, as
determined by the Corporation's Board of Directors. Notwithstanding the
foregoing, if the Corporation shall issue shares in the manner set forth in
(vii), above, and if the Investor owns, on a fully diluted basis, more than
seven and 5/10ths percent (7.5%) of the Corporation's stock, then the
Investor shall have the right of first refusal to purchase that number of
shares that will allow the Investor to maintain an ownership interest in the
Corporation of no less than seven and 5/10ths percent (7.5%).
b. EXERCISE OF RIGHT. If the Corporation intends to issue New
Securities after the date hereof, it shall give Investor written notice of its
intention, describing the type of New Securities, the aggregate price of the
offering, the price per share or unit, the intended Investor(s) and all of the
other terms upon which the Corporation proposes to issue the same (the "Offer").
Investor shall have ten (10) days from the effective date of such notice as
specified herein to agree to purchase its portion of the New Securities for the
price and upon the general terms specified in the Offer by giving written notice
to the Corporation and stating therein the quantity of New Securities to be
purchased. Investor shall have the right to condition its purchase on the sale
of a minimum number of New Securities by the Corporation (not to exceed the
aggregate size of the Offer), and shall pay the purchase price simultaneously
with the closing of the sale of such minimum number of New Securities.
c. FAILURE TO EXERCISE. In the event Investor fails to notify the
Corporation during such ten (10) day notice period of its election to exercise
its right of first refusal, its right to participate in such Offer will
terminate. If the Corporation fails to sell the New Securities on the terms set
forth in the Offer within ninety (90) days after the lapse of such ten (10) day
notice period, it must once again comply with the right of first refusal set
above.
d. TERMINATION OF THE RIGHT OF FIRST REFUSAL. Notwithstanding the
foregoing, the provisions of this Section 6 shall not apply to, and the Right of
First Refusal shall terminate upon, the sale of any of the Corporation's
securities to the public pursuant to the IPO or the automatic conversion of the
19
Corporation's Series C Preferred Stock pursuant to the Corporation's Articles.
e. LEGENDS. The Corporation may place a legend or legends
referencing the preemptive right on the certificate(s) representing the
Purchased Shares.
7. MISCELLANEOUS.
a. WAIVERS AND AMENDMENTS. The obligations of the Corporation and
the rights of the holders of the Purchased Shares under this Agreement may be
waived (either generally or in a particular instance, whether retroactively or
prospectively and either for a specified period of time or indefinitely), or
otherwise modified with the written agreement of the record or beneficial
holders of more than fifty percent (50%) of the Corporation's outstanding Series
C Preferred Stock shares as a group, and with the same agreement of the
Corporation as authorized by the Corporation's Board of Directors. No such
agreement, however, shall reduce the percentage ownership of Investor at the
time of such agreement. Any change, discharge of obligation or termination under
this agreement must be in writing. If this Agreement is modified in accordance
with this section, and if the Investor has not previously consented to the
modification in writing, the Corporation shall give prompt written notice of
such modification to the Investor.
b. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
c. ENTIRE AGREEMENT. This Agreement and the exhibits attached
hereto and the other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between and among the parties with regard to
the subjects hereof and thereof.
d. NOTICE. Any notice, payment, report or other communication
required or permitted to be given by one party to any other party by this
Agreement shall be in writing and either (i) served personally on the other
party or parties; (ii) sent by express, registered or certified first class
mail, postage prepaid, addressed to the other party or parties at its or their
address as any addressee shall have theretofore furnished to the other parties
by notice; (iii) delivered by commercial courier to the other party or parties;
or (iv) sent by facsimile. Such notice shall be deemed received on the second
day after transmittal if sent by one-day courier together with a
20
transmission of such notice by facsimile if the recipient has the capability
to receive a facsimile at its address. If sent by other methods, notice shall
be deemed received upon confirmation of receipt.
e. FINDER'S AND BROKER'S FEES. Each party hereto represents and
warrants that it has retained no finder or broker in connection with the
transactions contemplated by this Agreement, and hereby agrees to indemnify and
to hold the other harmless from any liability for any finder's or broker's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which such indemnifying
person, or any of its employees or representatives, are responsible.
f. TITLES AND SUBTITLES. The titles of the Sections and
subsections of this Agreement are for the convenience of reference only and are
not to be considered in construing this Agreement.
g. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
h. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts between California residents entered into and to be performed entirely
within the State of California.
i. ARBITRATION. Any dispute between the parties arising out of
this Agreement shall be submitted to final and binding arbitration in the City
of Santa ▇▇▇▇▇, County of Santa ▇▇▇▇▇, State of California, under the Commercial
Arbitration Rules of the American Arbitration Association then in effect, upon
written notification and demand of either party therefor. In the event either
party demands such arbitration, the American Arbitration Association shall be
requested to submit a list of prospective arbitrators consisting of persons
experienced in matters involving securities offerings. The provisions of
California Code of Civil Procedure section 1283.05 and the laws of the State of
California are incorporated herein and shall be applicable to the arbitration.
In making the award, the arbitrator shall award recovery of costs and expenses
of the arbitration and reasonable attorneys' fees to the prevailing party. Any
award may be entered as a judgment in any court of competent jurisdiction.
Should judicial proceedings be commenced to enforce or carry out this provision
or any arbitration award, the prevailing party in such proceedings shall be
entitled to reasonable attorneys' fees and costs in addition to
21
other relief. Either party shall have the right, prior to receiving an
arbitration award, to obtain preliminary relief from a court of competent
jurisdiction to avoid injury or prejudice to that party.
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
CORPORATION:
PHASECOM, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------
▇▇▇▇▇▇ ▇▇▇▇,
Chief Executive Officer
INVESTOR:
ADC TELECOMMUNICATIONS, INC.,
a Minnesota corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Manager/President
23
INDEX OF EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Registration Rights Agreement
Exhibit C Definition of Accredited Investor
Exhibit D Consolidated Financial Statements
Exhibit E Voting Agreement
24
EXHIBIT A
TO
PURCHASE AGREEMENT
CERTIFICATE OF INCORPORATION
The Certificate of Incorporation the Corporation is set forth on the
following pages.
25
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PHASECOM, INC.
PHASECOM, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), hereby certifies:
FIRST: The name of the Corporation is PHASECOM, INC., that the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on March 21, 1996; that a
Certificate of Amendment of Certificate of Incorporation of PhaseCom, Inc. was
filed on February 13, 1998; that a Certificate of Amendment of Certificate of
Incorporation of PhaseCom, Inc. was filed on September 15, 1998; and that an
Amended and Restated Certificate of Incorporation of PhaseCom, Inc. was filed on
November 30, 1998 (collectively, "Certificate of Incorporation").
SECOND: Pursuant to Section 245 of the General Corporation Law of the
State of Delaware, this Amended and Restated Certificate of Incorporation amends
and restates the provisions of the Certificate of Incorporation. This Amended
and Restated Certificate of Incorporation was duly approved by the Corporation's
Board of Directors, and was duly approved by the holders of the requisite number
of shares of the Corporation in accordance with Sections 242 and 245 of the
Delaware General Corporation Law. The total number of outstanding shares of
Common Stock, Series A Preferred Stock and Series B Preferred Stock entitled to
vote with respect to this amendment and restatement was forty two million three
hundred ninety six thousand one hundred eighty two (42,396,182) shares, one
million five hundred eighty three thousand six hundred forty six (1,583,646)
shares, and four million four hundred thousand three hundred (4,400,300) shares,
respectively. The number of shares voting in favor of such amendment and
restatement equaled or exceeded the vote required, such required vote being a
majority of the outstanding shares of Common Stock and Series A Preferred Stock,
and Series B Preferred Stock, each voting as a separate class.
THIRD: The text of the Certificate of Incorporation of the
Corporation is hereby amended and restated to read in its entirety as follows:
"I
The name of this corporation is PHASECOM, INC. (this "Corporation").
II
The address of the registered office of this Corporation in the State
of Delaware and County of New Castle shall be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The name of its registered agent at that address is
PHS Corporate Services, Inc.
26
III
The nature of the business or purposes to be conducted or promoted by
this Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
IV
A. AUTHORIZED SHARES. This Corporation is authorized to issue two
classes of shares, to be designated Common Stock and Preferred Stock,
respectively. This Corporation is authorized to issue two hundred million
(200,000,000) shares of Common Stock with a par value of $0.0001 per share and
one hundred million (100,000,000) shares of Preferred Stock with a par value of
$0.001 per share. The Preferred Stock authorized by this Certificate of
Incorporation shall be issued from time to time in one or more series.
B. AUTHORIZED SHARES - PREFERRED STOCK. Within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, the Board of Directors may increase or decrease (but neither above the
total number of authorized shares of the class, nor below the number of shares
of such series, then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series. In addition, the Board of
Directors is authorized, subject to limitations prescribed by law and the
provisions of Article IV, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
1. The number of shares constituting that series and the
distinctive designation of that series;
2. The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
3. Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
4. Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
27
5. Whether or not shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or date upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
6. Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
7. The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding up of this
Corporation, and the relative rights or priority, if any, of payment of shares
of that series; and
8. Any other relative rights, preferences and
limitations of that series.
C. AUTHORIZED SHARES - SERIES A PREFERRED STOCK AND SERIES B
PREFERRED STOCK AND SERIES C PREFERRED STOCK. The initial three series of
Preferred Stock shall be comprised of an aggregate total of eighty-six million
(86,000,000) shares, of which six million (6,000,000) shares shall be designated
"Series A Convertible Preferred Stock" (also referred to herein as "Series A
Preferred Stock" or "Series A Stock"), forty million (40,000,000) shares shall
be designated "Series B Convertible Preferred Stock" (also referred to herein as
"Series B Preferred Stock" or "Series B Stock") and forty million
(40,000,000)shares shall be designated "Series C Convertible Preferred Stock"
(also referred to herein as "Series C Preferred Stock" or "Series C Stock").
D. ATTRIBUTES OF SERIES A STOCK, SERIES B STOCK AND SERIES C
STOCK. The rights, preferences, privileges and restrictions of the Series A
Stock, Series B Stock and Series C Stock and of the holders thereof shall be as
follows:
1. DIVIDENDS.
a. SERIES A STOCK RIGHT TO CASH DIVIDENDS. Each
holder of outstanding shares of Series A Stock shall be entitled to receive,
when and if declared by the Board of Directors and out of any assets legally
available therefor, non-cumulative dividends in cash in an amount equal to
$0.0432 per share of Series A Stock per annum (the "Series A Preferential
Dividend"), payable in cash during each fiscal year of this Corporation and in
preference to any declaration or payment (payable other than in Common Stock) to
the Common Stock (but not without the holders of Series B Stock and Series C
Stock first receiving the Series B Preferential Dividend and Series C
Preferential Dividend, respectively (each as defined below).
b. SERIES B STOCK RIGHT TO CASH DIVIDENDS. Each
holder of outstanding shares of Series B Stock shall be entitled to receive,
when and if declared by the Board of Directors and out of any assets at the time
legally available therefor, non-cumulative dividends in cash in an amount equal
to $0.0800 per share of Series B Stock per annum (the "Series B Preferential
Dividend"), payable in cash during each fiscal year of this Corporation and in
28
preference to any declaration or payment (payable other than in Common Stock)
to the Common Stock, Series A Stock and Series C Stock.
c. SERIES C STOCK RIGHT TO DIVIDENDS. Each
holder of outstanding shares of Series C Stock shall be entitled to receive,
when and if declared by the Board of Directors and out of any assets at the time
legally available therefor, non-cumulative dividends in cash in an amount equal
to four percent (4%) of 54/100ths Dollars ($0.54) per share of Series C
Preferred Stock per annum (the "Series C Preferential Dividend"), payable in
cash during each fiscal year of this Corporation and in preference to any
declaration or payment (payable other than in Common Stock) to the Common Stock
and Series A Stock (but not without the holders of Series B Stock also receiving
the Series B Preferential Dividend.
d. PARTIAL CASH PAYMENT. If the Board of
Directors shall declare a dividend on the Series A Stock, Series B Stock or
Series C Stock and the amount available for payment thereof is insufficient to
permit the payment of the full preferential amounts required to be paid to the
holders of outstanding shares of Series A Stock and/or Series B Stock and/or
Series C Stock, then the amount available for such dividend payments shall be
distributed ratably first among the holders of shares of Series B Stock and the
holders of shares of Series C Stock according to (i) the respective dividend
preference amounts to which all such holders of outstanding shares of Series B
Stock and Series C Stock would otherwise be entitled, and (ii) the number of
outstanding shares of each such series until each holder of outstanding shares
of Series B Stock has received its Series B Preferential Dividend and each
holder of outstanding shares of Series C Stock has received it Series C
Preferential Dividend, as applicable, in full. For example, assume that: (1)
there are 300 shares of Series B Stock issued and outstanding, and the Series B
Preferential Dividend is $.10 per share; and (2) there are 300 shares of Series
C Stock issued and outstanding, and the Series C Preferential Dividend is $.20
per share; and (3) there is not enough money available for payment in full of
the preferential dividends to the holders of the outstanding shares of Series B
Stock and Series C Stock. In such event, the Series B Stock shareholders would
collectively be entitled to one-third (1/3) of the dividend to be paid; and the
Series C Stock shareholders would collectively be entitled to two-thirds (2/3)
of the dividend to be paid. Or, for example, assume that: (1) there are 200
shares of Series B Stock issued and outstanding, and the Series B Preferential
Dividend is $.10 per share; and (2) there are 400 shares of Series C Stock
issued and outstanding, and the Series C Preferential Dividend is $.20 per
share; and (3) there is not enough money available for payment in full of the
preferential dividends to the holders of the outstanding shares of Series B
Stock and Series C Stock. In such event, the Series B Stock shareholders would
collectively be entitled to one-fifth (1/5) of the dividend to be paid; and the
Series C Stock shareholders would collectively be entitled to four-fifths (4/5)
of the dividend to be paid. Thereafter, the amount available for such dividend
payments shall be distributed ratably among the holders of shares of Series A
Stock according to the number of issued and outstanding shares of Series A Stock
held by each such holder until each such holder has received its Series A
Preferential Dividend in full.
e. DIVIDENDS AFTER PAYMENT OF PREFERENTIAL
DIVIDENDS. After the holders of record of the Series A Stock, Series B Stock and
Series C Stock have been paid their Preferential Dividends in full, then, if the
Board of Directors shall declare a dividend on the
29
Common Stock, the holders of record of Series A Stock, Series B Stock, Series
C Stock and Common Stock shall share ratably in any additional dividends
during such fiscal year on an as converted basis (i.e., the number of shares
of Common Stock which would be outstanding if the Series A Stock, Series B
Stock and Series C Stock were converted to Common Stock)up to the payment in
full of the amount so declared.
f. DIVIDEND ADJUSTMENT. The Series A
Preferential Dividend, Series B Preferential Dividend and Series C Preferential
Dividend amounts shall be appropriately adjusted for any combination(s) stock
split(s),stock distribution(s) or dividend(s), as applicable.
2. PREFERENCE ON LIQUIDATION.
a. SERIES A STOCK PREFERENCE PRICE. In the
event of any liquidation, dissolution or winding up of this Corporation, whether
voluntary or involuntary (a "Liquidation Event") and after payment of the
"Series B Liquidation Price" (as defined below) and after payment of the "Series
B to Common Liquidation Price" (as defined below), and after payment of the
"Series C Liquidation Price" (as defined below), the holders of the outstanding
shares of Series A Stock shall be entitled to be paid out of the assets of this
Corporation available for distribution to its shareholders, whether from
capital, surplus or earnings, before any payment is made in respect of the
outstanding shares of Common Stock or any other equity security of this
Corporation of a lesser priority than the Series A Stock, in an amount equal to
Four Dollars and Sixty Cents ($4.60) per share plus any declared but unpaid
dividends on each such share (the "Series A Liquidation Price").
b. SERIES B STOCK PREFERENCE PRICE. Before
payment of any portion of the Series A Liquidation Price or the Series B to
Common Stock Liquidation Price or Series C Liquidation Price, in the event of a
Liquidation Event, the holders of the outstanding shares of Series B Stock shall
be entitled to be paid out of the assets of this Corporation available for
distribution to its shareholders, whether from capital, surplus or earnings,
before any payment is made in respect of the outstanding shares of Common Stock,
Series A Stock, Series C Stock or any other equity security of this Corporation
of a lesser priority than the Series B Stock, in an amount equal to One Dollar
and Fifty Cents ($1.50) per share, plus any declared but unpaid dividends on
each such share (the "Series B Liquidation Price").
c. SERIES C STOCK PREFERENCE PRICE. Before
payment of any portion of the Series A Liquidation Price or the Series B to
Common Stock Liquidation Price and after payment of the Series B Liquidation
Payment, in the event of a Liquidation Event, the holders of the outstanding
shares of Series C Stock shall be entitled to be paid out of the assets of this
Corporation available for distribution to its shareholders, whether from
capital, surplus or earnings, before any payment is made in respect of the
outstanding shares of Common Stock, Series A Stock or any other equity security
of this Corporation of a lesser priority than the Series C Stock, in an amount
equal to (i) 54/100ths Dollars ($0.54) per share together with an amount equal
to the greater of (A) four percent (4%) of such 54/100ths Dollars ($0.54)
compounded annually at the rate of 4% for each year (or fraction thereof) August
31, 1999, (the "Series C Stock Issuance Date") less the amount, if any, of any
dividends actually paid to the Series C Stock through the date of the
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Liquidation Event, or (B) any declared and unpaid dividends thereon (the "Series
C Liquidation Preference Price").
d. SERIES B TO COMMON STOCK LIQUIDATION PRICE.
Before payment of any portion of the Series A Liquidation Preference Price, and
after payment of the Series B Liquidation Price and Series C Liquidation Price,
in the event of a Liquidation Event, the holders of the outstanding shares of
Series B Stock, Series A Stock, and Common Stock shall each be entitled to be
paid out of the assets of this Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings, before any further
payment is made in respect of the outstanding shares of Series A Stock or any
other equity security of this Corporation, an amount equal to Forty Cents
($0.40) per share (the "Series B to Common Stock Liquidation Price"), as if all
Series A Preferred Stock, and all Series B Preferred Stock, and all Series C
Stock had been converted into Common Stock as of the date of the Liquidation
Event.
e. PARTIAL PAYMENT. If, upon a Liquidation
Event, the assets of this Corporation available for distribution to its
shareholders shall be insufficient to pay the full Liquidation Prices required
to be paid to the holders of the outstanding shares of Series A Stock, the
holders of the outstanding shares of Series B Stock, the holders of the
outstanding shares of Series C stock and the holders of the outstanding shares
of Common Stock, then all of the assets of this Corporation legally available
for distribution to the holders of equity securities shall be distributed
ratably: first, among the holders of the outstanding shares of Series B Stock
based upon the Series B Liquidation Price until payment in full of the Series B
Liquidation Price on all Series B Stock; next, ratably to the holders of the
outstanding shares of Series C Stock based upon the Series C Liquidation Price
until payment in full of the Series C Liquidation Price on all Series C Stock;
next, ratably to the holders of Series B Stock, Series A Stock, and Common Stock
based upon an as converted to Common Stock basis, the payment in full of the
Series B to Common Stock Liquidation Price; and then ratably among the holders
of the outstanding shares of Series A Stock until payment in full of their
Series A Liquidation Price on all Series A Stock.
f. AFTER PAYMENT OF PREFERRED LIQUIDATION
PRICES. After the holders of record of the Series A Stock, Series B Stock,
Series C Stock and Common Stock have been paid their Series A Liquidation Price,
Series B to Common Stock Liquidation Price, Series B Liquidation Price, and
Series C Liquidation Price, as applicable, in full, then the remaining assets of
this Corporation shall be distributed to the holders of shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
in an equal amount per share as if all Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock had been converted into Common
Stock as of the date of the Liquidation Event.
g. LIQUIDATION ADJUSTMENT. Notwithstanding the
foregoing, the amount to be paid for each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Common Stock upon a
Liquidation Event shall be appropriately adjusted for any combination(s), stock
split(s), stock distribution(s) or dividend(s) with respect to such shares.
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3. CERTAIN TRANSACTIONS. Notwithstanding anything to the
contrary in Section D.2 (above), the following shall be deemed to be a
Liquidation Event within the meaning of this Section D with respect to the
Series A Stock, Series B Stock, Series C Stock and Common Stock: (A) a sale of
all or substantially all of this Corporation's assets; or (B) a consolidation,
merger or reorganization of this Corporation with or into any other corporation
or corporations, unless such event results in the Common Stock equivalent value
of this Corporation's stock as a result of such event and determined as if all
Series A Stock, all Series B Stock and all Series C Stock had converted to
Common Stock, is One Dollar ($1.00), or more, per share (adjusted for stock
split(s), combination(s), reclassification(s), and the like).
4. CONSENT TO CERTAIN DISTRIBUTIONS. Each holder of
outstanding shares of Series A Stock, Series B Stock and Series C Stock shall,
by virtue of its acceptance of a stock certificate evidencing such shares, be
treated as having consented to distributions made, or to be made, by this
Corporation for the repurchase of shares of Common Stock from directors or
employees of, or consultants or advisers to, this Corporation upon the
termination of employment by, or service to, this Corporation or any subsidiary
of this Corporation or otherwise, if such repurchase is made in accordance with
an agreement approved by this Corporation's Board of Directors authorizing the
right of said repurchase.
E. VOTING. The holders of the outstanding shares of Common Stock
shall each have one (1) vote per each share of Common Stock owned by such
stockholder. The holders of the outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to cast
that number of votes equal to the number of shares of Common Stock into which
such holder's shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock are convertible immediately after the close of business
on the record date fixed for such meeting or, if no such record date is
established, the date such vote is taken or the effective date of such written
consent. The holders of the outstanding shares of Series C Stock, voting as a
single class, shall be entitled to elect one (1) Director to the Board of
Directors.
F. CONVERSION. The holders of the outstanding shares of Series A
Stock, Series B Stock and Series C Stock shall have the conversion rights set
forth below (the "Conversion Rights"):
1. SERIES A STOCK CONVERSION RIGHTS. Each share of
Series A Stock shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share, at the office of this Corporation
or any transfer agent for the shares of Series A Stock, or Common Stock, into
that number of fully paid and nonassessable shares of Common Stock which is
equal to the quotient obtained by dividing (A) Five Dollars and Forty Cents
($5.40), by (B) the Series A Conversion Price, immediately prior to the time of
such conversion. The "Series A Conversion Price" shall initially be Two Dollars
and Seventy Cents ($2.70) (as adjusted from time to time as hereinafter
provided).
2. SERIES B STOCK CONVERSION RIGHTS. Each share of
Series B Stock shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such shares, at the office of this
Corporation or any transfer agent for the shares of Series B Stock, or Common
32
Stock, into that number of fully paid and nonassessable shares of Common Stock
which is equal to the quotient obtained by dividing (A) One Dollar ($1.00), by
(B) the Series B Conversion Price, immediately prior to the time of such
conversion. The "Series B Conversion Price" shall initially be One Dollar
($1.00) (as adjusted from time to time as hereinafter provided).
3. SERIES C STOCK CONVERSION RIGHTS. Each share of
Series C Stock shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such shares, at the office of this
Corporation or any transfer agent for the shares of Series C Stock, or Common
Stock, into that number of fully paid and nonassessable shares of Common Stock
which is equal to the quotient obtained by dividing 54/100ths Dollars ($0.54) by
(B) the Series C Conversion Price, immediately prior to the time of such
conversion. The "Series C Conversion Price" shall initially be 54/100ths Dollars
($0.54) (as adjusted from time to time as hereinafter provided).
4. AUTOMATIC CONVERSION.
a. PREFERRED STOCK. Each outstanding share of
Series A Stock, Series B Stock and Series C Stock shall automatically be
converted into shares of Common Stock based upon their respective Conversion
Prices upon (i) the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offering and sale of shares of Common Stock for the account of this
Corporation (other than a registration statement effected solely to implement an
employee benefit plan, a transaction in which Rule 145 of the Securities and
Exchange Commission is applicable or any other form or type of registration in
which the shares of Common Stock issuable upon conversion of the shares of
Series A Stock or Series B Stock or Series C Stock cannot be included pursuant
to the Securities and Exchange Commission rules or practices) resulting in
aggregate proceeds to this Corporation (before the payment of underwriting
discounts and commissions and the expense of the offering) in excess of Twelve
Million Five Hundred Thousand Dollars ($12,500,000) with a Common Stock per
share purchase price of at least One Dollar ($1.00), or (ii) a merger or
consolidation with or into another corporation or a sale of all the shares of
Common Stock or a sale of all or substantially all of this Corporation's
properties and assets in which the Common Stock equivalent value of this
Corporation's stock as a result of such event and determined as if all Series A
Stock, all Series B Stock and all Series C Stock had converted to Common Stock,
is One Dollar ($1.00), or more, per share (adjusted for stock split(s),
combination(s), reclassification(s), and the like).
b. AUTOMATIC CONVERSION MECHANICS. Upon the
occurrence of any event specified in Section F.4.a (above), the outstanding
shares of Series A Stock, Series B Stock and Series C Stock shall be converted
into shares of Common Stock, whether or not the certificates representing such
shares are surrendered to this Corporation or its transfer agent; PROVIDED,
HOWEVER, that this Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares are either delivered to this Corporation or
its transfer agent as provided below or the holder notifies this Corporation or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to this Corporation indemnifying this
Corporation from any loss incurred by it in connection with the issuance of such
certificate. Upon the occurrence of such
33
automatic conversion of the outstanding shares of Series A Stock, Series B
Stock and Series C Stock, the holders of the outstanding shares of Series A
Stock, Series B Stock and Series C Stock shall surrender the certificates
representing such shares at the office of this Corporation or to any transfer
agent for the shares of Series A Stock, Series B Stock, Series C Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder,
promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
shares of Common Stock into which the surrendered shares of Series A Stock,
Series B Stock and Series C Stock of such holder were convertible on the date
on which such automatic conversion occurred, and this Corporation shall
promptly pay in cash all declared but unpaid dividends on the shares of
Series A Stock, Series B Stock and Series C Stock so converted.
5. MECHANICS OF NON-AUTOMATIC CONVERSION. Each holder of
outstanding shares of Preferred Stock shall convert, or at the option of the
holders of Preferred Stock, by surrendering the certificate or certificates
therefor, duly endorsed, at the office of this Corporation or of any transfer
agent for the shares of Preferred Stock or Common Stock and shall give written
notice to this Corporation at such office that such holder elects to convert the
same and shall state therein the number of shares of Preferred Stock being
converted. Thereupon, this Corporation shall issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled and shall promptly pay all declared but
unpaid dividends on the shares being converted in cash or, if this Corporation
so elects or is legally or financially unable to pay in cash, shares of Common
Stock (valued at the Common Stock's fair market value at the time of surrender
as determined in good faith by the Board of Directors), subject to the
limitations on the payment of accrued dividends as set forth in Section D.1
(above). Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the certificate or
certificates representing the shares to be converted, and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A Stock or Series B
Stock or Series C Stock for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock issuable upon such conversion
of the Series A Stock or Series B Stock or Series C Stock shall not be deemed to
have converted such Series A Stock or Series B Stock or Series C Stock until
immediately prior to the closing of such sale of securities.
6. ADJUSTMENTS TO SERIES A, SERIES B AND SERIES C
CONVERSION PRICE.
A. ADJUSTMENT FOR STOCK SPLITS AND
COMBINATIONS. If this Corporation at any time or from time to time after the
date this Amended and Restated Certificate of Incorporation is filed with the
Delaware Secretary of State (the "Filing Date") effects a division of the
outstanding shares of Common Stock, the Series A Conversion Price, the Series B
Conversion Price and the Series C
34
Conversion Price shall be proportionately decreased and, conversely, if this
Corporation at any time, or from time to time, after the Filing Date combines
the outstanding shares of Common Stock, the Series A Conversion Price, the
Series B Conversion Price and Series C Conversion Price shall be
proportionately increased. Any adjustment under this Section F.6.a shall be
effective on the close of business on the date such division or combination
becomes effective.
b. ADJUSTMENT FOR CERTAIN DIVIDENDS AND
DISTRIBUTIONS. If this Corporation at any time or from time to time after the
Filing Date pays or fixes a record date for the determination of holders of
shares of Common Stock entitled to receive a dividend or other distribution in
the form of shares of Common Stock, or rights or options for the purchase of, or
securities convertible into, Common Stock, then in each such event the Series A
Conversion Price, the Series B Conversion Price and the Series C Conversion
Price shall be decreased, as of the time of such payment or, in the event a
record date is fixed, as of the close of business on such record date, by
multiplying the Series A Conversion Price, the Series B Conversion Price and the
Series C Conversion Price by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to the time
of such payment or the close of business on such record date and (ii) the
denominator of which shall be (A) the total number of shares of Common Stock
outstanding immediately prior to the time of such payment or the close of
business on such record date plus (B) the number of shares of Common Stock
issuable in payment of such dividend or distribution or upon exercise of such
option or right of conversion; PROVIDED, HOWEVER, that if a record date is fixed
and such dividend is not fully paid or such other distribution is not fully made
on the date fixed therefor, the Series A Conversion Price, the Series B
Conversion Price, and the Series C Conversion Price shall not be decreased as of
the close of business on such record date as hereinabove provided as to the
portion not fully paid or distributed and thereafter the Series A Conversion
Price, the Series B Conversion Price and the Series C Conversion Price shall be
decreased pursuant to this Section F.6.b as of the date or dates of actual
payment of such dividend or distribution.
c. ADJUSTMENTS FOR OTHER DIVIDENDS AND
DISTRIBUTIONS. If this Corporation at any time or from time to time after the
Filing Date pays, or fixes a record date for the determination of holders of
shares of Common Stock entitled to receive, a dividend or other distribution in
the form of securities of this Corporation other than shares of Common Stock or
rights or options for the purchase of, or securities convertible into, Common
Stock, then in each such event provision shall be made so that the holders of
the outstanding shares of Series A Stock, the holders of the outstanding shares
of Series B Stock and the holders of the outstanding shares of Series C Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of this Corporation
which they would have received had their respective shares of Series A Stock,
Series B Stock and Series C Stock been converted into shares of Common Stock on
the date of such event and had such holders thereafter, from the date of such
event to and including the actual date of conversion of their shares, retained
such securities, subject to all other adjustments called for during such period
under this Section F with respect to the rights of the holders of the
outstanding shares of Series A Stock, the holders of the outstanding shares of
Series B Stock and the holders of the outstanding shares of Series C Stock.
d. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE
AND SUBSTITUTION. If, at any time or from time to time after the Filing Date,
the number of shares of Common Stock
35
issuable upon conversion of the shares of Series A Stock, Series B Stock and
Series C Stock is changed into the same or a different number of shares of
any other class or classes of stock or other securities, whether by
recapitalization, reclassification or otherwise (other than a
recapitalization, division or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section F), then, in any such event, each holder of
outstanding shares of Series A Stock, each holder of outstanding shares of
Series B Stock and each holder of the outstanding shares of Series C Stock
shall have the right thereafter to convert such shares of Series A Stock,
Series B Stock and Series C Stock into the same kind and amount of stock and
other securities receivable upon such recapitalization, reclassification or
other change, as the maximum number of shares of Common Stock into which such
shares of Series A Stock, Series B Stock and Series C Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein.
e. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR
SALES OF ASSETS. If, at any time or from time to time after the Filing Date,
there is a capital reorganization of the Common Stock (other than a
recapitalization, division, combination, reclassification or exchange of shares
provided for elsewhere in this Section F) or a merger or consolidation of this
Corporation into or with another corporation or a sale of all or substantially
all of this Corporation's properties and assets to any other person, then, as a
part of such capital reorganization, merger, consolidation or sale, provision
shall be made so that the holders of the outstanding shares of Series A Stock,
the holders of the outstanding shares of Series B Stock and the holders of the
outstanding shares of Series C Stock shall thereafter receive upon conversion
thereof the number of shares of stock or other securities or property of this
Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of the number of shares of Common Stock
into which their shares of Series A Stock, Series B Stock and Series C Stock
were convertible would have been entitled on such capital reorganization,
merger, consolidation or sale. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section F with respect to the
rights of the holders of the outstanding shares of Series A Stock, Series B
Stock and Series C Stock after the capital reorganization, merger,
consolidation, or sale to the end that the provisions of this Section F
(including adjustment of the Series A Conversion Price, Series B Conversion
Price, and Series C Conversion Price and the number of shares into which the
shares of Series A Stock, Series B Stock and Series C Stock may be converted)
shall be applicable after that event and be as nearly equivalent to such
Conversion Prices and number of shares as may be practicable.
f. SALE OF SHARES BELOW CONVERSION PRICE.
(i) If, at any time or from time to
time after the Filing Date, this Corporation issues or sells, or is deemed by
the express provisions of this Section f. to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined) for an Effective Price (as
hereinafter defined) less than the then current Series C Conversion Price, other
than (A) as a dividend or other distribution on any class of stock as provided
in Section F.6.b. above or (B) upon a division or combination of shares of
Common Stock as provided in Section F.6.a. above, then, in any such event, the
Series C Conversion Price shall be reduced, as of the close of business on the
36
date of such issuance or sale, to an amount determined by multiplying the Series
C Conversion Price by a fraction (A) the numerator of which shall be (x) the
number of shares of Common Stock outstanding at the close of business on the day
immediately preceding the date of such issuance or sale, plus (y) the number of
shares of Common Stock which the aggregate consideration received (or by the
express provisions hereof deemed to have been received) by this Corporation for
the total number of Additional Shares of Common Stock so issued or sold would
purchase at such Series C Conversion Price and (B) the denominator of which
shall be the number of shares of Common Stock outstanding at the close of
business on the date of such issuance or sale after giving effect to such
issuance or sale of Additional Shares of Common Stock. For the purpose of the
calculation described in this Section f., the number of shares of Common Stock
outstanding shall include, in addition to the number of shares of Common Stock
actually outstanding, (A) the number of shares of Common Stock into which the
then outstanding shares of Series A Stock, Series B Stock and Series C Stock
could be converted if fully converted on the day immediately preceding the
issuance or sale or deemed issuance or sale of Additional Shares of Common
Stock; and (B) the number of shares of Common Stock which would be obtained
through the exercise or conversion of all rights, options and Convertible
Securities (as hereinafter defined) outstanding on the day immediately preceding
the issuance or sale or deemed issuance or sale of Additional Shares of Common
Stock.
(ii) For the purpose of making any
adjustment required under this Section f., the consideration received by this
Corporation for any issuance or sale of securities shall (A) to the extent it
consists of property other than cash, be the fair value of that property as
reasonably determined in good faith by a disinterested majority of the Board of
Directors; and (B) if Additional Shares of Common Stock, Convertible Securities
(as hereinafter defined) or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of this Corporation for a
consideration which covers both, be the portion of the consideration so received
reasonably determined in good faith by a disinterested majority of the Board of
Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment
required under this Section f., if this Corporation issues or sells any rights
or options for the purchase of, or stock or other securities convertible into,
Additional Shares of Common Stock (such convertible stock or securities being
hereinafter referred to as "Convertible Securities") and if the Effective Price
(as defined in Clause (v) below) of such Additional Shares of Common Stock is
less than the then current Series C Conversion Price, this Corporation shall be
deemed to have issued, at the time of the issuance of such rights, options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration therefor an amount equal to (A) the total amount of the
consideration, if any, received by this Corporation for the issuance of such
rights or options or Convertible Securities plus (B) in the case of such rights
or options, the minimum amount of consideration, if any, payable to this
Corporation upon the exercise of such rights or options or, in the case of
Convertible Securities, the minimum amount of consideration, if any, payable to
this Corporation upon the conversion thereof. Thereafter, no further adjustment
of the Series C Conversion Price shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options
37
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire or otherwise terminate without having been exercised,
the Series C Conversion Price shall thereafter be the Series C Conversion
Price which would have been in effect had an adjustment been made on the
basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such
Convertible Securities, and were issued or sold for the consideration
actually received by this Corporation upon such exercise plus (A) the
consideration, if any, actually received for the granting of all such rights
or options, whether or not exercised, (B) the consideration, if any, actually
received by issuing or selling the Convertible Securities actually converted
and (C) the consideration, if any, actually received on the conversion of
such Convertible Securities. However, if any such rights or options or
Convertible Securities by their terms provide, with the passage of time or
otherwise, for any increase in the consideration payable to the Corporation,
upon the exercise, conversion or exchange thereof, the Conversion Price for
the Series C Stock, and any subsequent adjustments based thereon, shall upon
any such increase or decrease becoming effective be recomputed to reflect
such increase or decrease insofar as it affects such rights, options or the
rights of conversion or exchange under such Convertible Securities.
(iv) For the purpose of any adjustment
required under this Section F.6.f., if (a) this Corporation issues or sells any
rights or options for the purchase of Convertible Securities and (b) if the
Effective Price of the Additional Shares of Common Stock underlying such
Convertible Securities is less than the Series C Conversion Price, then in each
such event this Corporation shall be deemed to have issued at the time of the
issuance of such rights or options the maximum number of Additional Shares of
Common Stock issuable upon conversion of the total number of Convertible
Securities covered by such rights or options (as set forth in the legal
instruments setting forth the terms of such Convertible Securities) and to have
received as consideration for the issuance of such Additional Shares of Common
Stock an amount equal to the amount of consideration, if any, received for the
issuance of such rights or options plus (A) the minimum amount of consideration,
if any, payable upon the exercise of such rights or options and (B) the minimum
amount of consideration, if any, payable upon the conversion of such Convertible
Securities. No further adjustment of the Series C Conversion Price shall be made
as a result of the actual issuance of the Convertible Securities upon the
exercise of such rights or options or upon the actual issuance of Additional
Shares of Common Stock upon the conversion of such Convertible Securities. The
provisions of Section F.6.f.(iii) for the adjustment of the Series C Conversion
Price upon the expiration of rights or options or the rights of conversion of
Convertible Securities shall apply mutatis mutandis upon the expiration of the
rights, options and Convertible Securities referred to in this Clause F.6.f(iv).
(v) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued or deemed to be issued under this
Section D.8 after the Filing Date, other than (A) shares of Common Stock issued
upon conversion of the shares of Series A, or Series B or Series C Stock; (B)
any shares of Common Stock (or options, warrants or rights therefor) granted or
issued at the then fair market value as determined by the Board of Directors
hereafter to employees, officers, directors, contractors, consultants or
advisers to, the Corporation or any subsidiary pursuant
38
to incentive agreements, stock purchase or stock option plans, stock bonuses
or awards, warrants, contracts or other arrangements that are approved by the
Board of Directors; (C) securities issued by the Corporation in connection
with any credit agreements or similar instruments with equipment lessors or
commercial lenders; (D) securities issued in connection with or pursuant to
the acquisition of all or any portion of another company by the Company
whether by merger or any other reorganization or by the purchase of all or
any portion of the assets of another company, pursuant to a plan, agreement
or other arrangement approved by the Board of Directors; (E) shares of Common
Stock or Preferred Stock issued or issuable upon the exercise of any
warrants, options or other rights that are outstanding as of the Filing Date
(or issued or issuable after the reissuance of any such expired or terminated
options, warrants or rights and net of any such issued shares repurchased by
the Corporation); (F) the reissuance or assignment by the Corporation of any
shares of Common Stock outstanding as of the Filing Date to a different
person from the holder of such shares and (G) shares of Common Stock issued
by way of dividend or other distribution on shares of Common Stock excluded
from the definition of Additional Shares of Common Stock by the foregoing
clauses (A), (B), (C), (D), (E), (F) and this clause (G). The "Effective
Price" of Additional Shares of Common Stock shall mean the quotient obtained
by dividing the total number of Additional Shares of Common Stock issued or
sold, or deemed to have been issued or sold, under this Section f. into the
aggregate consideration received, or deemed to have been received for such
Additional Shares of Common Stock.
g. CERTIFICATE OF ADJUSTMENT. Upon the
occurrence of each adjustment or readjustment of the Series A Conversion Price
or Series B Conversion Price or Series C Conversion Price, this Corporation, at
its sole expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A Stock or Series B Stock or Series C Stock, as applicable, a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This Corporation shall,
upon the written request at any time of any holder of Series A Stock or Series B
Stock or Series C Stock furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
applicable Conversion Price at the time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of Series A Stock or Series B Stock
or Series C Stock, as the case may be.
h. NOTICES OF RECORD DATE. In the event of (i)
any taking by this Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or (ii) any capital
reorganization of this Corporation, any reclassification or recapitalization of
the capital stock of this Corporation, any merger or consolidation of this
Corporation with or into any other corporation, or any transfer of all or
substantially all of the assets of this Corporation, or any voluntary or
involuntary dissolution, liquidation or winding up of this Corporation, this
Corporation shall mail to each holder of shares of Series A Stock, Series B
Stock and Series C Stock at least twenty (20) days prior to the record date
specified therein, a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation,
39
merger, dissolution, liquidation or winding up is expected to become
effective and the specific details thereof; and (iii) the date, if any, that
is to be fixed as to when the holders of record of shares of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock
(or other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.
i. FRACTIONAL SHARES. No fractional shares of
Common Stock shall be issued upon conversion of the shares of Series A Stock or
Series B Stock or Series C Stock. In lieu of any fractional share to which the
holder of such shares would otherwise be entitled, this Corporation shall pay
cash equal to the product of (a) such fraction multiplied by (b) the fair market
value of one share of the Common Stock on the date of conversion. The fair
market value shall be determined by the average trading price of the Common
Stock over the past five (5) trading days, if such a price is available,
otherwise it shall be as determined in good faith by the Board of Directors.
j. RESERVATION OF STOCK ISSUABLE UPON
CONVERSION. This Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Stock, Series B Stock and
Series C Stock, such number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of Series A
Stock, Series B Stock and Series C Stock; and if at any time the number of
authorized, but unissued, shares of Common Stock shall not be sufficient to
effect the conversion of all then-outstanding shares of the Series A Stock or
the Series B Stock or the Series C Stock, in addition to such other remedies as
shall be available to the holder of such stock, this Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized, but unissued, shares of Common Stock to such number of shares as
shall be sufficient for such purposes, without the necessity of any stockholder
vote or approval.
k. NOTICES. Any notice required by the
provisions of this Section F to be given to a holder of shares of Series A Stock
or Series B Stock or Series C Stock, shall be deemed given upon the earlier of
actual receipt or seventy-two (72) hours after the same has been deposited in
the United States mail, certified or registered mail, return receipt requested,
postage prepaid, addressed to the holder at the address of such holder appearing
on the books of this Corporation.
G. RESTRICTIONS AND LIMITATIONS.
1. CORPORATE ACTION. Except as otherwise required by
law, so long as at least six hundred eighty thousand (680,000) shares of Series
A Stock remain outstanding (adjusted for stock split(s),combination(s),
reclassification(s), dividend(s) and the like), this Corporation shall not,
without the vote or written consent of the holders of a majority of the shares
of Series A Stock, voting as a separate class:
a. Increase the authorized number of shares of
Series A Stock;
40
b. Increase the authorized number of Preferred
Stock;
c. Create any new class or series of shares
having preference over the Series A Stock;
d. Merge, consolidate, or reorganize, where
such merger, consolidation, or reorganization would result, directly or
indirectly, in the change of a majority of the members of the Board of
Directors; or,
e. Sell all, or substantially all, of its
assets or issue more than fifty percent (50%) of this Corporation's Common Stock
in one transaction or series of related transactions.
2. CORPORATE ACTION. Except as otherwise required by
law, so long as at least three hundred fourteen thousand seven hundred twenty
four (314,724)shares of Series B Stock remain outstanding (adjusted for stock
split(s), combination(s), reclassification(s), dividend(s) and the like), this
Corporation shall not, without the vote or written consent of the holders of a
majority of the shares of Series B Stock, voting as a separate class:
a. Increase the authorized number of shares of
Series B Stock;
b. Increase the authorized number of Preferred
Stock;
c. Create any new class or series of shares
having preference over the Series B Stock;
d. Merge, consolidate, or reorganize, where
such merger, consolidation, or reorganization would result, directly or
indirectly, in the change of a majority of the members of the Board of
Directors; or,
e. Sell all, or substantially all, of its
assets or issue more than fifty percent (50%) of this Corporation's Common Stock
in one transaction or series of related transactions.
3. CORPORATE ACTION. Except as otherwise required by
law, so long as at least seventy five percent (75%) of any Series C Stock
purchased by ADC TELECOMMUNICATIONS, INC. remains outstanding (adjusted for
stock split(s),combination(s), reclassification(s), dividend(s) and the like),
this Corporation shall not, without the vote or written consent of the holders
of a majority of the shares of Series C Stock, voting as a separate class:
a. Increase or decrease the authorized number
of shares of Series C Stock or effect a stock split or reverse stock split of
the Series C Stock;
b. Increase the authorized number of Preferred
Stock;
41
c. Create any new class or series of shares
having preference over the Series C Stock or otherwise amend the Certificate of
Incorporation so as to materially and adversely affect the Series C Stock;
d. Merge, consolidate, reorganize, or sell all,
or substantially all, of its assets unless in any such reorganization the price
per share value is equal to or in excess of the Series C Liquidation Price;
e. Purchase, redeem or otherwise acquire any
Common Stock shares except in connection with contractual repurchases from
employees and consultants; or,
f. Voluntarily elect to wind up and dissolve
the Corporation.
4. DIVIDENDS. This Corporation shall not, without the
vote or written consent of the holders of a majority of the shares of Series A
Stock, Series B Stock or Series C Stock, take any action that would constitute
the declaring of a dividend for holders of Series A Stock, Series B Stock or
Series C Stock or Common Stock.
H. REPLACEMENT OF CERTIFICATES. Upon receipt of evidence
reasonably satisfactory to this Corporation of the loss, theft, destruction, or
mutilation of a certificate representing any of the outstanding shares of
Preferred Stock or Common Stock, and, in the case of loss, theft, or
destruction, the execution of an agreement satisfactory to this Corporation to
indemnify this Corporation from any loss incurred by it in connection therewith,
this Corporation will issue a new certificate representing such shares of
Preferred Stock or Common Stock in lieu of such lost, stolen, destroyed or
mutilated certificate.
I. ARRANGEMENT WITH CREDITORS. Whenever a compromise or
arrangement is proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders or any class of
them any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
42
J. FIDUCIARY DUTY. A director of this Corporation shall not be
personally liable to this Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to this Corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (iii) under Section
174 of the Delaware General Corporation Law; or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after the filing of the Certificate of Incorporation
of which this Article V is a part to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of this Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of the foregoing paragraph by the stockholders of this
Corporation shall not adversely affect any right or protection of a director of
this Corporation existing at the time of such repeal or modification.
V
A. INDEMNIFICATION.
1. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party, or is threatened to be made a party to, or is involved in, any
action, suit or proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), including, without limitation, Proceedings by or
in the right of this Corporation to procure a judgment in its favor, by reason
of the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director or officer, employee or agent of this
Corporation, or is or was serving at the request of this Corporation as a
director or officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such Proceeding is
alleged action in an official capacity as a director, officer, employee or
agent, or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by this Corporation to the
fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent such amendment permits this Corporation
to provide broader indemnification rights than said law permitted this
Corporation to provide prior to such amendment) against all expenses, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amount paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith. Such right shall be a contract
right and shall include the right to be paid by this Corporation for expenses
incurred in defending any such Proceeding in advance of its final disposition;
PROVIDED, HOWEVER, that the payment of such expenses incurred by a director or
officer of this Corporation in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of such Proceeding,
shall be made only upon delivery to this Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
should
43
be determined ultimately that such director or officer is not entitled to be
indemnified under this section, or otherwise.
2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 1 (above) is not paid in full by this Corporation within ninety (90)
days after a written claim has been received by this Corporation, the claimant
may at any time thereafter bring suit against this Corporation to recover the
unpaid amount of the claim, and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any Proceeding in advance of its final
disposition where the required undertaking has been tendered to this
Corporation), that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
this Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on this Corporation. Neither the failure
of this Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by this Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of conduct.
B. NON-EXCLUSIVITY OF RIGHTS. The rights conferred by Section A.1
and A.2 (above) shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors, or otherwise.
C. AMENDMENT OR REPEAL. Neither any amendment nor repeal of this
Article V, nor the adoption of any provision of this Corporation's Certificate
of Incorporation inconsistent with this Article V, shall eliminate or reduce the
effect of this Article V, in respect of any matter occurring, or any action or
Proceeding accruing or arising, or that, but for this Article V would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent provision.
VI
A. DIRECTORS' POWERS. The Directors of this Corporation shall
have the power to adopt, amend or repeal the Bylaws of this Corporation. The
management of the business and the conduct of the affairs of this Corporation
shall be vested in its Board of Directors. The number of directors which shall
constitute the whole Board of Directors shall be fixed exclusively by, or in the
manner provided in, the Bylaws of this Corporation or this Certificate of
Incorporation.
B. CORPORATION EXISTENCE. This Corporation is to have perpetual
existence.
44
C. ELECTION OF DIRECTORS. The election of the Directors of this
Corporation need not be by written ballot, unless the Bylaws of this Corporation
so shall provide.
VII
A. QUALIFIED PUBLIC OFFERING. For the management of the business,
and for the conduct of the affairs of this Corporation, and in further
definition, limitation and regulation of the powers of this Corporation, of its
directors and of its stockholders or any class thereof, as the case may be, it
is further provided that, effective upon the closing of a registered public
offering of this Corporation's Common Stock causing an automatic conversion of
this Corporation's Series A Stock, Series B Stock and Series C Stock, whereby
this Corporation is no longer subject to Section 2115 of the California
Corporation's Code (a "Qualified Public Offering"):
1. BOARD CLASSES AND TERMS. The Board of Directors shall
be divided into three (3) classes, designated at Class I, Class II, and Class
III, respectively. Directors shall be assigned to each class in accordance with
a resolution or resolutions adopted by the Board of Directors. At the first
annual meeting of stockholders following the date of the Qualified Public
Offering, the term of office of the Class I directors shall expire, and Class I
directors shall be elected for a full term of three (3) years. At the second
annual meeting of stockholders following the date of the Qualified Public
Offering, the term of office of the Class II directors shall expire, and Class
II directors shall be elected for a full term of three (3) years. At the third
annual meeting of stockholders following the date of the Qualified Public
Offering, the term of office of the Class III directors shall expire, and Class
III directors shall be elected for a full term of three (3) years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three (3) years to succeed the directors of the class whose terms expire
at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his or her successor is duly elected and qualified, or under
his or her death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
2. BOARD VACANCIES. Any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal, or other
causes shall be filled by either (i) the affirmative vote of the holders of a
majority of the voting power of the then-outstanding shares of voting stock of
this Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class; or (ii) by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Newly created directorships resulting
from any increase in the number of directors shall, unless the Board of
Directors determines by resolution that any such newly-created directorship
shall be filled by the stockholders, be filled only by the affirmative vote of
the directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
which the
45
new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
B. BYLAWS. In furtherance, and not in limitation, of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend, or repeal the Bylaws of this Corporation.
C. VOTE.
1. The affirmative vote of sixty-six and two-thirds
percent (66-2/3%) of the voting power of the then-outstanding shares of Voting
Stock, voting together as a single class, shall be required for the adoption,
amendment or repeal of Sections 2.2 (Annual Meeting) and 2.3 (Special Meeting)
of this Corporation's Bylaws.
2. Effective upon the closing of a Qualified Public
Offering, any director, or the entire Board of Directors, may be removed from
office at any time (i) with cause by the affirmative vote of the holders of at
least a majority of the voting power of all of the then-outstanding shares of
the voting stock, voting together as a single class; or (ii) without cause by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock.
D. NO ACTION. Effective upon the closing of a Qualified Public
Offering, no action shall be taken by the stockholders of this Corporation,
except at an annual or special meeting of the stockholders called in accordance
with the Bylaws. Effective upon the closing of a Qualified Public Offering, the
Stockholders shall not take any action by written consent. Until the closing of
a Qualified Public Offering, shareholder actions shall be governed by this
Certificate of Incorporation and this Corporation's Bylaws.
E. STOCKHOLDER NOMINATION. Advance notice of stockholder
nomination for the election of directors and of business to be brought by
stockholders before any meeting of the stockholders of this Corporation shall be
given in the manner provided in the Bylaws of this Corporation.
F. AMENDMENT. Notwithstanding any other provisions of this
Certificate of Incorporation, or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law,
this Certificate of Incorporation or any Preferred Stock Designation, upon the
closing of a Qualified Public Offering, the affirmative vote of the holders of
at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
of the then-outstanding shares of the Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal this Article VII.
46
VIII
This Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in this Certificate, and
all rights conferred upon the stockholders herein are granted subject to this
right."
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed and attested by ▇▇▇▇▇▇ ▇▇▇▇,
its Chief Executive Officer, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, its Secretary, as of August
24, 1999.
PHASECOM, INC.
BY:_____________________________,
▇▇▇▇▇▇ ▇▇▇▇,
Chief Executive Officer
ATTEST:_________________________,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Secretary
47
EXHIBIT B
TO
PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
The form of the Registration Rights Agreement is set forth on the
following pages.
48
PHASECOM, INC.
AMENDMENT TO REGISTRATION RIGHTS
AND LOCK-UP AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AND LOCK-UP AGREEMENT made as of
this ______ day of August, 1999 by and among PHASECOM INVESTOR GROUP LIMITED
PARTNERSHIP, a Delaware limited partnership ("PhaseCom LP"), PHASECOM, INC., a
Delaware Corporation ("PhaseCom Del."), GALRAN PROPERTIES (1993) LTD.
("Galran"), EICHOT CAPITAL MARKETS AND INVESTMENTS (1993) LTD. ("Eichot"), ▇▇▇
HOLDINGS AND PROPERTIES (1993) LTD. ("▇▇▇"), ▇. ▇▇▇▇ INVESTMENTS LTD. ("Atai"),
ADC TELECOMMUNICATIONS, INC., a Minnesota Corporation ("ADC") and the additional
holders of PhaseCom Del's Series A Convertible Preferred Stock identified on the
signature page to this Agreement (collectively, the "Additional Series A
Stockholders").
W I T N E S S E T H :
WHEREAS, PhaseCom LP, PhaseCom Del., Galran, Eichot, ▇▇▇ and ▇▇▇▇ are
parties to that Registration Rights and Lock-Up Agreement dated as of April 21,
1996 (the "Registration Rights Agreement"); and
WHEREAS, in connection with the acquisition of shares in PhaseCom Del
by ADC, the parties hereto desire to amend the Registration Rights Agreement as
set forth herein and to add ADC and the Additional Series A Stockholders as a
party thereto.
NOW, THEREFORE, for and in consideration of the mutual agreements,
covenants, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
1. DEFINITIONS. Except as otherwise expressly provided herein,
the definitions set forth in Article 1 of the Registration Rights Agreement
shall have the same meaning in this Agreement as if fully set forth herein.
2. ADDITIONAL PARTIES TO AGREEMENT. Effective upon the Closing
(as defined in the Series C Preferred Stock Purchase Agreement, dated as of even
date herewith, by and between PhaseCom Del and ADC), ADC and each Additional
Series A Stockholder shall be deemed a "Holder" and an "Initial Holder" for all
purposes under the Registration Rights Agreement, as amended by this Amendment
and shall, for all purposes under said Registration Rights Agreement be deemed a
party thereto.
3. AMENDMENT TO ARTICLE 2, m.Sections 2 m (i), 2 m (ii) and 2 m
(iii) of the Registration Rights Agreement, entitled "Standoff Agreement," shall
be deleted and in their place, the following new Articles 2 m (i) and 2 m (ii),
shall be inserted:
m. (i) In connection with the Offering, each of the
Holders agrees to have placed on his, her or its certificate(s) representing
his, her or its PhaseCom Del share interests, in addition to any other
applicable securities legends, a legend stating that the shares represented by
49
that certificate may not be transferred by any means whatsoever, without the
agreement of PhaseCom Del for a period commencing as of the commencement of the
Offering and ending on the one hundred eightieth (180th) day following the
commencement of the Offering. Each Holder agrees to be bound by the legend
restrictions set forth above.
(ii) Until the lock-up period expires, the
standoff holder agrees unless released in writing by PhaseCom Del and the
underwriters managing the Offering, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the Offering). PhaseCom Del, as
applicable, may impose stop transfer instructions with respect to the shares
subject to the foregoing restrictions, until the end of the lock-up period.
4. FULL FORCE AND EFFECT. The parties hereto hereby modify and
amend the Registration Rights Agreement in accordance with the provisions of
this Amendment and except as hereby and herein modified and amended, the
Registration Rights Agreement shall remain in full force and effect and binding
upon the parties.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
PHASECOM INVESTOR GROUP
LIMITED PARTNERSHIP
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, President
Harmony Management, Inc., General Partner
PHASECOM, INC.
a Delaware Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, Chief Executive Officer
GALRAN PROPERTIES (1993) LTD.
--------------------------------------
(signature)
--------------------------------------
50
(print name)
EICHOT CAPITAL MARKETS AND
INVESTMENTS (1993) LTD.
--------------------------------------
(signature)
--------------------------------------
(print name)
▇▇▇ HOLDINGS AND PROPERTIES (1993) LTD.
--------------------------------------
(signature)
--------------------------------------
(print name)
▇. ▇▇▇▇ INVESTMENTS (1993) LTD.
--------------------------------------
(signature)
--------------------------------------
(print name)
ADC TELECOMMUNICATIONS, INC.
a Minnesota Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
By:
--------------------------------------
(signature)
-----------------------------------------
(print name & title)
PHASECOM INVESTOR GROUP
LIMITED PARTNERSHIP NO. 2
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, President
Harmony Management, Inc., General Partner
51
DAVIDI and ▇▇▇▇▇▇▇ ▇▇▇▇ TRUST U/T/D
1/18/91
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, Trustee
▇▇▇▇▇▇▇-▇▇▇▇▇▇ TRUST U/T/D
4/3/87
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
(signature)
ITHZAK and ▇▇▇▇▇▇ HOFFI
--------------------------------------
(signature)
--------------------------------------
(signature)
CHIM-NIR LTD
By:
--------------------------------------
(signature)
-----------------------------------------
(print name & title)
HAREL-HAMISHMAR INVESTMENTS LTD.
By:
--------------------------------------
(signature)
-----------------------------------------
(print name & title)
52
AL-BEN LTD.
By:
--------------------------------------
(signature)
-----------------------------------------
(print name & title)
▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
(signature)
▇▇▇▇▇ and YUVAL EZYONI
-----------------------------------------
(signature)
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(signature)
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(signature)
REUVEN and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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MIRI LENT
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(signature)
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO. (successor in interest to
▇. ▇▇▇▇▇▇▇ & CO) as Trustee U/A dtd 11/10/97
FBO: The parties identified on Schedule A hereto
By:
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(signature)
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(print name & title)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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(signature)
YOTAM FINANCING TECHNOLOGICAL
VENTURES LTD.
By:
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(signature)
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(print name & title)
SCHLOMO RACHIV
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(signature)
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SCHEDULE A
▇. ▇▇▇▇▇▇▇ & Co. as Trsutee U/A dtd 11/10/97
FBO: ▇. ▇▇▇▇ Investments Ltd.
FBO: Galran Properties (1993) Ltd.
FBO: ▇▇▇ Holdings and Properties (1993) Ltd.
FBO: Eichut Capital Markets and Investments (1993) Ltd.
FBO: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
FBO: ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Hoffi
FBO: Chim-Nir Ltd.
FBO: MMD Technology Israel Ltd.
FBO: ▇▇▇▇▇ Investment Company Ltd.
FBO: Cham Foods (Israel) Ltd.
FBO: Harel Hamishmar Investments Ltd.
FBO: Reuven and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
FBO: Al-Ben Ltd.
FBO: Miri Lent
FBO: ▇▇▇▇ ▇▇▇▇▇
FBO: Yotam Financing and Technology Ventures Ltd.
FBO: Hananyah and Tamar Amishav
FBO: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
FBO: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FBO: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or Successor, as Trustee on behalf of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
FBO: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or Successor, as Trustee on behalf of ▇▇▇▇ ▇▇▇▇▇▇
FBO: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or Successor, as Trustee on behalf of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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EXHIBIT C
TO
STOCK PURCHASE AGREEMENT
DEFINITION OF ACCREDITED INVESTOR
ACCREDITED INVESTOR. "Accredited investor" shall mean any person who
comes within any of the following categories as at the Closing Date:
(1) Any bank as defined in section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); any insurance
company as defined in section 2(13) of the Securities Act; any investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that Act; Small Business
Investment Company licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974 if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decision made solely by persons that are accredited investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) Any director or executive officer of the Corporation;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
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(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; and
(8) Any entity in which all of the equity owners are accredited
investors.
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EXHIBIT D
TO
PURCHASE AGREEMENT
FINANCIAL STATEMENTS
The Financial Statements of the Corporation are set forth on the
following pages.
[Exhibit D is not attached to this Agreement.]
58
EXHIBIT E
TO
PURCHASE AGREEMENT
VOTING AGREEMENT
The Voting Agreement is set forth on the following pages.
59
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made as of the _____ day of
August, 1999 by and among Phasecom, Inc., a Delaware corporation (the
"COMPANY"), ADC Telecommunications, Inc. ("ADC"), Gilo Family Partnership, a
California limited partnership and ▇▇▇▇▇▇ ▇▇▇▇ (the ▇▇▇▇ Family Partnership and
▇▇▇▇▇▇ ▇▇▇▇ are referred to as the "MAJORITY HOLDERS").
RECITALS:
WHEREAS, the Company has agreed to sell, and ADC has agreed to
purchase, certain shares of the Company's Series C Convertible Preferred Stock
(the "Series C Preferred"); and
WHEREAS, the Majority Holders currently own of record a majority of the
voting power of the Company's issued and outstanding shares of capital stock;
and
WHEREAS, the closing of such sale and purchase of the Series C
Preferred shares is conditioned upon, among other things, the parties hereto
executing this Voting Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"BOARD" shall mean the Company's Board of Directors.
"ADC DIRECTOR" shall mean the individual appointed by ADC to
serve on the Board and who is elected by a majority of the
issued and outstanding shares of capital stock of the Company.
"RESTRICTED SECURITIES" shall mean all shares of capital stock
of the Company, regardless of class or series, now or
hereafter held by the Majority Holders.
"DISCRETIONARY SHARES" shall mean any shares of capital stock
of the Company, regardless of class or series, with respect to
which the Majority Holders or any entity controlled by ▇▇▇▇▇▇
▇▇▇▇ has the power to vote, whether through direct or indirect
ownership, the appointment of a proxy, a voting agreement, a
voting trust or otherwise.
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2. VOTING FOR THE ADC DIRECTOR.
2.1 FRAMEWORK OF THIS VOTING AGREEMENT. The Company's
Second Amended and Restated Certificate of Incorporation, together with the
Bylaws of the Company, currently provides that the Company's Directors are
elected by the holders of a majority of the voting power of the Company's
capital stock without regard to class or series.
2.2 SHARES SUBJECT TO AGREEMENT. The Majority Holders
agree to hold their Restricted Securities subject to, and to vote such shares in
accordance with, the provisions of this Agreement.
2.3 ELECTION OF ONE ADC DIRECTOR. Each time there is a
meeting, or act by written consent in lieu of a meeting, for the purpose of
electing Directors, the Majority Holders agree to nominate a candidate for
Director specified by ADC, and the Majority Holders agree to vote so many of
their shares of Restricted Securities and Discretionary Shares as may be
necessary to elect the Director nominee that is specified by ADC.
Notwithstanding the foregoing, the Majority Holders shall not be required to act
in the foregoing manner unless ADC owns less than fifty percent (50%) of the
issued and outstanding Series C Preferred.
2.4 FILLING VACANCIES. In the event of a vacancy on the
Board resulting from the removal, resignation or death of the ADC Director whose
nomination was specified by ADC pursuant to Section 2.3, the Majority Holders
agree to vote so many of their shares of Restricted Securities and Discretionary
Shares as may be necessary to fill the vacancy pursuant to the terms of Section
2.3 hereof.
2.5 LEGENDS. Each certificate representing any of the
Restricted Securities shall be marked by the Company with a legend reading as
follows:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT
(A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER), AND MAY NOT
BE TRANSFERRED BY THE HOLDER HEREOF UNLESS THE TRANSFEREE
AGREES TO BE BOUND BY ALL OF THE TERMS THEREOF."
2.6 FUTURE SHARE ISSUANCES. The Company covenants and
agrees that commencing on the date immediately prior to any issuance of capital
stock, warrant or convertible security, or the grant of any option to acquire
any capital stock or convertible security, which would result in the Majority
Holders owing less than fifty percent (50%) of the Company's issued and
outstanding voting stock immediately after giving effect to such issuance,
exercise or conversion, the Company will require, as a condition to any future
stock issuance, the grant or issuance of any option or warrant to acquire
capital stock of the
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Company or any security convertible into capital stock of the Company, or the
issuance of any security convertible into capital stock of the Company, which
would result upon the issuance, exercise or conversion thereof in any holder
either singly or together with any affiliates of such holder in owning more
that 1% of the issued and outstanding capital stock of the Company, to
execute a counterpart to this Agreement and acknowledge that such holder is
bound by all the terms hereof to the same extent as the Majority Holders.
3. SUCCESSORS IN INTEREST. The provisions of this Agreement shall
be binding upon the successors in interest of the Majority Holders to any of the
Restricted Securities. The Majority Holders agree not to transfer any of the
Restricted Securities, and the Company shall not permit the transfer of any
Restricted Securities on its books or issue a new certificate representing any
Restricted Securities, unless and until the person to whom such security is to
be transferred shall have executed a written agreement pursuant to which such
person becomes a party to this Agreement and agrees to be bound by all the
provisions hereof as if such person was a party hereunder.
4. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties regarding the subject
matter hereof. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
5. NOTICES, ETC. All notices, requests, demands and other
communications under this Agreement or in connection herewith shall be given to
or made upon the Majority Holders at c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ADC at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: General Counsel, and, if to the Company, at:
Phasecom, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
6. SEVERABILITY. In case any provision or portion of any
provision of the Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions or portion of
such provision shall not in any way be affected or impaired.
7. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware (without regard to principles
of conflict of law).
8. TERMINATION. All parties' rights under this Agreement will
terminate upon the earliest to occur of:
(i) the closing of the Company's initial public offering
pursuant to a registration statement filed under the
Securities Act of 1933, as
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amended which results in the automatic
conversion of the Series C Convertible Preferred
Stock into common stock as provided by Section F
of Article IV of the Company's Second Amended and
Restated Certificate of Incorporation;
(ii) At such time as ADC does owns less that 7.5% of the
issued and outstanding capital stock of the Company; or
(iii) upon mutual agreement of the Majority Holders and ADC
(and any successors in interest thereto).
9. MODIFICATION, WAIVER AND AMENDMENT. This Agreement, in whole
or in part, may be modified, waived or amended only upon the written consent of
each party hereto.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
[This space left intentionally blank]
63
The foregoing Agreement is hereby executed as of the date first above
written.
COMPANY:
PHASECOM, INC.
By:
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Name:
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Title:
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GILO FAMILY PARTNERSHIP
By:
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Name:
----------------------------
Title:
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---------------------------------
▇▇▇▇▇▇ ▇▇▇▇
ADC TELECOMMUNICATIONS, INC.
By:
------------------------------
Name:
----------------------------
Title:
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64