Document:

exv10w3a

 

Exhibit 10.3A

ARUBA NETWORKS, INC.

2007 EQUITY INCENTIVE PLAN

     1. Purposes of the Plan. The purposes of this Plan are:

	 	•	 	to attract and retain the best available personnel for positions of
substantial responsibility,
	 
	 	•	 	to provide additional incentive to Employees, Directors and Consultants, and
	 
	 	•	 	to promote the success of the Company’s business.

          The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted
Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Shares and or Deferred Stock
Units.

     2. Definitions. As used herein, the following definitions will apply:

          (a) “Administrator” means the Board or any of its Committees as will be administering
the Plan, in accordance with Section 4 of the Plan.

          (b) “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any other country or jurisdiction where Awards are, or will be, granted under
the Plan or a sub-plan or addendum hereto.

          (c) “Award” means, individually or collectively, a grant under the Plan of Options,
SARs, Restricted Stock, Restricted Stock Units, Performance Shares or Deferred Stock Units.

          (d) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The Award Agreement is
subject to the terms and conditions of the Plan.

          (e) “Board” means the Board of Directors of the Company.

          (f) “Change in Control” means the occurrence of any of the following events:

               (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities; or

 

 

               (ii) The consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets;

               (iii) A change in the composition of the Board occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors”
means directors who either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company); or

               (iv) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation.

          (g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a
section of the Code herein will be a reference to any successor or amended section of the Code.

          (h) “Committee” means a committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.

          (i) “Common Stock” means the common stock of the Company.

          (j) “Company” means Aruba Networks, Inc., a Delaware corporation, or any successor
thereto.

          (k) “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.

          (l) “Deferred Stock Unit” means a deferred stock unit Award granted to a Participant
pursuant to Section 11.

          (m) “Director” means a member of the Board.

          (n) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code, provided that in the case of Awards other than Incentive Stock Options, the
Administrator in its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the Administrator from time to
time.

          (o) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. Neither service as a Director nor

-2-

 

payment of a director’s fee by the Company will be sufficient to constitute “employment” by
the Company.

          (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (q) “Exchange Program” means a program under which (i) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise
prices and different terms), awards of a different type, and/or cash, (ii) Participants would have
the opportunity to transfer any outstanding Awards to a financial institution or other person or
entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is
reduced. The Administrator will determine the terms and conditions of any Exchange Program in its
sole discretion.

          (r) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq Global Select Market, Nasdaq Global Market or the
Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or
system on the day of determination (or, if the day of determination is not a market trading day, on
the first market trading day following the day of determination), as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and
low asked prices for the Common Stock on the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

               (iii) For purposes of any Awards granted on the Registration Date, the Fair Market Value will
be the initial price to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company’s Common Stock; or

               (iv) In the absence of an established market for the Common Stock, the Fair Market Value will
be determined in good faith by the Administrator.

          (s) “Fiscal Year” means the fiscal year of the Company.

          (t) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder and
which is expressly designated by the Administrator at the time of grant as an incentive stock
option.

          (u) “Inside Director” means a Director who is an Employee.

          (v) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or
is not intended to qualify as an Incentive Stock Option.

-3-

 

          (w) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

          (x) “Option” means a stock option granted pursuant to the Plan.

          (y) “Optioned Stock” means the Common Stock subject to an Award.

          (z) “Outside Director” means a Director who is not an Employee.

          (aa) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code and the regulations thereunder.

          (bb) “Participant” means the holder of an outstanding Award.

          (cc) “Performance Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of performance goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.

          (dd) “Period of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial
risk of forfeiture. Such restrictions may be based on the passage of time (including the
continuation of employment or service), the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.

          (ee) “Plan” means this 2007 Equity Incentive Plan.

          (ff) “Registration Date” means the effective date of the first registration statement
that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act,
with respect to any class of the Company’s securities.

          (gg) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under
Section 7 of the Plan, or issued pursuant to the early exercise of an Option.

          (hh) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to
the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the Company.

          (ii) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

          (jj) “Section 16(b)” means Section 16(b) of the Exchange Act.

          (kk) “Service Provider” means an Employee, Director or Consultant.

          (ll) “Share” means a share of the Common Stock, as adjusted in accordance with Section
15 of the Plan.

          (mm) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with an Option, that pursuant to Section 9 is designated as a SAR.

-4-

 

          (nn)
“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code and the regulations thereunder.

     3. Stock Subject to the Plan.

          (a) Stock Subject to the Plan. Subject to the provisions of Section 15 of the Plan,
the maximum aggregate number of Shares that may be issued under the Plan is (i) the number of
Shares which have been reserved but not issued under the Company’s 2002 Stock Plan (the “2002
Plan”) as of the Registration Date, up to a maximum of seven million (7,000,000) Shares, (ii) any
Shares returned to the 2002 Plan as a result of termination of options or repurchase of Shares
issued under such plan, up to a maximum of ten million (10,000,000) Shares, and (iii) an annual
increase to be added on the first day of the Company’s fiscal year beginning with the Company’s
2008 fiscal year, equal to the lesser of (A) fifteen million (15,000,000) Shares, or (B) five
percent (5%) of the outstanding Shares on the last day of the immediately preceding Company fiscal
year. The Shares may be authorized, but unissued, or reacquired Common Stock.

          (b) Lapsed Awards. If an Award expires or becomes unexercisable without having been
exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted
Stock, Restricted Stock Units, Performance Shares or Deferred Stock Units, is forfeited to or
repurchased by the Company due to failure to vest, the unpurchased Shares (or for Awards other than
Options or SARs the forfeited or repurchased Shares) which were subject thereto will become
available for future grant or sale under the Plan (unless the Plan has terminated). With respect
to SARs, only Shares actually issued pursuant to an SAR will cease to be available under the Plan;
all remaining Shares under SARs will remain available for future grant or sale under the Plan
(unless the Plan has terminated). Shares that have actually been issued under the Plan under any
Award will not be returned to the Plan and will not become available for future distribution under
the Plan; provided, however, that if Shares issued pursuant to awards of Restricted Stock,
Restricted Stock Units, Performance Shares or Deferred Stock Units are repurchased by the Company
or are forfeited to the Company due to their failure to vest, such Shares will become available for
future grant under the Plan. Shares used to pay the exercise price of an Award or to satisfy the
minimum statutory withholding obligations related to an Award will become available for future
grant or sale under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided
in Section 15, the maximum number of Shares that may be issued upon the exercise of Incentive Stock
Options shall equal the aggregate Share number stated in Section 3(a), plus, to the extent
allowable under Section 422 of the Code and the regulations thereunder, any Shares that become
available for issuance under the Plan under this Section 3(b).

          (c) Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to satisfy the requirements
of the Plan.

     4. Administration of the Plan.

          (a) Procedure.

               (i) Multiple Administrative Bodies. Different Committees with respect to different
groups of Service Providers may administer the Plan.

-5-

 

               (ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or
more “outside directors” within the meaning of Section 162(m) of the Code.

               (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the
requirements for exemption under Rule 16b-3.

               (iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy
Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Awards may be granted hereunder;

               (iii) to determine the number of Shares or equivalent units to be covered by each Award
granted hereunder;

               (iv) to approve forms of Award Agreement for use under the Plan;

               (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any
Award granted hereunder. Such terms and conditions include, but are not limited to, the grant
date, the exercise price, the time or times when Awards may be exercised or earned (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture or repurchase
restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator will determine;

               (vi) to institute an Exchange Program;

               (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

               (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws or qualifying for preferred tax treatment under applicable foreign tax laws;

               (ix) to modify or amend each Award (subject to Section 20(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of Awards longer than
is otherwise provided for in the Plan (subject to compliance with Code Section 409A);

-6-

 

               (x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed
in Section 16;

               (xi) to authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Award previously granted by the Administrator;

               (xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award

               (xiii) to make all other determinations deemed necessary or advisable for administering the
Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations will be final and binding on all Participants and any other holders of Awards.

     5. Eligibility. Awards may be granted to Service Providers; provided, however that
Incentive Stock Options may be granted only to Employees.

     6. Stock Options.

          (a) Limitations. The Administrator will have complete discretion to determine the
number of Shares that will be subject to an Option granted to any Service Provider. Each Option
will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year (under all plans of the Company and any
Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated
as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
will be determined as of the time the Option with respect to such Shares is granted.

          (b) Term of Option. The term of each Option will be stated in the Award Agreement.
In the case of an Incentive Stock Option, the term will be ten (10) years from the date of grant or
such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive
Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be
five (5) years from the date of grant or such shorter term as may be provided in the Award
Agreement.

          (c) Option Exercise Price and Consideration.

               (i) Exercise Price. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option will be determined by the Administrator, subject to the following:

                    (1) In the case of an Incentive Stock Option

-7-

 

                         a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.

                         b) granted to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price will be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.

                         c) Notwithstanding the foregoing, Incentive Stock Options may be granted with a per Share
exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant pursuant to a transaction described in, and in a manner consistent with, Section
424(a) of the Code.

                    (2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be no less
than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and will determine any
conditions that must be satisfied before the Option may be exercised.

               (iii) Form of Consideration. The Administrator will determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator will determine the acceptable form of consideration at
the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) other
Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by
the Participant and not subject to substantial risk of forfeiture for more than six months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option will be exercised; (4) consideration received
by the Company under a broker-assisted or other cashless exercise program; (5) such other
consideration and method of payment for the issuance of Shares to the extent permitted by
Applicable Laws; or (6) any combination of the foregoing methods of payment.

          (d) Exercise of Option.

               (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
will be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. An Option may not be
exercised for a fraction of a Share.

                    An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such
form as the Administrator specify from time to time) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is exercised
(together with applicable withholding taxes). Full payment may consist of any consideration and
method of payment authorized by the Administrator and permitted by the Award Agreement and the
Plan. Shares issued upon exercise of an Option will be issued in the name of the

-8-

 

Participant or, if requested by the Participant, in the name of the Participant and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder will exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company will issue or cause to be issued (and
which issuance may be in electronic form) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Section 15 of the Plan.

               Exercising an Option in any manner will decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

               (ii) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, other than upon the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for three (3) months
following the Participant’s termination. Unless otherwise provided by the Administrator, if on the
date of termination the Participant is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified by the Administrator, the
Option will terminate, and the Shares covered by such Option will revert to the Plan.

               (iii) Disability of Participant. If a Participant ceases to be a Service Provider as
a result of the Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term of such Option as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
will revert to the Plan. If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.

               (iv) Death of Participant. If a Participant dies while a Service Provider, the Option
may be exercised following the Participant’s death within such period of time as is specified in
the Award Agreement to the extent that the Option is vested on the date of death (but in no event
may the option be exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has
been designated prior to Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the
personal representative of the Participant’s estate or by the person(s) to whom the Option is
transferred pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the Option will remain

-9-

 

exercisable for twelve (12) months following Participant’s death. Unless otherwise provided
by the Administrator, if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will immediately revert to the
Plan. If the Option is not so exercised within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.

     7. Restricted Stock.

          (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the
Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service
Providers in such amounts as the Administrator, in its sole discretion, will determine.

          (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by
an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and
such other terms and conditions as the Administrator, in its sole discretion, will determine.
Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of
Restricted Stock until the restrictions on such Shares have lapsed.

          (c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.

          (d) Other Restrictions. The Administrator, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate. The
Administrator may set restrictions based upon the achievement of Company-wide, departmental,
business unit, or individual goals (including, but not limited to, continued employment or service)
or any other basis determined by the Administrator in its discretion.

          (e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares
of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released
from escrow as soon as practicable after the last day of the Period of Restriction or at such other
time as the Administrator may determine. The Administrator, in its discretion, may accelerate the
time at which any restrictions will lapse or be removed.

          (f) Voting Rights. During the Period of Restriction, Service Providers holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless the Administrator determines otherwise.

          (g) Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other
distributions paid with respect to such Shares unless the Administrator provides otherwise. If any
such dividends or distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect
to which they were paid.

          (h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company
and again will become available for grant under the Plan.

-10-

 

     8. Restricted Stock Units.

          (a) Grant. Restricted Stock Units may be granted at any time and from time to time as
determined by the Administrator. After the Administrator determines that it will grant Restricted
Stock Units under the Plan, it shall advise the Participant in an Award Agreement of the terms,
conditions, and restrictions related to the grant, including the number of Restricted Stock Units.

          (b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in
its discretion, which, depending on the extent to which the criteria are met, will determine the
number of Restricted Stock Units that will be paid out to the Participant. The Administrator may
set vesting criteria based upon the achievement of Company-wide, departmental, business unit, or
individual goals (including, but not limited to, continued employment or service), or any other
basis determined by the Administrator in its discretion.

          (c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant shall be entitled to receive a payout as specified in the Restricted Stock Unit Award
Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units,
the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be
met to receive a payout.

          (d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be
made as soon as practicable after the date(s) set forth in the Restricted Stock Unit Award
Agreement. The Administrator may only settle earned Restricted Stock Units in Shares.

          (e) Cancellation. On the date set forth in the Restricted Stock Unit Award Agreement,
all unearned Restricted Stock Units shall be forfeited to the Company.

     9. Stock Appreciation Rights.

          (a) Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be
granted to Service Providers at any time and from time to time as will be determined by the
Administrator, in its sole discretion.

          (b) Number of Shares. The Administrator will have complete discretion to determine
the number of SARs granted to any Service Provider.

          (c) Exercise Price and Other Terms. The per share exercise price for the Shares to be
issued pursuant to exercise of an SAR shall be determined by the Administrator and shall be no less
than one hundred percent (100%) of the Fair Market Value per Share on the date of grant, except
that Stock Appreciation Rights may be granted with a per Share exercise price of less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of the Code and the
regulations thereunder. Otherwise the Administrator, subject to the provisions of the Plan, shall
have complete discretion to determine the terms and conditions of SARs granted under the Plan;
provided, however, that no SAR may have a term of more than ten (10) years from the date of grant.

-11-

 

          (d) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will
specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Administrator, in its sole discretion, will determine.

          (e) Expiration of SARs. An SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.
Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs.

          (f) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to
receive payment from the Company in an amount determined by multiplying:

               (i) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times

               (ii) The number of Shares with respect to which the SAR is exercised.

     The payment upon SAR exercise may only be in Shares of equivalent value (rounded down to the
nearest whole Share).

     10. Performance Shares.

          (a) Grant of Performance Shares. Subject to the terms and conditions of the Plan,
Performance Shares may be granted to Service Providers at any time as shall be determined by the
Administrator, in its sole discretion. The Administrator shall have complete discretion to
determine (i) the number of Shares subject to a Performance Share award granted to any Participant,
and (ii) the conditions that must be satisfied, which typically will be based principally or solely
on achievement of performance milestones but may include a service-based component, upon which is
conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the
form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes
of determining the number of Shares subject to an Award. Until the Shares are issued, no right to
vote or receive dividends or any other rights as a stockholder shall exist with respect to the
units to acquire Shares.

          (b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have
complete discretion to determine the terms and conditions of Performance Shares granted under the
Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions
determined by the Administrator at the time the stock is awarded, which may include such
performance-based milestones as are determined appropriate by the Administrator. The Administrator
may require the recipient to sign a Performance Shares Award Agreement as a condition of the award.
Any certificates representing the Shares of stock awarded shall bear such legends as shall be
determined by the Administrator.

          (c) Performance Share Award Agreement. Each Performance Share grant shall be
evidenced by an Award Agreement that shall specify such other terms and conditions as the
Administrator, in its sole discretion, shall determine.

          (d) Cancellation. On the date set forth in the Performance Share Award Agreement, all
unearned Performance Shares shall be forfeited to the Company.

-12-

 

     11. Deferred Stock Units. Deferred Stock Units shall consist of a Restricted Stock,
Restricted Stock Unit or Performance Share Award that the Administrator, in its sole discretion
permits to be paid out in installments or on a deferred basis, in accordance with rules and
procedures established by the Administrator. Deferred Stock Units shall remain subject to the
claims of the Company’s general creditors until distributed to the Participant.

     12. Formula Awards to Outside Directors.

          (a) General. Outside Directors will be entitled to receive all types of Awards
(except Incentive Stock Options) under this Plan, including discretionary Awards not covered under
this Section 12. All grants of Awards to Outside Directors pursuant to this Section will be
automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance
with the following provisions:

          (b) Type of Option. If Options are granted pursuant to this Section they will be
Nonstatutory Stock Options and, except as otherwise provided herein, will be subject to the other
terms and conditions of the Plan.

          (c) No Discretion. No person will have any discretion to select which Outside
Directors will be granted Awards under this Section or to determine the number of Shares to be
covered by such Awards (except as provided in Sections 12(i) and 15).

          (d) Initial Award. Each person who first becomes an Outside Director following the
Registration Date will be automatically granted an Option to purchase 50,000 Shares (the “Initial
Award”) on or about the date on which such person first becomes an Outside Director, whether
through election by the stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director, but who remains a
Director, will not receive an Initial Award.

          (e)
Annual Award. Each Outside Director who first becomes an Outside
Director following the Registration Date will be automatically granted an Option to
purchase 15,000 Shares (an “Annual Award”) on each date of the annual meeting of the stockholders
of the Company beginning in 2007, if as of such date, he or she will
have served on the Board for at least the preceding six (6) months.
Each Outside Director who first became an Outside Director on or prior to the
Registration Date will be automatically granted an Annual Award on
each date of the annual meeting of the stockholders of the Company
beginning in 2009, if as of such date, he or she will have served on the Board for
at least the preceding six (6) months.

          (f) Committee Chair Award. On each date of the annual meeting of the stockholders of
the Company beginning in 2007, each Outside Director who is then serving as Chairman of a standing
committee of the Board (a “Committee Chair”) will automatically be granted an Option to purchase
10,000 Shares (a “Committee Chair Award”). An Outside Director shall be entitled to more than one
Option pursuant to this Section 12(f) to the extent that on the date of any applicable annual
meeting of the stockholders of the Company, he or she is the Committee Chair of more than one
standing committee of the Board. Each Option granted pursuant to this Section 12(f) shall be in
addition to any other Option(s) to which the Outside Director may be entitled under any other
subsection of Section 12.

          (g) Committee Member Award. On each date of the annual meeting of the stockholders of
the Company beginning in 2007, each Outside Director who is then serving as a non-Chairman member
of a standing committee of the Board (a “Committee Member”) will automatically be granted an Option
to purchase 5,000 Shares (a “Committee Member Award”). An

-13-

 

Outside Director shall be entitled to more than one Option pursuant to this Section 12(g) to
the extent that on the date of any applicable annual meeting of the stockholders of the Company, he
or she is a Committee Member of more than one standing committee of the Board. Each Option granted
pursuant to this Section 12(g) shall be in addition to any other Option(s) to which the Outside
Director may be entitled under any other subsection of Section 12.

          (h) Terms. The terms of each Award granted pursuant to this Section will be as
follows:

               (i) The term of the Award will be ten (10) years.

               (ii) The exercise price for Shares subject to Awards will be 100% of the Fair Market Value on
the grant date.

               (iii) Subject to Section 15, each Award granted pursuant to this Section 12 will vest and
become exercisable as to 1/48th of the shares subject to the Award on each monthly
anniversary of the Award grant date (or on the last day of the month, if there is no corresponding
date), provided that the Participant continues to serve as a Director through each such date.

          (i) Amendment. The Administrator in its discretion may change the number of Shares
subject to the Initial Awards, Annual Awards, Committee Chair Awards and Committee Member Awards.

     13. Leaves of Absence/Transfers Between Locations. Unless the Administrator provides
otherwise or except as otherwise required by Applicable Laws, vesting of Awards granted hereunder
shall cease commencing on the first day of any unpaid leave of absence and shall only recommence
upon return to active service. A Service Provider will not cease to be an Employee in the case of
(i) any leave of absence approved by the Company or (ii) transfers between locations of the Company
or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no
such leave may exceed three (3) months (the “Maximum Leave Period”), unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of
a leave of absence approved by the Company is not so guaranteed, then three (3) months following
the day after the end of the Maximum Leave Period any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option.

     14. Transferability of Awards. Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.

     15. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

          (a) Adjustments. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Shares or other securities of the Company, or other change in the corporate structure
of

-14-

 

the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or
enlargement of the benefits or potential benefits intended to be made available under the Plan,
shall adjust the number and class of Shares that may be delivered under the Plan and/or the number,
class, and price of Shares covered by each outstanding Award, and the numerical Share limits in
Section 3 of the Plan and the number of Shares issuable pursuant to Options to be granted under
Section 12 of the Plan.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of such proposed action.

          (c) Change in Control. In the event of a merger or Change in Control, each
outstanding Award will be treated as the Administrator determines, including, without limitation,
that each Award be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. The Administrator shall not be
required to treat all Awards similarly in the transaction.

          In the event that the successor corporation does not assume or substitute for the Award, the
Participant will fully vest in and have the right to exercise all of his or her outstanding Options
and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be
vested or exercisable, all restrictions on Restricted Stock, Restricted Stock Units, Performance
Shares and Deferred Stock Units will lapse, and, with respect to Awards with performance-based
vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred
percent (100%) on-target levels and all other terms and conditions met. In addition, if an Option
or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the
Administrator will notify the Participant in writing or electronically that the Option or Stock
Appreciation Right will be exercisable for a period of time determined by the Administrator in its
sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of
such period.

          For the purposes of this subsection (c), an Award will be considered assumed if, following the
Change in Control, the Award confers the right to purchase or receive, for each Share subject to
the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the Change in Control by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the Change in Control is not
solely common stock of the successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be received upon the
exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit,
Performance Share or Deferred Stock Unit, for each Share subject to such Award, to be solely common
stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.

          Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests is earned
or paid-out upon the satisfaction of one or more performance goals will not be considered

-15-

 

assumed if the Company or its successor modifies any of such performance goals without the
Participant’s consent; provided, however, a modification to such performance goals only to reflect
the successor corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

          (d) Outside Director Awards. With respect to Awards granted to an Outside Director
that are assumed or substituted for, if on the date of or following such assumption or substitution
the Participant’s status as a Director or a director of the successor corporation, as applicable,
is terminated other than upon a voluntary resignation by the Participant (unless such resignation
is at the request of the acquirer), then the Participant will fully vest in and have the right to
exercise Options and/or Stock Appreciation Rights as to all of the Optioned Stock, including Shares
as to which such Awards would not otherwise be vested or exercisable, all restrictions on
Restricted Stock and Restricted Stock Units will lapse, and, with respect to Performance Shares,
all performance goals or other vesting criteria will be deemed achieved at one hundred percent
(100%) on-target levels and all other terms and conditions met.

     16. Tax Withholding.

          (a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company will have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, local, foreign or other taxes (including the Participant’s FICA obligation)
required to be withheld with respect to such Award (or exercise thereof).

          (b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant
to such procedures as it may specify from time to time, may permit a Participant to satisfy such
tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b)
electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market
Value equal to the minimum statutory amount required to be withheld, (c) delivering to the Company
already-owned Shares having a Fair Market Value equal to the minimum statutory amount required to
be withheld, or (d) a combination of the foregoing. The Fair Market Value of the Shares to be
withheld or delivered will be determined as of the date that the taxes are required to be withheld.

     17. No Effect on Employment or Service. Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor will they interfere in any way with the Participant’s right or the
Company’s right to terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.

     18. Date of Grant. The date of grant of an Award will be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is determined by the Administrator. Notice of the determination will be provided to each
Participant within a reasonable time after the date of such grant.

-16-

 

     19. Term of Plan. Subject to Section 23 of the Plan, the Plan will become effective
upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless
terminated earlier under Section 20 of the Plan.

     20. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.

          (b) Stockholder Approval. The Company will obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and signed by the
Participant and the Company. Termination of the Plan will not affect the Administrator’s ability
to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior
to the date of such termination.

     21. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares will comply with
Applicable Laws and will be further subject to the approval of counsel for the Company with respect
to such compliance.

          (b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     22. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.

     23. Stockholder Approval. The Plan will be subject to approval by the stockholders of
the Company within twelve (12) months after the date the Plan is adopted by the Board. Such
stockholder approval will be obtained in the manner and to the degree required under Applicable
Laws.

-17-exv4w1

 

Exhibit 4.1

CERTIFICATE OF DESIGNATION

FOR

CHARTWELL INTERNATIONAL, INC.

     WHEREAS, the Amended and Restated Articles of Incorporation of Chartwell International, Inc.,
a Nevada corporation (the “Corporation”) presently authorizes the issuance of 25,000,000 shares of
Preferred Stock, $0.001 par value, in one or more series upon terms and conditions that are to be
designated by the Board of Directors (the “Board”); and

     WHEREAS, the Board wishes to designate 20,000 shares of the Corporation’s Preferred Stock as
“Series A Preferred Stock.”

     NOW, THEREFORE, BE IT RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation hereinafter designated “Series A Preferred Stock” is hereby created, and that the
designation and amount thereof and the rights, preferences, privileges and restrictions granted to
or imposed upon the Series A Preferred Stock or the holders thereof are as follows:

     1. Designation and Amount. The number of shares of Preferred Stock (“Preferred
Stock”) which the Corporation is authorized to issue is 25,000,000, of which 20,000 shares are
hereby designated as Series A Preferred Stock, $0.001 par value (“Series A Preferred Stock”).

     2. Dividends. The holders of Series A Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors for holders of Common Stock of the Corporation, such
dividends as may be declared from time to time by the Board of Directors.

     3. Liquidation Rights. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be
entitled to receive pari passu any distribution of any of the assets of the Corporation to holders
of Common Stock of the Corporation.

     4. Redemption. If a holder of Series A Preferred Stock acquires a redemption right on
or before March 5, 2007, the Series A Preferred Stock shall be redeemable as follows:

         (a) Commencing on December 31, 2012 and if the Corporation is not at that date publicly traded
on a national exchange, the holder of Series A Preferred Stock shall have the option to require the
Corporation to acquire and redeem all, but not part, of such holder’s Series A Preferred Stock at
any time (the “Redemption Right”) at a purchase price of $1,000.00 per share (as adjusted for any
combinations or splits with respect to such shares) (the “Redemption Price”). To exercise its
Redemption Right, the holder shall deliver notice to the Corporation in writing at least thirty
(30) days prior to date of redemption (the “Redemption Date”). The Corporation shall effect
redemptions by paying cash, from any funds legally available for such purpose.

         (b) In connection with any redemption by the Corporation pursuant to Section 4(a) above, at
least thirty (30) days prior to the date the holder elects to require redemption of the

1

 

shares, the holder shall mail a Redemption Request Notice by certified mail to the Corporation. The Redemption
Request Notice shall specify the number of shares to be redeemed from such holder, the Redemption
Date and the Redemption Price. Each surrendered certificate , if any, shall be cancelled, and the
Redemption Price for such shares shall then be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, or records of the Corporation,
and in the manner set forth in Section 4(a).

     5. Reacquired Stock. Any Series A Preferred Stock purchased, redeemed or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof. All such shares shall upon their cancellation become authorized but
unissued Preferred Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to any conditions and
restrictions on issuance set forth herein.

     6. Conversion. The holders of the Series A Preferred Stock shall have conversion
rights as follows (the “Conversion Rights”):

         (a) Right to Convert.

              (i) Each share of Series A Preferred 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 Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock of the Corporation as is determined by dividing $1,025.65 per
share by the Conversion Price at the time in effect for such share, provided,
however, the number of shares of Common Stock that may be acquired by any holder upon any
conversion hereunder shall be limited to the extent necessary to ensure that, following such
exercise, the total number of shares of Common Stock then beneficially owned by the holder and its
affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated
with the holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed ten percent
(10%) of the total number of issued and outstanding shares of Common Stock of the Corporation
(including for such purpose the shares of Common Stock issuable upon such conversion). The initial
Conversion Price per share for shares of Series A Preferred Stock shall be $2.50; provided however,
that the Conversion Price for the Series A Preferred Stock shall be subject to adjustment as
provided in this Section 4.

         (b) Mechanics of Conversion. Before any holder of Series A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, it shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the Corporation or of any transfer agent for
the Series A Preferred Stock, and shall give written notice by mail, postage prepaid, to the
Corporation at its principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of Common Stock are
to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of

2

 

Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date.

         (c) Conversion Price Adjustment of Preferred Stock. The Conversion Price of the
Series A Preferred Stock shall be subject to adjustment from time to time as follows:

              (i) In the event the Corporation should at any time or from time to time after the date when
the first shares of Series A Preferred Stock are issued (“Purchase Date”) fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by
such holder for the additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of
such record date (or the date of such dividend, distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Series A Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.

              (ii) If the number of shares of Common Stock outstanding at any time after the Purchase Date
is decreased by a combination of the outstanding shares of Common Stock, then, following the record
date of such combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on conversion of each
share of such series shall be decreased in proportion to such decrease in outstanding shares.

         (d) Other Distributions. In the event the Corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by the Corporation or
other persons, assets (excluding cash dividends) or options or rights not referred to in Section
6(c)(i) above, then, in each such case for the purpose of this Section 6(d), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of the Corporation into which
their shares of Series A Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to receive such
distribution.

         (e) Reclassification, Exchange and Substitution. If the Common Stock is changed into
the same or different number of shares of any other class or series of stock, whether by capital
reorganization, reclassification or otherwise (other than an event treated under Section 3 as
liquidation, dissolution or winding up, and other than a stock dividend, combination, split or
other event for which adjustment is made pursuant to Section 6(c)), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or reclassification, be
adjusted such

3

 

that the Series A Preferred Stock shall be convertible into, in lieu of the Common
Stock which the holders would otherwise have been entitled to receive, a number of shares of such
other class or series of stock equivalent to the number of shares of Common Stock that the holders
would have been entitled to receive upon conversion of their Series A Preferred Stock immediately
prior to such reclassification, exchange or capital reorganization.

         (f) No Impairment. The Corporation will not, by amendment of its Amended and Restated
Articles of Incorporation or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 6 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A
Preferred Stock against impairment.

         (g) Notices of Record Date. In the event of any taking by the Corporation of a record
of the holders of any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend) or other distribution, any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall mail to each holder of
Series A Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.

         (h) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the shares of the Series A Preferred Stock such number of
its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock, the 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.

         (i) Notices. Any notice required by the provisions of this Section 6 to be given to
the holders of shares of Series A Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at the holder’s address
appearing on the books of the Corporation.

         (j) No Fractional Shares and Certificate as to Adjustments.

              (i) No fractional shares shall be issued upon conversion of the Series A Preferred Stock, and
the number of shares of Common Stock to be issued shall be

4

 

rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis
of the total number of shares of Series A Preferred Stock that the holder is at the time converting
into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

              (ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series
A Preferred Stock pursuant to this Section 6, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish
to each holder of Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series A Preferred Stock.

     7. Voting Rights. Except as provided herein or by law, holders of Series A Preferred
Stock shall have no voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for taking any
corporate action.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation as of the date set
forth below.

	 	 	 
	Date: March 2, 2007
	 	 
	 

	 	 
	 

	 	Paul Biberkraut, Chief Financial Officer

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}]]