Document:

Exhibit 10.36

 

NONQUALIFIED STOCK OPTION AGREEMENT

UNDER THE

NEUSTAR, INC. 1999 EQUITY INCENTIVE PLAN

 

THIS
AGREEMENT, made as of February 14, 2005 (the “Effective Date”), by and between
NeuStar, Inc., a Delaware corporation (the “Company”), and Frank Schiff (the
“Participant”).

 

W I  T  N  E  S  S
E  T  H:

 

WHEREAS, the
Company desires to afford the Participant the opportunity to acquire an
ownership of the Company’s common stock, par value $.002 per share (“Common
Stock”), so that the Participant may have a direct proprietary interest in the
Company’s success.

 

NOW,
THEREFORE, in consideration of the covenants and agreements herein contained,
the parties hereto hereby agree as follows:

 

1.             Grant of Option.  Subject to the terms and conditions set forth
herein and in the Company’s 1999 Equity Incentive Plan, as restated as of March
13, 2002 and as amended as of June 21, 2004 and September 22, 2004  (the “Plan”), the Company hereby grants to
the Participant, during the period commencing on the date of this Agreement and
ending on February 14, 2015 (the “Expiration Date”), the right and option (the
right to purchase any one share of Common Stock hereunder being an “Option”) to
purchase from the Company 59,088 shares of Common Stock.  The Options shall have an exercise price
of  $15.20 per share.  None of the Options granted pursuant to this
Section 1 is intended to constitute Incentive Stock Options.

 

2.             Limitations on
Exercise of Options.  Subject to the
terms and conditions set forth herein and the Plan, the Options shall vest and
become exercisable, on a cumulative basis, with respect to 100% of the shares
on February 14, 2005; provided, however, the Participant may not exercise any
Option for fractional shares of Common Stock.  
The Committee or the Board may accelerate the vesting and exercisability
of any or all of the then-unvested Options at any time.

3.             Termination of Service.  (a) 
If, prior to the Expiration Date, the Participant’s Service with the
Company shall terminate (the date of termination being the “Date of
Termination”) by reason of a Normal Termination (as defined in the Plan), the
Options shall remain exercisable until the earlier of the Expiration Date or
the day three (3) months after the Date of Termination to the extent the
Options were vested and exercisable as of the Date of Termination.

 

(b)           If the Participant’s Service with the
Company shall cease prior to the Expiration Date by reason of death or
disability, or the Participant shall die or become disabled while entitled to
exercise any of the Options pursuant to paragraph 3(a), the Participant or the
Participant’s legal representative, or, in the case of death, the executor or
administrator of the estate of the Participant or the person or persons to whom
the Options shall have been validly transferred by the executor or
administrator pursuant to

 

 

 

will or the laws of descent and
distribution, shall have the right, until the earlier of the Expiration Date or
one year after the date of death or disability, to exercise the Options to the
extent that the Participant was entitled to exercise them on the date of death
or disability.

 

(c)           If, prior to the Expiration Date, the
Participant’s Service with the Company is terminated for “Cause” (as defined in
the Plan), (i) unless otherwise provided by the Committee, the Options, to the
extent not exercised as of the Date of Termination, shall lapse and be
canceled, and (ii) all shares of Common Stock received pursuant to an exercise
of the Options after such termination, in contravention of subsection (i)
above, may be purchased by the Company at its discretion for the exercise price
of such shares paid by the Participant. 
If the Participant’s Service relationship with the Company is suspended
pending an investigation of whether the Participant shall be terminated for
Cause, all the Participant’s rights with respect to the Options shall be
suspended during the period of investigation.

 

(d)           If, prior to the Expiration Date, the
Participant’s Service with the Company is terminated other than for Cause, a Normal
Termination, death or disability, the Options, to the extent then vested and
exercisable as of the Date of Termination, shall remain exercisable until the
earlier of the Expiration Date or thirty (30) days after the Date of
Termination.

 

(e)           After the expiration of any exercise
period described in any of Sections 3(a) - (d) hereof, or otherwise upon the
Expiration Date, the Options shall terminate together with all of the
Participant’s rights hereunder, to the extent not previously exercised.

 

4.             Non-Transferable.  Except as provided below or as otherwise
authorized by the Committee, the Participant may not transfer the Options
except by will or the laws of descent and distribution and the Options shall be
exercisable during the Participant’s lifetime only by the Participant or, in
the event of the Participant’s legal incapacity, his guardian or legal
representative.  Except as so authorized,
no purported assignment or transfer of the Options, or of the rights represented
thereby, whether voluntary or involuntary, by operation of law or otherwise
(except by will or the laws of descent and distribution), shall vest in the
assignee or transferee any interest or right herein whatsoever.  Without limiting the generality of the
foregoing, the Participant may transfer the Options to one family member (as
defined in under Regulation 701(c)(3) of the Securities Act of 1933, as amended
(the “Act”)) in whole or in part. 
An Option that is transferred pursuant to the preceding sentence, absent
further action by the Committee, (i) may not be subsequently transferred
otherwise than by will or by the laws of descent and distribution and (ii)
remains subject to the terms of the Plan and this Agreement.  Any shares of Common Stock acquired upon the
exercise of an Option by a permitted transferee shall be subject to the terms
of the Plan and this Agreement.

 

5.             Adjustments and Corporate
Reorganizations; Changes in Organization.

 

(a)           In accordance with and subject to the
applicable terms of the Plan and this Agreement, the Options shall be subject
to adjustment or substitution, as

 

 

 

determined by the Committee in
its sole discretion, as to the number, price or kind of Common Stock or other
consideration subject to such Options or as otherwise determined by the
Committee in its sole discretion to be equitable (i) in the event of changes in
the outstanding Common Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
hereof or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, the Participant, or
which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Plan.  The
Committee shall give the Participant written notice of an adjustment
hereunder.  Neither the foregoing, nor
any similar provision in the Plan, shall apply to changes in tax laws, tax
interpretations or tax rates.

 

(b)           In the event that the Company
undertakes a change in its organization, including but not limited to a
combination of business units, the creation of a new business unit, the
elimination of a business unit, or the acquisition, sale or transfer of an
interest in a business unit, the Options shall be subject to adjustment or
substitution (including but not limited to the substitution of common stock of
or other ownership interest in a Related Entity, other consideration or another
Award under the Plan), as to the number, price or kind of Common Stock or other
consideration subject to such Options or as otherwise determined by the
Committee in its sole discretion to be equitable.  For purposes of this Agreement, a “business
unit” shall mean any Related Entity or any division or other unit or group
within the Company that the Committee designates as a “business unit”.

 

6.             Exercise; Payment For and
Delivery of Common Stock; Shareholders Agreement.  (a)  The Options shall be
exercised by delivering written notice to the Committee stating the number of
whole shares of Common Stock to be purchased, the person or persons in whose
name the shares of Common Stock are to be registered and each such person’s
address and social security number.  Such
notice shall not be effective unless accompanied by the full purchase price for
all shares to be purchased, and any applicable withholding (as described
below).  The purchase price shall be
payable in cash, in shares of Common Stock, any combination of cash or shares
of Common Stock or such other method of payment as is authorized by the Plan
with the consent of the Committee; provided, however, that the
Participant may use Common Stock in payment of the exercise price only if the
shares so used are considered “mature” for purposes of generally accepted
accounting principles (i.e., (i) been held by the Participant free and
clear for at least six (6) months (or such other period necessary to avoid a
charge, for accounting purposes, against the Company’s earnings as reported in
the Company’s financial statements) prior to the use thereof to pay part of an
Option exercise price, (ii) been purchased by the Participant in other than a
compensatory transaction, or (iii) meet any other requirements for “mature”
shares as may exist on the date of the use thereof to pay part of an Option
exercise price) and the Participant has good title free and clear of any liens
and encumbrances.  In the event that all
or part of the purchase price is paid in shares of Common Stock, the shares
used in payment shall be

 

 

 

 

valued at their Fair Market
Value on the date of exercise of the Options. 
At the time of exercise, the Committee shall require the Participant to
pay to the Company an amount sufficient to pay all federal, state and local
withholding taxes incurred, in the Committee’s judgment, by reason of the
exercise of the Options. and the Participant’s right to receive shares of
Common Stock shall be contingent upon such payment.  Such payment to the Company may be effected
through (a) payment by the Participant to the Company of the aggregate
withholding taxes in cash or cash equivalents; (b) at the discretion of the
Committee, the Company’s withholding from the number of shares of Common Stock
that would otherwise be delivered to the Participant upon exercise of the
Options, a number of shares of Common Stock with an aggregate Fair Market Value
on the Settlement Date equal to the aggregate amount of minimum required
withholding taxes; or (c) at the discretion of the Committee, any combination
of these two methods.

 

(b)           Notwithstanding anything herein to
the contrary, in accordance with Section 12(q) of the Plan, as a condition to
the receipt of a certificate or certificates representing shares of Common
Stock acquired pursuant to the exercise of Options, to the extent required by
the Committee, the Participant shall execute and deliver a shareholders
agreement or such other documentation which shall provide for restrictions on
transferability of the shares of Common Stock acquired hereunder, a right of
first refusal of the Company with respect to the shares of Common Stock
acquired hereunder and such other terms as the Board or Committee shall from
time to time require.

 

(c)           The Committee reserves the right to
require, upon exercise of all or any portion of the Option while the Company is
not a reporting company under Section 12 of the Securities Exchange Act of
1934, as amended, the deposit of the shares issued into a trust (with a trustee
designated by the Company) to the extent the Committee determines in its
discretion that such an arrangement is appropriate to ensure compliance with
applicable laws, rules or regulations governing ownership of Company shares.
The trust would be the shareholder of record, and would hold the shares for the
benefit of the Participant. Any transferee of the shares would be required to
retain the shares in the voting trust. The trust would end at such time as the
Company has become a reporting Company under such Section 12 of the Securities
Exchange Act of 1934, as amended.  The
trust would provide that the trustee would exercise voting rights with respect
to the shares in trust, and would contain such other provisions and limitations
governing transfer and other ownership rights as the Committee determines in
its discretion are necessary or desirable.

 

7.             Rights as Common Stockholder.  The Participant or a transferee of the
Options shall have no rights as a stockholder with respect to any shares
covered by the Options until he shall have become the holder of record of such
shares (and the Company shall use its reasonable best efforts to cause the
Participant promptly to become the holder of record of such shares), and,
except as provided in Section 5 hereof, no adjustment shall be made for
dividends or distributions or other rights in respect of such shares for which
the record date is prior to the date upon which he shall become the holder or
record thereof.

 

 

 

 

 

8.             Company; Participant.  (a) 
The term “Company” as used in this Agreement with reference to
employment shall include the Company and its affiliates.

 

(b)           Whenever the word “Participant” is
used in any provision of this Agreement under circumstances where the provision
should logically be construed to apply to the executors, the administrators,
legal representatives or the person or persons to whom the Options may be
transferred by will or by the laws of descent and distribution, the word
“Participant” shall be deemed to include such person or persons.

 

9.             Requirements of Law.  (a)  By
accepting the Options, the Participant represents and agrees for himself and
his permitted transferees that, unless a registration statement under the Act,
is in effect as to shares purchased upon any exercise of the Options, (i) any
and all shares so purchased shall be acquired for his personal account and not
with a view to, or for sale in connection with, any distribution, (ii) each
notice of the exercise of any portion of the Options shall be accompanied by a
representation and warranty in writing, signed by the person entitled to
exercise the same, that the shares are being so acquired in good faith for his
personal account and not with any present intention of distributing or selling
any of such shares of Common Stock; and (iii) the shares have not been
registered under the Securities Act on the ground that no distribution or
public offering of the shares is to be effected (it being understood, however,
that the shares are being issued and sold in reliance on the exemption provided
under Rule 701 under the Securities Act), and in this connection the Company is
relying in part on the Participant’s representations set forth in this Section.

 

(b)           No certificate or certificates for
shares of Common Stock may be purchased, issued or transferred if the exercise
hereof or the issuance or transfer of such shares shall constitute a violation
by the Company or the Participant of any (i) provision of any Federal, state or
other securities law, (ii) requirement of any securities exchange listing
agreement to which the Company may be a party, or (iii) other requirement of
law or of any regulatory body having jurisdiction over the Company.  Any reasonable determination in this
connection by the Board or the Committee, upon notice given to the Participant,
shall be final, binding and conclusive.

 

(c)           The certificates representing shares
of Common Stock acquired pursuant to the exercise of Options shall carry such
appropriate legend, and such written instructions shall be given to the
Company’s transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Act or any state
securities laws.

 

(d)           The Participant hereby confirms that
the Participant has been informed that any shares of Common Stock acquired
hereunder are restricted securities under Rule 144 promulgated under the
Securities Act and may not be resold or transferred unless the Common Stock is
first registered under the Federal securities laws or unless an exemption from
registration is available.  The Company
shall in no event be obligated to register any securities pursuant to the Securities
Act or to take any other

 

 

 

 

 

affirmative action in order to
cause the issuance or transfer of shares acquired pursuant to this Agreement to
comply with any law or regulation of any governmental authority.

 

10.           Notices.  Any notice to be given to either party shall
be in writing and shall be given by hand delivery to such party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company in care of its Secretary at its principal office, and
to the Participant at the address given beneath his signature hereto, or at
such other address as either party shall have furnished to the other in writing
in accordance herewith.  Notice and
communications shall be effective when actually received by the addressee.

 

11.           Disposition of Common Stock.  The Participant agrees to notify the Company,
in writing, within thirty (30) days of any disposition (whether by sale,
exchange, gift or otherwise) of shares of Common Stock purchased under this
Agreement.

 

12.           Binding Effect.  Subject to Section 4 hereof, this Agreement
shall be binding upon the heirs, executors, administrators, successors and
permitted assigns of the parties hereto.

 

13.           Plan.  The terms and provisions of the Plan are
incorporated herein by reference and made a part hereof as though fully set forth
herein.  In the event of any conflict or
inconsistency between discretionary terms and provisions of this Agreement,
this Agreement shall govern and control. 
In all other instances of conflicts or inconsistencies or omissions, the
terms and provisions of the Plan shall govern and control.  All capitalized terms not otherwise expressly
defined in this Agreement shall have the meaning ascribed to them in the Plan.

 

14.           Governing Law.  This Agreement
shall be construed and interpreted in accordance with the laws of the State of
Delaware, without regard to the principles of conflicts of law thereof.

 

15.           Counterparts.  This Agreement may be signed in counterparts,
each of which shall be an original with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

16.           No Right to Continued Service.  This Agreement does not confer upon the
Participant any right to continue as an employee of the Company, nor shall it
interfere in any way with the right of the Company to terminate the Participant’s
employment at any time for any reason (subject to any employment agreement).

 

17.           Entire Agreement.  This Agreement, together with the Plan,
contains the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.

 

 

 

 

 

IN WITNESS
WHEREOF, the Company has granted this Option on the Effective Date.

 

This
instrument may be executed in any number of counterparts, each of which shall be
deemed to be an original, and such counterparts together shall constitute one
and the same instrument.

 

 

	
   

  	
  NEUSTAR,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Ganek

  	
   

  
	
   

  	
  Jeffrey Ganek

  
	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  /s/ Frank Schiff

  	
   

  	
   

  
	
  Frank SchiffExhibit 10.16

 

CERTIFICATE OF
DESIGNATIONS, PREFERENCES AND RIGHTS

of

SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK

of

BANCTEC, INC.

 

(Pursuant to Section 151
of the Delaware General Corporation Law)

 

 

BANCTEC, INC., a
corporation organized and existing under the laws of the State of Delaware (the
“Corporation”), hereby certifies that, pursuant to authority vested in the
Board of Directors of the Corporation by Article Fourth of the Certificate
of Incorporation of the Corporation, the following resolution was adopted as of
March 31, 2004 by the Board of Directors of the Corporation pursuant to Section 141
of the Delaware General Corporation Law:

 

 “RESOLVED that, pursuant to authority vested
in the Board of Directors of the Corporation by Article Fourth of the
Corporation’s Certificate of Incorporation, of the total authorized number of
200,000 shares of Preferred Stock, $.01 par value per share, of the
Corporation, there shall be designated a series of 35,520 shares which shall
constitute a single series to be known as “Series B Preferred Stock”
(hereinafter called the “Series B Preferred Stock”).  The Series B Preferred Stock shall have
the voting powers, designations, preferences and other special rights, and
qualifications, limitations and restrictions thereof set forth below.  In addition, the voting powers, designations,
preferences and other special rights, and qualifications, limitations and
restrictions of the 100,667 shares of Series A Preferred Stock previously
issued by the Corporation (hereinafter called the “Series A Preferred
Stock” and, collectively with the Series B Preferred Stock, the “Preferred
Stock”) are hereby amended and restated as set forth below:

 

Except as otherwise
expressly provided herein, (a) all shares of Series A Preferred Stock
shall be identical and shall entitle the holders thereof to the same rights and
privileges, and all shares of Series B Preferred Stock shall be identical
and shall entitle the holders thereof to the same rights and privileges and (b) with
respect to dividend rights, redemption rights and rights on liquidation,
winding up, corporate reorganization and dissolution, the Series A
Preferred Stock and the Series B Preferred Stock shall (i) rank pari
passu with each other and (ii) rank senior to (A) the Common Stock,
$.01 par value per share, of the Corporation (the “Common Stock”), (B) the
Class A Common Stock, $.01 par value per share, of the Corporation (the “Class A
Common Stock”) and (C) all classes and series of stock of the Corporation
now or hereafter authorized, issued or outstanding ranking pari passu or junior
to the Preferred Stock (such stock, collectively with the Common Stock and the Class A
Common Stock, being hereinafter called the “Junior Stock”).

 

SERIES A AND SERIES B
PREFERRED STOCK

 

1.               Dividends.

 

1A.  Dividends. 
The holders of Preferred Stock shall be entitled to receive, out of
funds legally available for such purpose, cash dividends at the rate of (i) in
the case of the Series A Preferred Stock, 7% per annum (computed on the
basis of a 365-day year) of the Stated Value (as defined below) per share and (ii) in
the case of the Series B Preferred Stock, 25% per annum (computed on the
basis of a 365-day year) of the Stated Value (as defined below) per share.  Such dividends shall be payable (x) quarterly
in arrears on March 1, June 1, September 1 and December 1
of each year (each such payment date being referred to herein as a “Dividend
Payment Date”), commencing on the Dividend Payment Date immediately following
the date of issuance thereof, or (y) when and as declared by the Board of
Directors of the Corporation.  Dividends
on the Preferred Stock shall be cumulative and shall accrue quarterly from and
after the date of issue of the Preferred Stock whether or not declared and
whether or not there are any funds of the Corporation legally available for the
payment of dividends.  The Board of
Directors of the Corporation may fix a record date for the determination of
holders of Preferred Stock entitled to receive payment of a dividend declared
thereon, which record date shall be no more than 60 days prior to the date
fixed for the payment thereof.

 

 

1B.  Adjustment to Stated Value.  Notwithstanding anything to the contrary
provided in this Certificate of Designations, in the event that any portion of
the quarterly dividend on the Preferred Stock is not declared and paid in cash
on any Dividend Payment Date, the amount of such accrued dividend which is not
so paid shall be accumulated and shall automatically be added to the Stated
Value of such share on such Dividend Payment Date.  Accumulated dividends on shares of Preferred
Stock that have previously been added to the Stated Value thereof pursuant to
the terms of this subparagraph 1B, may, in the discretion of the Board of
Directors of the corporation, be paid in cash on any Dividend Payment
Date.  Accumulated dividends on any share
of Preferred Stock which are added to the Stated Value of such share pursuant
to this subparagraph 1B shall not be deemed to be in arrears for any purpose
whatsoever.  As used herein, the “Stated
Value” per share of the Preferred Stock shall mean the sum of (i) $150,
plus (ii) all accumulated and unpaid dividends, if any, added to such
Stated Value pursuant to this subparagraph 1B, less (iii) all amounts paid
in cash in respect of such previously accumulated and unpaid dividends, if any,
that were originally added to such Stated Value pursuant to this subparagraph
1B.

 

1C.  Dividend Preference.  As long as any shares of Preferred Stock
shall remain outstanding, in no event shall any dividend be declared or paid
upon, nor shall any distribution be made upon, any shares of Junior Stock, nor
(without the consent of the holders of a majority in interest of the
outstanding Preferred Stock voting together as a single class) shall any shares
of Junior Stock be purchased or redeemed by the Corporation (other than
purchases and repurchases of shares of Common Stock from employees, consultants
and other stockholders of the Corporation pursuant to, and in accordance with
the terms of, an employee stock option plan established by the Corporation
pursuant to which the Corporation has the right to repurchase such shares of
Common Stock for a consideration not greater than the consideration paid for
such shares by such employee, consultant or stockholder), nor shall any moneys
be paid to or made available for a sinking fund for the purchase or redemption
of shares of any Junior Stock.

 

2.   Redemption. 
The shares of Preferred Stock shall be redeemable as follows:

 

2A.  Redemption at Option of Holders.  In case of (i) a merger or consolidation
of the Corporation with or into another entity (other than a merger in which
the Corporation is the surviving corporation and which will not result in more
than 50% of the capital stock of the Corporation outstanding immediately after
the effective date of such merger being owned of record or beneficially by
persons other than the holders of such capital stock immediately prior to such
merger), (ii) the sale or other disposition of all or substantially all of
the assets or properties of the Corporation or any of its subsidiaries, or of
any division of the Corporation or any of its subsidiaries, (iii) the
acquisition of “beneficial ownership” by any “person” or “group” (other than
Welsh, Carson, Anderson & Stowe VIII, L.P.  or its affiliates) of voting stock of the
Corporation representing more than 50% of the voting power of all outstanding
shares of such voting stock, whether by way of merger or consolidation or
otherwise, or (iv) a “Qualified IPO” as defined in subparagraph 4H (any
event described in the foregoing clauses (i) through (iv) being
referred to herein as a “Liquidity Event”), the Corporation shall, not later
than 45 days prior to the effective date of any such Liquidity Event, give written
notice thereof (the “Liquidity Event Notice”) to each holder of shares of
Preferred Stock. In the event that within 15 days after receipt of the
Liquidity Event Notice, the holders of a majority of the outstanding shares of Series A
Preferred Stock elect, by written notice to the corporation, to have any or all
of their shares of Series A Preferred Stock redeemed, the Corporation shall
redeem, to the extent legally permitted, the same (in the manner and with the
effect provided in subparagraphs 2C through 2F below) not later than the day
prior to the effective date of such Liquidity Event.

 

As used herein, (i) the
terms “person” and “group” shall have the meaning set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether
or not applicable, (ii) the term “beneficial owner” shall have the meaning
set forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have “beneficial ownership”
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events, and (iii) any “person” or “group” will be
deemed to beneficially own any voting stock of the Corporation so long as such
person or group beneficially owns, directly or indirectly, in the aggregate a
majority of the voting stock of a registered holder of the voting stock of the
Corporation.

 

2B.  Redemption at Option of Corporation.  The Corporation may, in its sole discretion,
redeem at any time and from time to time (in the manner and with the effect
provided in subparagraphs 2C through 2F below), any whole number of shares of Series A
Preferred Stock or Series B Preferred Stock.

 

2C.  Redemption Price.  Any date on which the Corporation elects or
is required to redeem shares of Preferred Stock as provided in subparagraph 2A
or 2B shall be referred to as a “Redemption Date.”  The Preferred Stock to be redeemed on a
Redemption Date shall be redeemed by paying for each share the sum of (i) the
Stated Value per share as of such Redemption Date, plus (ii) an amount
equal to dividends accumulated and unpaid thereon (to the extent not included
in the Stated Value of such shares) up to such Redemption Date, the sum of (i) and
(ii) being herein sometimes referred to as the “Redemption Price”.  In the case of a redemption pursuant to
subparagraph 2B above, not less than 30 days before such

 

 

Redemption Date, written
notice shall be given by registered mail, postage prepaid to the holders of
record of the Preferred Stock to be redeemed, such notice to be addressed to
each such stockholder at his post office address as shown by the records of the
Corporation, specifying the number of shares of Series A Preferred Stock
to be redeemed, the paragraph or paragraphs of this Certificate of Designations
pursuant to which such redemption shall be made, the Redemption Price and the
place and date of such redemption, which date shall not be a day on which banks
in the City of New York are required or authorized to close.  If a notice of redemption shall have been
duly given under subparagraph 2A or 2B and if on or before such Redemption Date
the funds necessary for redemption shall have been set aside so as to be and
continue to be available therefor, then, notwithstanding that any certificate
for shares of Preferred Stock to be redeemed shall not have been surrendered
for cancellation, after the close of business on such Redemption Date, the
shares so called for redemption shall no longer be deemed outstanding, the
dividends thereon shall cease to accrue, and all rights with respect to such
shares shall forthwith after the close of business on the Redemption Date,
cease, except only the right of the holders thereof to receive, upon presentation
of the certificate representing shares so called for redemption, the Redemption
Price therefor, without interest thereon.

 

2D.  Redeemed or Otherwise Acquired Shares to Be
Retired.  Any shares of the Preferred
Stock redeemed pursuant to this paragraph 2 or otherwise acquired by the
Corporation in any manner whatsoever shall be permanently retired and shall not
under any circumstances be reissued; and the Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the number
of authorized shares of Preferred Stock accordingly.

 

2E.  Shares to be Redeemed.  In case of the redemption under this
paragraph 2, for any reason, of only a part of the outstanding shares of the Series A
Preferred Stock or the Series B Preferred Stock on a Redemption Date, all
shares of Preferred Stock to be redeemed shall be selected pro rata, and there
shall be so redeemed from each registered holder in whole shares, as nearly as
practicable to the nearest share, that proportion of all the shares of the
applicable class to be redeemed which the number of shares held of record by
such holder bears to the total number of shares of Preferred Stock of the
applicable class at the time outstanding.

 

2F.  Credit Facility.  Notwithstanding anything herein to the
contrary, any redemption of shares of Preferred Stock pursuant to subparagraph
2A above is subject to the following: 
Any cash proceeds or other consideration received by the Corporation or
any subsidiary of the Corporation, as the case may be, in connection with any
of the transactions described in subparagraph 2A shall be used by the
Corporation to repay any and all amounts owed by the Corporation pursuant to
the terms and conditions of the Credit Agreement, dated as of July 22,
1999, among the Corporation and the other parties signatory thereto, prior to
the Corporation’s redemption of any Preferred Stock pursuant to subparagraph
2A.

 

3.   Liquidation. 
Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of Preferred Stock,
before any distribution or payment is made upon the Junior Stock, shall be
entitled to be paid for each share, with each series being determined
separately the sum of (x) the Stated Value per share as of such date of
liquidation, dissolution or winding up (the “Liquidation Date”), plus (y) an
amount equal to dividends accumulated but unpaid thereon (to the extent not
included in the Stated Value of such share) up to the Liquidation Date, the sum
of (x) and (y) above being herein sometimes referred to as the “Liquidation
Payments”.

 

If, upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Preferred Stock
shall be insufficient to permit payment to such holders of the preferential
amounts to which they are entitled, then the entire assets of the Corporation
to be so distributed shall be distributed ratably among the holders of
Preferred Stock.  Upon any such
liquidation, dissolution or winding up of the Corporation, after the holders of
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled, the remaining net assets of the Corporation available for distribution
to its shareholders may be distributed to the holders of the Junior Stock.
Written notice of such liquidation, dissolution or winding up, stating a
payment date, the amount of the Liquidation Payments, and the place where said
Liquidation Payments shall be payable, shall be given by registered mail,
postage prepaid, not less than 45 days prior to the payment date stated
therein, to the holders of record of Preferred Stock, such notice to be
addressed to each such holder at his post office address as shown by the
records of the Corporation. A Liquidity Event shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 3.

 

4.   Conversion of Series B Preferred Stock.

 

4A.  Right to Convert.  Subject to the terms and conditions of this
paragraph 4, the holder of any share or shares of Series B Preferred Stock
shall have the right, at its option at any time, to convert any such shares of Series B
Preferred Stock (except that upon any liquidation, dissolution or winding up of
the Corporation the right of conversion shall terminate at the close of
business on the last full business day next preceding the date fixed for
payment of the amount distributable on the Series B Preferred Stock), into
such number of fully paid and nonassessable whole shares of Common Stock as is
obtained by multiplying the number of shares of the Series B Preferred
Stock so to be converted by $150 and dividing the result by

 

 

$8.325 per share, or by
the conversion price as last adjusted and in effect at the date any share or
shares of Series B Preferred Stock are surrendered for conversion (such
conversion price as last adjusted being referred to herein as the “Series B
Conversion Price”).

 

The rights of conversion
contained in this subparagraph 4A shall be exercised by the holder of shares of
Series B Preferred Stock by giving written notice that such holder elects
to convert a stated number of shares of Series B Preferred Stock into
Common Stock and by surrender of a certificate or certificates for the shares
so to be converted to the Corporation at its principal office (or such other
office or agency of the Corporation as the Corporation may designate by notice
in writing to the holder or holders of the Series B Preferred Stock) at
any time during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued.

 

4B.  Issuance of Certificates; Time Conversion
Effected.  Promptly after the receipt of
the written notice referred to in subparagraph 4A and surrender of the
certificate or certificates for the share or shares of Series B Preferred
Stock to be converted, the Corporation shall issue and deliver, or cause to be
issued and delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of whole shares
of Common Stock issuable upon the conversion of such share or shares of Series B
Preferred Stock.  To the extent permitted
by law, such conversion shall be deemed to have been effected, and the Series B
Conversion Price shall be determined, as of the close of business on the date
on which such written notice shall have been received by the Corporation and
the certificate or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
share or shares of Series B Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.

 

4C.  Dividends; Fractional Shares; Partial
Conversion. Notwithstanding any other provision of this Certificate of
Designations, upon any conversion of shares of Series B Preferred Stock
into Common Stock, the holder of such shares shall relinquish any right to
receive dividends accumulated and unpaid thereon (whether or not included in
the Stated Value of such shares).  No
fractional shares may be issued upon conversion of the Series B Preferred
Stock into Common Stock.  In case the
number of shares of Series B Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 4A exceeds the
number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder thereof, at the expense of the Corporation, a
new certificate or certificates for the number of shares of Series B
Preferred Stock represented by the certificate or certificates surrendered
which are not to be converted.  If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this subparagraph 4C, be deliverable upon any such
conversion, the Corporation, in lieu of delivering the fractional share
thereof, shall pay to the holder surrendering the Series B Preferred Stock
for conversion an amount in cash equal to the current market price or fair
value of such fractional interest as determined in good faith by the Board of
Directors of the Corporation.

 

4D.  Adjustment of Series B Conversion Price
Upon Issuance of Common Stock.  Except as
provided in subparagraph 4F hereof, if the Corporation shall issue or sell, or
is in accordance with subparagraphs 4D(1) through 4D(6) deemed to
have issued or sold, any shares of its Common Stock without consideration or
for a consideration per share less than the Series B Conversion Price in
effect immediately prior to the time of such issue or sale, then, forthwith
upon such issue or sale, the Series B Conversion Price shall be reduced to
the price (calculated to the nearest cent) determined by dividing (i) an
amount equal to the sum of (a) Adjusted Outstanding Common Stock (as
defined below) multiplied by the then existing Series B Conversion Price,
plus (b) the consideration, if any, received by the Corporation upon such
issue or sale, by (ii) an amount equal to the sum of Adjusted Outstanding
Common Stock plus the number of shares of Common Stock issued or sold or deemed
to have been issued or sold.

 

For the purposes of this
subparagraph 4D, the following terms shall have the meanings set forth below:

 

“Adjusted Outstanding
Common Stock” shall mean the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of outstanding Series B
Preferred Stock), plus (ii) the number of shares of Common Stock issuable
upon the exercise of any outstanding stock subscription warrants and vested
stock options (reduced by the number of shares which, when multiplied by the
then current Series B Conversion Price, would equal the aggregate exercise
price for such warrants or options, as the case may be).

 

For purposes of this
subparagraph 4D, the following subparagraphs 4D(1) to 4D(6) shall
also be applicable:

 

4D(1)  Issuance of
Rights or Options.  In case at any time
the Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securities convertible
into or exchangeable for Common Stock (such rights or

 

 

options being herein
called “Options” and such convertible or exchangeable stock or securities being
herein called “Convertible Securities”) whether or not such Options or the
right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
the exercise of such Options or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any, received
or receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration payable
to the Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the Series B
Conversion Price in effect immediately prior to the time of the granting of
such Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for such price per share as of
the date of granting of such Options and thereafter shall be deemed to be
outstanding.  Except as otherwise
provided in subparagraph 4D(3), no adjustment of the Series B Conversion
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual issue
of such Common Stock upon conversion or exchange of such Convertible
Securities.

 

4D(2)  Issuance of
Convertible Securities.  In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Series B Conversion Price in effect
immediately prior to the time of such issue or sale, then the totalmum number
of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such price per
share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 4D(3) below, no adjustment of the Series B
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (b) if any such
issue or sale of such Convertible Securities is made upon exercise of any
Option to purchase any such Convertible Securities for which adjustments of the
Series B Conversion Price have been or are to be made pursuant to other
provisions of this subparagraph 4D, no further adjustment of the Series B
Conversion Price shall be made by reason of such issue or sale.

 

4D(3)  Change in
Option Price or Conversion Rate. Upon the happening of any of the following
events, namely, if (i) the purchase price provided for in any Option
referred to in subparagraph 4D(1), (ii) the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subparagraph 4D(1) or 4D(2) or subparagraph 4D(1) or
4D(2) are convertible into or exchangeable for Common Stock shall change
at any time (in each case other than under or by reason of provisions designed
to protect against dilution), then the Series B Conversion Price in effect
at the time of such event shall, as required, forthwith be readjusted to such Series B
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; and on the expiration of any such
Option or the termination of any such right to convert or exchange such
Convertible Securities, the Series B Conversion Price then in effect
hereunder shall, as required, forthwith be increased to the Series B
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, and the Common Stock issuable thereunder shall no longer be deemed to
be outstanding.  If the purchase price
provided for in any such Option referred to in subparagraph 4D(1) or the
rate at which any Convertible Securities referred to in subparagraph 4D(1) or
4D(2) are convertible into or exchangeable for Common Stock shall be
reduced at any time under or by reason of provisions with respect thereto
designed to protect against dilution, then, in case of the delivery of Common
Stock upon the exercise of any such Option or upon conversion or exchange of
any such Convertible Securities, the Series B Conversion Price then in
effect hereunder shall, as required, forthwith be adjusted to such respective
amount as would have been obtained had such Option or Convertible Securities
never been issued as to such Common Stock and had adjustments been made upon
the issuance of the shares of Common Stock delivered as aforesaid, but only if
as a result of such adjustment the Series B Conversion Price then in
effect hereunder is thereby reduced.

 

4D(4)  Stock
Dividends.  In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock, Options or Convertible Securities (other
than any such dividend payable solely in Common Stock, which shall be treated
as a subdivision of the Corporation’s shares of Common Stock into a greater
number of shares pursuant to subparagraph 4E below), any Common Stock, Options
or Convertible Securities, as

 

 

the case may be, issuable
in payment of such dividend or distribution shall be deemed to have been issued
or sold without consideration.

 

4D(5)  Consideration
for Stock.  In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by
the Corporation therefor, without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith.  In
case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration as determined in good faith by the Board
of Directors of the Corporation as confirmed by the Corporation’s auditors,
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith.  In case any Options shall be
issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the Corporation, such Options
shall be deemed to have been issued without consideration, and the Series B
Conversion Price shall be reduced as if the Corporation had subdivided its
outstanding shares of Common Stock into a greater number of shares, as provided
in subparagraph 4E hereof.

 

4D(6)  Record
Date.  In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be, provided that such shares of Common Stock shall
in fact have been issued or sold.

 

4E.    Subdivision or Combination of Stock.  In case the Corporation shall at any time
subdivide its outstanding shares of Common Stock into a greater number of
shares, the Series B Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Series B Conversion Price in effect
immediately prior to such combination shall be proportionately increased.

 

4F.    Certain Issues of Common Stock
Excepted.  Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Series B Conversion Price upon the issuance of Common
Stock upon (i) the conversion of outstanding shares of Series B
Preferred Stock or (ii) the exercise of warrants to purchase Common Stock
issued by the Company prior to the date of first issuance of Series B
Preferred Stock.

 

4G.    Reorganization,
Reclassification, Consolidation, Merger or Sale.  If any capital reorganization or
reclassification of the capital stock of the Corporation or any consolidation
or merger of the Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected in
such a way (including, without limitation, by way of consolidation or merger)
that holders of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful
and adequate provisions (in form satisfactory to the holders of at least 66-2/3%
of the outstanding shares of Series B Preferred Stock) shall be made
whereby each holder of a share or shares of Series B Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such
shares of Series B Preferred Stock, such shares of stock, securities or
assets as may be issuable or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Series B Conversion
Price) shall thereafter be applicable, as nearly practicable, in relation to
any shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights (including, if necessary to effect the adjustments
contemplated herein, an immediate adjustment, by reason of such reorganization,
reclassification, consolidation, merger or sale, of the Series B
Conversion Price to the value for the Common Stock reflected by the terms of
such reorganization, reclassification, consolidation, merger or sale if the
value so reflected is less than the Series B Conversion Price in effect
immediately prior to such reorganization, reclassification, consolidation,
merger or sale).  In the event of a
merger or consolidation of the Corporation as a result of which a greater or
lesser number of shares of common stock of the surviving corporation is
issuable to holders of Common Stock of the Corporation outstanding immediately
prior to such merger or consolidation, the Series B Conversion Price in
effect immediately prior to such merger or consolidation shall be adjusted in
the same manner as though there were a subdivision or combination of the outstanding
shares of Common Stock of the Corporation. 
The Corporation will not effect any such consolidation or merger, or any
sale of all or substantially all of its assets and properties, unless prior to
the consummation thereof the successor corporation (if other than the
Corporation)

 

 

resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument (in form reasonably satisfactory to the holders of at
least a majority of the shares of Series B Preferred Stock at the time
outstanding), executed and mailed or delivered to each holder of shares of Series B
Preferred Stock at the last address of such holder appearing on the books of
the Corporation, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive.

 

4H.  Conversion Upon Qualified IPO.  In the event that, at any time while any of
the Series B Preferred Stock shall be outstanding, (i) the
Corporation shall complete an underwritten public offering underwritten by a
securities firm of nationally recognized standing involving the sale by the
Corporation of shares of Common Stock in which the aggregate net proceeds to
the Corporation are at least $20,000,000 (a “Qualified IPO”) and (b) the
holders of a majority of the Series B Preferred Stock shall have elected,
by giving written notice to the Corporation within 15 days after receipt of the
related Liquidity Event Notice, to cause all outstanding shares of Series B
Preferred Stock to be converted into Common Stock pursuant to this subparagraph
4H (and such holders shall not have elected to have their shares of Series B
Preferred Stock redeemed by the Corporation pursuant to subparagraph 2B), then
all outstanding shares of Series B Preferred Stock shall, automatically
and without further action on the part of the holders of the Series B
Preferred Stock, be converted into shares of Common Stock in accordance with
the terms of this paragraph 4 with the same effect as if the certificates
evidencing such shares had been surrendered for conversion, such conversion to
be effective simultaneously with the closing of such public offering, provided,
however, that certificates evidencing the shares of Common Stock issuable upon
such conversion shall not be issued except on surrender of the certificates for
the shares of the Series B Preferred Stock so converted.

 

4I.  Notice of Adjustment.  Upon any adjustment of the Series B
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, addressed to each holder
of shares of Series B Preferred Stock at the address of such holder as
shown on the books of the Corporation, which notice shall state the Series B
Conversion Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.

 

4J.  Other Notices.  In case at any time:

 

(1)  the Corporation
shall declare any dividend upon its Junior Stock payable in cash or stock or
make any other distribution to the holders of its Junior Stock;

 

(2)  the Corporation
shall offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;

 

(3)  there shall be
any capital reorganization or reclassification of the capital stock of the
Corporation, or a consolidation or merger of the Corporation with, or a sale of
a substantial portion of its assets to, another entity; or

 

(4)  there shall be
a voluntary or involuntary dissolution, liquidation or winding up of the
Corporation;

 

then, in any one or more
of said cases, the Corporation shall give, by first class mail, postage
prepaid, addressed to each holder of any shares of Series B Preferred
Stock at the address of such holder as shown on the books of the Corporation, (a) at
least 45 days’ prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 45 days’ prior written notice
of the date when the same shall take place. 
Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.

 

4K.  Stock to be Reserved.  The Corporation will at all times reserve and
keep available out of its authorized Common Stock or its treasury shares,
solely for the purpose of issue upon the conversion of the Series B
Preferred Stock as herein provided, such number of shares of Common Stock as
may then be issuable upon the conversion of all outstanding shares of Series B
Preferred Stock.  The Corporation
covenants that all shares of Common Stock which shall be so issued shall be
duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof and, without
limiting the generality of the foregoing, the Corporation covenants that it
will from time to time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times equal to or less
than the effective Series B Conversion Price.  The Corporation will take all such action as
may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of

 

 

any requirements of any
national securities exchange upon which the Common Stock of the Corporation may
be listed.  The Corporation will not take
any action which results in any adjustment of the Series B Conversion
Price f the total number of shares of Common Stock issued and issuable after
such action upon conversion of the Series B Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Corporation’s
Certificate of Incorporation.

 

4L.  No Reissuance of Series B Preferred
Stock.  Shares of Series B Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.

 

4M.  Issue Tax. 
The issuance of certificates for shares of Common Stock upon conversion
of the Series B Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof.

 

4N.  Closing of Books.  The Corporation will at no time close its
transfer books against the transfer of any Series B Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any shares
of Series B Preferred Stock in any manner which interferes with the timely
conversion of such Series B Preferred Stock.

 

4O.  Definition of Common Stock.  As used in this paragraph 4, the term “Common
Stock” shall mean and include the Corporation’s authorized Common Stock, $.01
par value, and the Corporation’s authorized Class A Common Stock, $.01 par
value, as constituted on the date of the filing of this Certificate of
Designations, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
provided, however, that such term, when used to describe the securities
receivable upon conversion of shares of the Series B Preferred Stock of
the Corporation, shall include only shares designated as Common Stock of the
Corporation on the date of filing of this Certificate of Designations, any
shares resulting from any combination or subdivision thereof referred to in
subparagraph 4E, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 4G.

 

5.   Voting. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation or this Certificate of
Designations, the holders of Preferred Stock shall not be entitled to vote on
any matters to be voted on by the stockholders of the Corporation.

 

6.   Restrictions.  At any time when shares of Preferred Stock
are outstanding, except where the vote or written consent of the holders of a
greater number of shares of Preferred Stock of the Corporation is required by
law or the Certificate of Incorporation of the Corporation, and in addition to
any other vote required by law, without the prior consent of the holders of at
least 66-2/3% of the outstanding Preferred Stock, given in person or by proxy,
either by written consent without a meeting or at a special meeting called for
that purpose, at which meeting the holders of the shares of such Preferred
Stock shall vote together as a class:

 

(1)  the Corporation
will not (i) create or authorize the creation of any additional class or
series of shares unless the same ranks junior to the Preferred Stock as to the
payment of dividends, redemption rights and the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, (ii) increase
the authorized amount of the Preferred Stock or the authorized amount of any
additional class or series of shares unless the same ranks junior to the
Preferred Stock as to the payment of dividends, redemption rights and the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation, (iii) create or authorize any obligation or security convertible
into shares of Preferred Stock or into shares of any other class or series
unless the same ranks junior to the Preferred Stock as to the payment of
dividends, redemption rights and the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, whether any such
creation or authorization or increase shall be by means of amendment of the
Certificate of Incorporation, by a Certificate of Designations, or by merger,
consolidation or otherwise, (iv) modify or amend any right, preference or
term of the Preferred Stock or (v) create or authorize any debt obligation
or security of the Corporation convertible into (or which is issued or sold as
a unit with a warrant or other right to subscribe for) any equity security of
the Corporation (including, without limitation, Common Stock or equity
securities junior to the Preferred Stock);

 

(2)  the Corporation
will not amend, alter or repeal the Corporation’s Certificate of Incorporation
or By-laws in any manner, or file any directors’ resolutions pursuant to the
General Corporation Law of the State of Delaware containing any provision, in
either case, which adversely affects the respective preferences,
qualifications, special or relative rights or privileges of the Preferred Stock
or which in any manner adversely affects the Preferred Stock or the holders
thereof;

 

(3)  the Corporation
will not purchase or set aside any sums for the purchase of any shares of stock
of the Corporation or the purchase of any options, warrants or other rights to
acquire any shares of stock of the Corporation, except for redemptions of
Preferred Stock pursuant to paragraph 2 hereof; or

 

 

(4)  the Corporation
will not declare, or set aside funds for the payment of, dividends or
distributions on any class of stock of the Corporation, other than dividends on
Preferred Stock pursuant to paragraph 1 hereof.”

 

IN WITNESS WHEREOF, this
Certificate of Designations has been executed by the Corporation as of this
31st day of March, 2004.

 

	
   

  	
  BANCTEC, INC.

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
  / s /    Brian R. Stone

  	
   

  
	
   

  	
  Brian R. Stone

  
	
   

  	
  Secretary

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