-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NsT2J+KN1FGJ3b3XJ+jsUwLst5R/EHaEX7HffMZQLOECrVEvlXycMbGwQB3/Dwud El7hoprQzxHdVwm4f0trRQ== 0000950149-99-002123.txt : 19991122 0000950149-99-002123.hdr.sgml : 19991122 ACCESSION NUMBER: 0000950149-99-002123 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19991119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRICOM INC / DE CENTRAL INDEX KEY: 0000884318 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 770294597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-91359 FILM NUMBER: 99761494 BUSINESS ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GRATOS STATE: CA ZIP: 95030 BUSINESS PHONE: 4083998200 MAIL ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GATOS STATE: CA ZIP: 95030 S-3 1 REGISTRATION STATEMENT FOR FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- METRICOM, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0294597 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
980 UNIVERSITY AVENUE LOS GATOS, CALIFORNIA 95030-2375 (408) 399-8200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) TIMOTHY A. DREISBACH PRESIDENT AND CHIEF EXECUTIVE OFFICER METRICOM, INC. 980 UNIVERSITY AVENUE, LOS GATOS, CALIFORNIA 95030-2375 (408) 399-8200 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: KENNETH L. GUERNSEY JEREMY W. DICKENS CYDNEY S. POSNER WEIL, GOTSHAL & MANGES LLP LAURA RANDALL WOODHEAD 767 FIFTH AVENUE COOLEY GODWARD LLP NEW YORK, NEW YORK 10153 ONE MARITIME PLAZA, 20TH FLOOR (212) 310-8000 SAN FRANCISCO, CALIFORNIA 94111 (415) 693-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AMOUNT OF TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(2) - ---------------------------------------------------------------------------------------------------------------- Debt Securities(3).............................. (4) (4) - ---------------------------------------------------------------------------------------------------------------- Common Stock, $0.001 par value per share(5)..... (4) (4) - ---------------------------------------------------------------------------------------------------------------- Total................................... $1,200,000,000(6) $333,600 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
(1) The proposed maximum aggregate offering price per class of security will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder. (2) Calculated pursuant to Rule 457(o) under the Securities Act. (3) Subject to note 6 below, there is being registered hereunder an indeterminate principal amount of debt securities of the registrant as may be sold, from time to time, by us. If any debt securities are issued at an original issue discount, then the offering price shall be in such greater principal amount at maturity as shall result in aggregate gross proceeds to the registrant not to exceed $1.2 billion less the gross proceeds attributable to any securities previously issued pursuant to this registration statement. (4) Not required to be included in accordance with General Instruction II.D. of Form S-3. (5) Subject to note 6 below, there is being registered hereunder an indeterminate number of shares of common stock of the registrant as may be sold from time to time. (6) In no event will the aggregate offering price of all securities issued from time to time pursuant to this registration statement exceed $1.2 billion. The securities registered hereunder may be sold separately or as units with other securities registered hereunder. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1999 PROSPECTUS $1,200,000,000 METRICOM, INC. [LOGO] COMMON STOCK DEBT SECURITIES We may offer shares of common stock and one or more series of debt securities from time to time at prices and on terms to be determined by market conditions at the time we make the offer. We will provide the specific terms of each series of debt securities in supplements to this prospectus. Before you invest in the securities, you should carefully read this prospectus and the prospectus supplement related to the securities offered. Metricom's common stock is traded on the Nasdaq National Market under the symbol "MCOM." On November 18, 1999, the last reported sale price of the common stock on the Nasdaq National Market was $54 1/8 per share. ------------------------- THE SECURITIES WE MAY OFFER INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 5. ------------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------- If we sell the securities through agents or underwriters, we will include their names and the fees, commissions and discounts they will receive, as well as the net proceeds to us, in the applicable prospectus supplement. The date of this Prospectus is , 1999 3 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................. 3 Risk Factors........................ 5 Forward-Looking Information......... 5 Deficiency of Earnings to Fixed Charges........................... 5 Use of Proceeds..................... 5 Description of Debt Securities...... 6
PAGE ---- Description of Capital Stock........ 14 Plan of Distribution................ 16 Legal Matters....................... 17 Experts............................. 17 Where You Can Get More Information....................... 17
------------------ No dealer, sales person or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. Metricom(R), Ricochet(R) and Ricochet(2) are our trademarks. Trade names and trademarks of other companies appearing in this prospectus are the property of their respective holders. 2 4 PROSPECTUS SUMMARY The following is a summary of our business. This summary highlights selected information from this prospectus and does not contain all the information that may be important to you. To understand the terms of the securities, you should read this prospectus with the accompanying prospectus supplement carefully. Together, these documents describe the specific terms of the securities we are offering. You should also carefully read the section entitled "Risk Factors" in this prospectus and the accompanying prospectus supplement and the documents identified under the caption "Where You Can Get More Information." OVERVIEW We provide wide area wireless data communications solutions. We design, develop and market wireless network products and services that provide low-cost, high performance, easy-to-use data communications that can be used in a broad range of personal computer and industrial applications. Our primary service, Ricochet, provides users of portable and desktop computers and hand-held computing devices with fast, reliable, portable, wireless access to the Internet, private intranets, local area networks, e-mail and on-line services for a low, flat monthly subscription fee that permits unlimited usage. We were incorporated in California in December 1985 and reincorporated in Delaware in April 1992. Our principal office is located at 980 University Avenue, Los Gatos, California 95030-2375. Our telephone number at that location is (408) 399-8200, and our Web sites are located at www.metricom.com and www.ricochet.net. Information contained on our Web sites does not constitute part of this prospectus. THE SECURITIES WE MAY OFFER We may offer shares of our common stock and various series of debt securities, with a total value of up to $1.2 billion, from time to time, under this prospectus at prices and on terms to be determined by market conditions at the time of offering. This prospectus provides you with a general description of the securities we may offer. Each time we offer a type or series of securities, we will provide a prospectus supplement that will describe the specific amounts, prices and other important terms of the securities, including, to the extent applicable: - designation or classification; - aggregate principal amount or aggregate offering price; - maturity, if applicable; - rates and times of payment of interest or dividends, if any; - redemption, conversion or sinking fund terms, if any; - voting or other rights, if any; - conversion prices, if any; and - important federal income tax considerations. The prospectus supplement may also add, update or change information contained in this prospectus or in documents we have incorporated by reference. THIS PROSPECTUS MAY NOT BE USED TO COMPLETE ANY SALE OF SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. We may sell the securities directly to or through agents, underwriters or dealers. We, and our agents or underwriters, reserve the right to accept or reject all or part of any proposed purchase of securities. If we do offer securities through agents or underwriters, we will include in the applicable prospectus supplement: - the names of those agents or underwriters; - applicable fees, discounts and commissions, to be paid to them; and 3 5 - the net proceeds to us. Common Stock. We may issue shares of our common stock, from time to time. Holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders, except those matters that are submitted solely to a vote of the holders of preferred stock. Subject to any preferences of outstanding shares of preferred stock, holders of common stock are entitled to dividends when and if declared by the board of directors. Debt Securities. We may offer debt securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible debt. The senior debt securities will rank equally with all of our other unsecured and unsubordinated debt. The subordinated debt securities will be subordinate and junior in right of payment, to the extent and in the manner described in the instrument governing the debt, to all of our senior indebtedness. Convertible debt securities will be convertible into our common stock. Conversion may be mandatory or at your option, and would be at prescribed conversion rates. The debt securities will be issued under indentures between us and the party to be named as trustee in the prospectus supplement. In this prospectus, we have summarized certain general features of the debt securities. We urge you, however, to read the prospectus supplements related to the series of debt securities being offered, as well as the complete indentures, which contain the terms of the debt securities. The indentures have been filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated by reference from reports we file with the SEC. 4 6 RISK FACTORS The prospectus supplement applicable to each type or series of securities we offer will contain a discussion of risks applicable to an investment in our company and to the particular types of securities that we are offering under that supplement. Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed under the caption "Risk Factors" in the applicable prospectus supplement, together with all of the other information contained in the prospectus supplement or appearing or incorporated by reference in the registration statement of which this prospectus is a part. FORWARD-LOOKING INFORMATION This prospectus contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on our current expectations about our company and our industry. We use words such as "expect," "anticipate," "estimate," "believe," "intend," "plan" and other similar expressions to identify some forward-looking statements, but not all forward-looking statements include these words. All our forward-looking statements involve risks and uncertainties. Our actual results may differ significantly from our expectations and from the results expressed in or implied by these forward-looking statements. The section captioned "Risk Factors" that appears in our annual report on Form 10-K, as amended, for the year ended December 31, 1998 and our current report on Form 8-K filed with the SEC on July 9, 1999, as well as the section captioned "Risk Factors" that will appear in prospectus supplements accompanying this prospectus describe some, but not necessarily all, of the factors that could cause these differences. We urge you to read those sections carefully. Except as may be required by law, we undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. DEFICIENCY OF EARNINGS TO FIXED CHARGES Our earnings were insufficient to cover our fixed charges during each of the periods described below. For the purpose of these calculations, "earnings" consist of income before taxes, plus fixed charges, and "fixed charges" consist of interest expense incurred and the portion of rental expense deemed by us to be representative of the interest factor of rental payments under leases.
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------------------- -------------- 1994 1995 1996 1997 1998 1998 1999 ----- ----- ----- ----- ----- ----- ----- (DOLLARS IN MILLIONS) Deficiency of earnings to fixed charges.............................. $11.7 $23.5 $39.3 $59.3 $84.2 $45.9 $48.2
USE OF PROCEEDS Unless otherwise described in a prospectus supplement, the net proceeds from the offering of the securities will be used for deployment and commercialization of our networks and for other general corporate purposes, principally working capital, capital expenditures and operating expenses. When we offer a particular type or series of securities, the prospectus supplement relating to those securities will describe our intended use of the net proceeds we will receive from the sale of those securities. Pending application for specific purposes, the net proceeds of any offering of securities may be invested in short-term investments and marketable securities. 5 7 DESCRIPTION OF DEBT SECURITIES We may offer the debt securities from time to time as either senior or subordinated debt or as senior or subordinated convertible debt. We will issue senior debt securities under an indenture between us and the party to be named as trustee in the prospectus supplement. We will issue subordinated debt securities under another indenture between us and the party to be named as trustee in the prospectus supplement. The terms of the indentures are also governed by the provisions of the Trust Indenture Act. The following is a summary of the material provisions of the debt securities; however, we urge you to review the senior debt indenture and the subordinated debt indenture, which are filed as exhibits to the registration statement of which this prospectus is a part, in their entirety. See "Where You Can Find More Information." Unless the context requires otherwise, whenever we refer to the indentures, we also are referring to any supplemental indentures that specify the terms of a particular series of debt securities. GENERAL The indentures allow us to issue debt securities in series up to the aggregate amount we authorize from time to time for each series. We will describe the following terms of the debt securities, to the extent those terms are applicable, and other information that we consider relevant relating to a particular series of debt securities in a prospectus supplement: - the designation and title of the debt securities; - the classification of those securities as senior or subordinated debt securities; - the aggregate principal amount, or principal amount at maturity, as applicable, of the debt securities; - the percentage of the principal amount, or principal amount at maturity, as applicable, at which we will issue and sell the debt securities; - the date or dates on which the debt securities will mature; - the rate or rates per annum, if any, which may be fixed or variable, at which the debt securities will bear or accrete interest, or the method of determination of the interest rate or rates; - the times and places at which the interest, if any, will be payable; - provisions for sinking, purchase or other analogous funds, if any; - the date or dates or particular events, if any, after which we may, or must, redeem the debt securities, as well as the redemption price or prices; - the date or dates or particular events, if any, after which we must offer to repurchase the debt securities from their holders, as well as the repurchase price or prices; - the date or the dates, if any, after which the holders may convert the debt securities into shares of our common stock and the terms for that conversion; and - any other material terms of, including any covenants or defined terms applicable to, the debt securities. We will pay the principal, premium, if any, and interest, if any, on debt securities by wire transfer of immediately available funds to the holder of any debt securities held in global form and at the office of the trustee maintained for that purpose with respect to any certificated notes. With respect to certificated debt securities, we may pay interest, if any, at our option by check mailed to the address of the person entitled to payment as it appears in our security register or by wire transfer of immediately available funds in accordance with instructions provided by the registered holders of certificated debt securities. Debt securities will be transferable at the office of the trustee maintained for that purpose. We may issue debt securities in registered form and, unless otherwise specified in the applicable prospectus supplement, only in denominations of $1,000 and integral multiples of $1,000. We may also issue 6 8 debt securities in book-entry form, without certificates. We will describe the procedures relating to an issue of book-entry debt securities in the prospectus supplement relating to those debt securities. We will not require a service charge for any transfer or exchange of the debt securities, but we or the trustee may require payment of a sum sufficient to cover any transfer tax or other similar government charge payable in connection with a transfer or exchange. We may issue debt securities under the indentures at a substantial discount from their stated principal amount at maturity. We will describe any United States federal income tax consequences and other considerations applicable to debt securities issued with "original issue discount" in the prospectus supplement relating to those debt securities. CONVERSION RIGHTS The prospectus supplement will describe, if applicable, the terms on which the holders may convert debt securities into common stock. The conversion may be mandatory or may be at the option of the holder of debt securities. The prospectus supplement will describe how the number of shares of common stock to be received upon conversion would be calculated. MERGER, CONSOLIDATION AND SALE OF ASSETS Unless we provide otherwise in the prospectus supplement relating to a particular series of debt securities, the indentures will not permit us to consolidate with or merge into any other person or sell, convey, transfer or lease all or substantially all of our properties and assets as an entirety to any person, unless: - the person formed by the consolidation or into which we are merged, or the person that acquires our properties and assets by sale, conveyance or transfer or which leases our properties and assets substantially as an entirety: - is a corporation, validly existing under the laws of the United States of America, any state of the United States, or the District of Columbia, and - expressly assumes, by a supplemental indenture, executed and delivered to the trustee, in form reasonably satisfactory to the trustee, our obligations for the due and punctual payment of the principal of, premium, if any, and interest on all the debt securities and the performance and observance of every covenant of the indentures; - immediately after giving effect to the transaction, no default or event of default shall have occurred and be continuing with respect to the applicable debt securities; and - the person formed by the consolidation or surviving the merger or acquiring or leasing our properties and assets delivers an officers' certificate and an opinion of counsel to the trustee, each stating that the consolidation, merger, conveyance, transfer or lease and the supplemental indenture comply with these provisions of the indentures and that all conditions precedent provided for under the indentures that relate to the transaction have been satisfied. These provisions apply only to a merger or consolidation in which we are not the surviving corporation and to sales, conveyances, leases and transfers by us as transferor or lessor. We use the term "person" to mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision of a government entity. The indentures also provide that, upon completion of any of the transactions described above in accordance with the preceding paragraphs, the person formed by the consolidation or surviving the merger or acquiring or leasing our properties and assets will be substituted for us and will succeed to, and may exercise, all of our rights and powers under the indentures with the same effect as if that person had been named as the obligor under the indentures. Also, upon completion of any of these transactions, except in the case of a lease, we will be discharged from all our obligations and covenants under the indentures and the debt securities. 7 9 EVENTS OF DEFAULT Unless we provide otherwise in the prospectus supplement relating to a particular series of debt securities, the following will be events of default under the indentures: (1) default in the payment of interest on any debt securities when the interest becomes due and payable, if the default continues for 30 days; or (2) default in the payment of the principal of, or premium, if any, on, any debt securities of that series at its maturity or upon any redemption; or (3) default in the deposit of any sinking fund payment when and as due pursuant to the terms of the debt securities of that series and the indentures and such default shall continue for a period of 30 days; or (4) default in the performance, or breach, of any covenant or warranty in the indentures, other than a default in the performance, or breach, of a covenant or warranty that is specifically dealt with elsewhere under this "events of default" section, if the default or breach continues for 60 days after the trustee or the holders of at least 25% in principal amount, or principal amount at maturity, as applicable, deliver a written "notice of default" to us specifying the default or breach and requiring it to be remedied; or (5) the entry of a decree or order by a court with appropriate jurisdiction adjudging us bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition with regard to us under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator, or other similar official with regard to us or any substantial part of our property, or ordering the winding up or liquidation of our affairs, if such a decree or order continues unstayed and in effect for a period of 60 consecutive days; or (6) our institution of proceedings to be adjudicated bankrupt or insolvent, or our consent to the institution of bankruptcy or insolvency proceedings against us, or our filing of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or our consent, to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, or other similar official regarding us or of any substantial part of our property, or our making of an assignment for the benefit of creditors; or (7) any other event of default provided with respect to debt securities of that series. In each case, "default" means any event which is, or after notice or passage of time or both would be, an event of default. Unless we provide otherwise in the prospectus supplement relating to a particular series of debt securities, if an event of default described in clause (1), (2), (3), (4) or (7) above occurs and is continuing, then in every case the trustee or the holders of not less than 25% in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of that series may declare the principal amount or, if the debt securities of that series are original issue discount securities, the portion of the principal amount as may be specified in the terms of that series, of all of the debt securities of that series to be due and payable immediately, by a notice in writing to us, and to the trustee if given by holders, and upon any declaration the principal amount or specified portion of the principal amount will become immediately due and payable. If an event of default described in clause (5) or (6) above occurs and is continuing, then the principal amount of all the debt securities will automatically be immediately due and payable without any declaration or other act on the part of the trustee or any holder of those debt securities. At any time after a declaration of acceleration with respect to debt securities of any series or all series, as applicable, has been made, the holders of a majority in principal amount, or principal at maturity, as applicable, of the outstanding debt securities of that series, or of all series, as the case may be, by written notice to us and the trustee, may rescind and annul the declaration and its consequences if the rescission would 8 10 not conflict with any judgment or decree and if all existing events of default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. Such a rescission will not affect any subsequent default or impair any right consequent to a subsequent rescission. Except as otherwise provided in each indenture, or any supplement thereto, the holders of not less than a majority in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of any series may, on behalf of the holders of all the debt securities of such series, waive any past default, described in clause (1), (2), (3), (4) or (7) of the first paragraph of this section, or, in the case of a default described in clause (5) or (6) of the first paragraph of this section, the holders of not less than a majority in principal amount, or principal amount at maturity, as applicable, of all outstanding debt securities may waive any such past default, and its consequences, except a default: - in respect of the payment of the principal of, or premium, if any, on, or interest on any debt security, or - in respect of a covenant or provision which under the indentures cannot be modified or amended without the consent of the holders of all or more than a majority in principal amount, or principal amount at maturity, as applicable, of the outstanding debt security of the affected series. A default will cease to exist upon a waiver and any event of default arising from that default will be deemed to have been cured for every purpose of the indentures, but the waiver will not extend to any subsequent or other default or event of default. Except to enforce the right to receive payment of principal, premium, if any, or interest on any debt security, no holder of any debt security of any series will have any right to institute any proceeding, judicial or otherwise, with respect to the indentures, or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless: - that holder has previously given written notice to the trustee of a continuing event of default with respect to the debt securities of that series; - the holders of not less than 25% in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of that series in the case of any event of default under clause (1), (2), (3), (4) or (7) of the first paragraph of this section, or, in the case of any event of default described in clause (5) or (6) of the first paragraph of this section, the holders of not less than 25% in principal amount, or principal amount at maturity, as applicable, of all outstanding debt securities delivers a written request to the trustee to institute proceedings in respect of the event of default in its own name as trustee under each of the indentures; - that holder or holders offer the trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with the request to institute proceedings; - the trustee fails to institute a proceeding for 60 days after receiving the notice, request and offer of indemnity; and - no direction inconsistent with such written request has been given to the trustee during such 60-day period by the holders of at least a majority in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of that series in the case of any default under clause (1), (2), (3), (4) or (7) of the first paragraph of this section, or, in the case of any event of default described in clause (5) or (6) of the first paragraph of this section, by the holders of at least a majority in principal amount, or principal amount at maturity, as applicable, of all outstanding debt securities. During the existence of an event of default, the trustee must exercise the rights and powers vested in it under either indenture in good faith. Subject to the provisions of the indentures relating to the duties of the trustee, in case an event of default occurs and is continuing, the trustee under the indentures is not under any obligation to exercise any of its rights or powers under the indentures at the request or direction of any of the holders unless these holders offer the trustee reasonable indemnity. Subject to provisions of the indentures 9 11 concerning the rights of the trustee, with respect to the debt securities of any series, the holders of not less than a majority in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of that series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee under the indentures. Within 90 days after the occurrence of any default with respect to debt securities of any series, the trustee will transmit notice of any default known to it to the holders of the affected debt securities in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, unless the default is cured or waived; however, except in the case of a default in the payment of the principal of, or premium, if any, on, or interest on any debt securities of that series, or in the payment of any sinking fund installment with respect to debt securities of that series, the trustee will be protected in withholding that notice if and so long as the trustee in good faith determines that the withholding of that notice is in the interest of the holders of debt securities of that series. We are required to deliver a brief certificate of our compliance with all of the conditions and covenants under the indentures to the trustee within 120 days after the end of each fiscal year. DEFEASANCE OR COVENANT DEFEASANCE We may, at our option and at any time, terminate our obligations with respect to the outstanding debt securities of any series, referred to as "defeasance." Defeasance means that we will be deemed to have paid and discharged the entire indebtedness represented by the outstanding debt securities, except for the following provisions, which will survive until otherwise terminated or discharged under the indentures: - the rights of holders of the outstanding debt securities - to receive, solely from the trust fund described in the indentures, payments in respect of the principal of, and premium, if any, on, and interest on those debt securities when those payments are due, and - to receive shares of common stock or other securities from us upon conversion of any convertible debt securities issued thereunder; - our obligations to issue temporary debt securities, register the transfer or exchange of any debt securities, replace mutilated, destroyed, lost or stolen debt securities, maintain an office or agency for payments in respect of the debt securities and, if we act as our own paying agent, hold in trust, money to be paid to the persons entitled to payment, and with respect to "additional amounts," if any, on those debt securities as contemplated in the indentures; - the rights, powers, trusts, duties and immunities of the trustee under the indentures; and - the defeasance provisions of the indentures. In addition, we may, at our option and at any time, elect to terminate our obligations with respect to selected covenants that are set forth in the indentures and any omission to comply with those obligations will not constitute a default or an event of default with respect to the debt securities, referred to as "covenant defeasance." In order to exercise either defeasance or covenant defeasance: - we must irrevocably deposit or cause to be deposited with the trustee, in trust, for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the applicable debt securities, - money, or - Government Obligations that mature not later than one day before the due date of any payment of principal, premium, if any, and interest, under the applicable debt securities, or - a combination of money and Government Obligations as described immediately above, 10 12 - the money or Government Obligations, or both, must in any case, be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge - the principal of, and any premium and all installments of interest on, the outstanding debt securities on the stated maturity date (or any redemption date that we select, if applicable), and - any mandatory sinking fund payments or analogous payments applicable to the outstanding debt securities on the day on which those payments are due and payable; however, we must deliver to the trustee irrevocable instructions to apply the money or the proceeds of the Government Obligations to the payments required to be made with respect to those debt securities; - the defeasance or covenant defeasance of the debt securities will not result in a breach or violation of, or constitute a default under, the indentures or any other material agreement or instrument to which we are a party or by which we are bound; - we must effect the defeasance or covenant defeasance of the debt securities in compliance with any additional or substitute terms, conditions or limitations set forth in the prospectus supplement relating to a particular series of debt securities; and - we must deliver an officers' certificate and an opinion of counsel to the trustee, each stating that all conditions precedent under the indentures to either defeasance or covenant defeasance, as the case may be, have been satisfied. "Government Obligations" means direct obligations, or certificates representing an ownership interest in such obligations, of the United States, including any agency or instrumentality of the United States, for the payment of which the full faith and credit of the United States is pledged and which are not callable or redeemable at the issuer's option. Before we make a deposit to effect a defeasance or covenant defeasance of the debt securities, we may give to the trustee, in accordance with the redemption provisions in the indentures, a notice of our election to redeem all or any portion of the outstanding debt securities at a future date in accordance with the terms of the debt securities of that series and the redemption provisions of the indentures, which notice must be irrevocable. If we deliver such an irrevocable redemption notice, it will be given effect in applying the foregoing. With respect to subordinated debt securities, money and securities held in trust pursuant to the defeasance and covenant defeasance provisions of the indentures, will not be subject to the subordination provisions of the subordinated indenture. SATISFACTION AND DISCHARGE The indentures will, upon a written request or order signed by one of our designated officers and delivered to the trustee, cease to be of further effect with respect to any series of debt securities, except as to any surviving rights of registration of transfer or exchange or conversion of debt securities of that series expressly provided for, and the trustee will be required to execute proper instruments acknowledging satisfaction and discharge of such indenture as to that series when either: - we have delivered to the trustee for cancellation all debt securities of that series previously authenticated and delivered, other than: - debt securities that have been destroyed, lost or stolen and which have been replaced or paid, as provided in the indentures, and - debt securities for which money sufficient to make all payment on the debt securities has previously been deposited in trust with the trustee or any paying agent or segregated and held in 11 13 trust by us with any remaining amounts to thereafter be repaid to us, as provided in the indentures, or - all debt securities, other than convertible debt securities, of the series: - have become due and payable, or - will become due and payable at their stated maturity within one year, or - if redeemable at our option, are to be called for redemption within one year under arrangements reasonably satisfactory to the trustee for the giving of notice of redemption by the trustee in the name, and at our expense; and we irrevocably deposit or cause to be deposited with the trustee as trust funds in trust an amount of money or Government Obligations sufficient to pay and discharge the entire indebtedness on those debt securities not previously delivered to the trustee for cancellation, including all principal of and any premium and installments of interest to the date of such deposit in the case of debt securities which have become due and payable or to the stated maturity or redemption date of the debt securities, as applicable. In addition, in order to satisfy and discharge the securities, we will be required to: - pay or cause to be paid all other sums payable under the debt securities by us; and - deliver an officers' certificate and an opinion of counsel to the trustee, each stating that all conditions precedent provided for relating to the satisfaction and discharge of the indentures as to such series have been satisfied. AMENDMENTS AND WAIVERS Under the indentures, we and the trustee may at any time and from time to time, without the consent of any holder of debt securities, enter into one or more supplemental indentures to: - cure ambiguities, defects or inconsistencies, or to make any other provisions with respect to questions or matters arising under the indentures; - effect or maintain the qualification of the indentures under the Trust Indenture Act; - secure any debt securities; - add covenants for the protection of the holders of debt securities; - establish the forms or terms of debt securities of any series; - make any other change that does not adversely affect in any material respect the rights under such indenture of the holders of debt securities thereunder; - add a guarantee of our payment obligations under the indentures by a subsidiary or other party; - evidence the acceptance of appointment by a successor trustee; and - to evidence the succession of another person to us and the assumption by any such successor of our obligations in accordance with the indentures and the debt securities. Other amendments and modifications of the indentures or the debt securities may be made by us and the trustee with the consent of the holders of not less than a majority of the aggregate principal amount, or principal amount at maturity, as applicable, of all of the then outstanding debt securities of the affected series; 12 14 however, no such modification or amendment may, without the consent of the holder of each outstanding debt security affected thereby, - change the stated maturity of the principal of, or any installment of interest on, any debt security; - reduce the principal amount or the rate of interest or any premium payable upon the redemption of any debt security; - change any obligation of us to pay any "additional amounts" contemplated by each indenture (except as contemplated and permitted by certain provisions of the indentures); - reduce the accreted amount of an original issue discount security that would be due and payable upon a declaration of acceleration of the maturity of the debt securities under the indentures or the amount of the debt securities provable in bankruptcy pursuant to the indentures; - adversely affect, after the event giving rise to any right of repayment occurs, any right of repayment at the option of any holder of any debt security, or change any place of payment described in the indentures where any debt security or any premium or the interest thereon is payable; - impair the right to institute suit for the enforcement of any payment on or after the stated maturity of the debt securities, or, in the case of redemption or repayment of the debt securities, on or after the redemption date or repayment date, as applicable; - adversely affect any right to convert any debt securities as may be provided under the indentures; or - reduce the percentage in principal amount, or principal amount at maturity, as applicable, of the outstanding debt securities of any series, the consent of whose holders is required for any such supplemental indenture, for any waiver of compliance with provisions of the indentures or defaults thereunder and their consequences provided for in the indentures. SENIOR DEBT The debt securities that will be senior debt securities will be issued under the senior debt indenture and will rank on an equal basis with all of our other unsecured and unsubordinated debt. SUBORDINATED DEBT The debt securities that will be subordinated debt securities will be issued under the subordinated debt indenture and will be subordinate and junior in right of payment, to the extent and in the manner set forth in the subordinated debt indenture, to all of our "Senior Indebtedness." Unless we provide otherwise in the prospectus supplement relating to a particular series of debt securities, the subordinated debt indenture will define "Senior Indebtedness" as obligations, or obligation guaranteed or assumed by us, for borrowed money or evidenced by bonds, debentures, notes or other similar instruments, and amendments, renewals, extensions, modifications and refundings of any such indebtedness or obligations, other than nonrecourse obligations, the subordinated debt securities or any other obligations specifically designated as not constituting, or as being subordinate in right of payment to, Senior Indebtedness. In the event: - of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in respect of us or a substantial part of our property, or - that a default occurs with respect to the payment of principal of, and any premium or interest on, or other monetary amounts due and payable on any Senior Indebtedness or - that there occurs an event of default, other than a default in the payment of principal, and any premium or interest, or other monetary amounts due and payable, with respect to any Senior Indebtedness, permitting the holder or holders of that Senior Indebtedness to accelerate the maturity of that Senior Indebtedness, with notice or lapse of time, or both, and such event of default continues 13 15 beyond the period of grace, if any, in respect of that default or event of default, and the default or event of default is not cured or waived or ceases to exist; or - that the principal of and accrued interest on, or the accreted amount of, the subordinated debt securities is declared due and payable as a result of an event of default of the subordinated debt indenture and that declaration is not rescinded and annulled as provided under the subordinated debt indenture, then the holders of all Senior Indebtedness will be entitled to receive payment, in cash or cash equivalents, of the full amount unpaid on that Senior Indebtedness first, or provision will be made for that payment in money or money's worth, before the holders of any of the subordinated debt securities are entitled to receive a payment on account of the principal of, and any premium or interest on, the indebtedness evidenced by such subordinated debt securities. If this prospectus is being delivered in connection with a series of subordinated debt securities, the accompanying prospectus supplement or the information incorporated by reference will set forth the approximate amount of Senior Indebtedness outstanding as of the end of the most recent fiscal quarter. Moreover, that prospectus supplement will contain more specifically the subordination provisions applicable to the particular series of subordinated debt securities being offered. GOVERNING LAW The indentures and the debt securities will be governed by and construed in accordance with the laws of the State of New York. The indentures are subject to the provisions of the Trust Indenture Act that are required to be a part thereof and will, to the extent applicable, be governed by such provisions. DESCRIPTION OF CAPITAL STOCK GENERAL We have authorized capital stock of 150 million shares of common stock, $0.001 par value per share, and 80 million shares of preferred stock, $0.001 par value per share. As of November 16, 1999, there were 22,091,324 shares of our common stock and 60 million shares of our preferred stock outstanding. Our Restated Bylaws divide our board of directors into three classes as nearly equal in size as possible with staggered three-year terms. The classification of the board of directors could delay or deter a third party from acquiring control of Metricom. We are currently subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. Section 203 prevents certain Delaware corporations, including those whose securities are listed on the Nasdaq National Market, from engaging, under certain circumstances, in a "business combination," which includes a merger or sale of more than 10% of the corporation's assets, with any interested stockholder for three years following the date that the stockholder became an interested stockholder. An interested stockholder is a stockholder who acquired 15% or more of the corporation's outstanding voting stock without the prior approval of the corporation's board of directors. At the annual meeting of stockholders held on October 15, 1999, our stockholders elected not to be governed by Section 203. The election will become effective 12 months after adoption of the election. The following summaries of certain provisions of the common stock and preferred stock do not purport to be complete and are subject to, and qualified in their entirely, by the provisions of our Restated Certificate of Incorporation and Amended and Restated Bylaws, which are incorporated by reference into this registration statement of which this prospectus is a part. 14 16 COMMON STOCK Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available for the payment of dividends at the times and in the amounts that the board of directors may determine from time to time. Except as disclosed below under the caption "Preferred Stock," each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in our restated certificate, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election (other than directors to be elected solely by the holders of the series of preferred stock). The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon a liquidation, dissolution or winding-up of Metricom, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding preferred stock and payment of other claims of creditors. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be validly issued, fully paid and nonassessable. The transfer agent and registrar for our common stock is Boston Equiserve. PREFERRED STOCK Our Restated Certificate authorizes 80 million shares of preferred stock, of which 36 million shares are designated Series A1 preferred stock, 36 million shares are designated Series A2 preferred stock and 8 million shares are not currently designated. The material terms of the Series A1 and Series A2 preferred stock are summarized below. Our board of directors has the authority to issue the remaining undesignated shares of preferred stock in additional series and to fix the rights, preferences, privileges and restrictions of any new series, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by our stockholders, subject to rights of the holders of outstanding preferred stock. The preferred stock may have the effect of delaying, deferring or preventing a change in our control without further action by our stockholders and may adversely affect the voting and other rights of the holders of our common stock, including the loss of voting control of others. SERIES A1 AND A2 PREFERRED STOCK Dividends. The holders of shares of each of the Series A1 preferred and Series A2 preferred have the right to receive cumulative dividends payable, at our option, in cash or additional shares of Series A1 preferred or Series A2 preferred, as the case may be, at the annual rate of 6.5% of the original issue price of $10 per share, until November 15, 2002. Dividends payable to the holders of Series A1 preferred stock will be prior and in preference to any dividends payable to the holders of common stock. Voting Rights. For so long as more than 7.5 million shares of each of the Series A1 preferred and Series A2 preferred are outstanding, the affirmative vote of the holders of at least a majority of the outstanding shares of each of the Series A1 and Series A2 preferred will be required to: - amend any provision of our restated certificate that changes the rights and preferences of that series so as to adversely affect the rights of the Series A1 preferred or Series A2 preferred, as the case may be, in a manner different from other classes or series of stock; - issue any new class or series of stock ranking senior in liquidation preference or dividends to the Series A1 preferred or Series A2 preferred, as the case may be; - issue any debt securities convertible into our equity securities at a price lower than $10 per share, subject to adjustment for any stock dividend, split, combination or other similar event; - redeem or repurchase, under specified circumstances, any series of stock junior to the Series A1 preferred or Series A2 preferred, as the case may be; or - declare or pay any dividend on outstanding common stock, subject to specified exceptions. 15 17 In addition, for so long as more than 7.5 million shares of either of the Series A1 preferred or Series A2 preferred are outstanding, the holders of shares of those series of preferred stock, voting as separate classes, will be entitled to elect one member of our board of directors to represent each series. Holders of outstanding shares of Series A1 preferred may waive this right from time to time and instead designate an observer to attend meetings of the board of directors. Liquidation Rights. If we are liquidated, dissolved or wound up, the holders of Series A1 preferred and holders of Series A2 preferred will be entitled to be paid out of our assets, before any distribution to the holders of common stock, an amount equal to the greater of the original issue price plus accrued but unpaid dividends or the amount the holders would have received if the shares had been converted to common stock. For this purpose, "liquidation" includes: - a consolidation, merger or other reorganization in which our stockholders prior to the transaction own less than 50% of our voting power after such transaction or other transaction or series of transactions to which we are a party in which over 50% of our voting power is transferred; or - a sale, lease or other disposition of all or substantially all of our assets. Redemption. On November 15, 2009, we must redeem all outstanding shares of Series A1 and Series A2 preferred. In the event of a change of control or major acquisition by us, each holder of Series A1 and Series A2 preferred will have the right to require us to redeem all, but not less than all, of the shares of preferred stock held by that holder. For purposes of this provision, a "change of control" means an event by which any person or group, other than Vulcan, MCI WorldCom and their respective affiliates: - becomes a beneficial owner of more than 30% of our outstanding equity securities, or - acquires the right to elect at least 30% of the board of directors. For purposes of this provision, a "major acquisition" means the acquisition by us of more than 50% of the outstanding equity securities or all or substantially all of the assets of any entity, or our merger with another entity in which we are the surviving entity, in each case, for equity consideration exceeding 25% of our outstanding equity securities. Conversion. Holders of each of the Series A1 and Series A2 preferred have the right to convert their shares into common stock, subject to the limitation that Series A1 preferred shares do not begin to become convertible until May 2002. Each share of Series A1 and Series A2 preferred is initially convertible into one share of common stock. The conversion rates and prices for each of the Series A1 and Series A2 preferred will be adjusted in the event of any stock split or combination, dividend payment or distribution on the common stock, reclassification or other change to the common stock, or reorganization, merger or sale of assets. Each of the Series A1 and Series A2 preferred will automatically be converted into shares of common stock in the event that shares of either series are transferred by the original purchaser to a person other than Vulcan, MCI WorldCom or their respective affiliates. PLAN OF DISTRIBUTION We may sell the securities being offered by this prospectus through agents, underwriters or dealers. Agents designated by us from time to time may solicit offers to purchase the securities offered by this prospectus. Any agent involved in the offer or sale of those securities may be deemed to be an underwriter under the Securities Act and we will name that agent and describe any commissions payable by us to that agent in a prospectus supplement. Any agent appointed by us will be acting on a reasonable efforts basis for the period of its appointment or, if indicated in the applicable prospectus supplement, on a firm commitment basis. We may be obligated under agreements with these agents to indemnify them against civil liabilities, including liabilities under the Securities Act. These agents may also engage in transactions with or perform services for us in the ordinary course of business. 16 18 If we utilize any underwriters in any sale of the securities in respect of which this prospectus is delivered, we will enter into an underwriting agreement with those underwriters at the time of sale to them and the names of the underwriters and the terms of the transaction will be set forth in the prospectus supplement. That prospectus supplement will be used by the underwriters to make resales of the securities in respect of which this prospectus is delivered to the public. We may be obligated under the underwriting agreements with these underwriters to indemnify them against civil liabilities, including liabilities under the Securities Act. These underwriters may also engage in transactions with or perform services for us in the ordinary course of business. If we utilize a dealer in any sale of the securities in respect of which the prospectus is delivered, we will sell the securities to the dealer, as principal. The dealer may then resell those securities to the public at varying prices to be determined by the dealer at the time of resale. We may be obligated under agreements with these dealers to indemnify them against civil liabilities, including liabilities under the Securities Act. These dealers may also engage in transactions with or perform services for us in the ordinary course of business. If so indicated in the applicable prospectus supplement, we will authorize agents, underwriters or dealers to solicit offers from purchasers to purchase the securities from us at the public offering price set forth in the prospectus supplement under delayed delivery contracts providing for payment and delivery of those securities on a specified date in the future. These delayed delivery contracts will be subject to only those conditions set forth in the prospectus supplement, and we will set forth the commission payable for solicitation of these offers in the prospectus supplement. LEGAL MATTERS Cooley Godward LLP, San Francisco, California will provide us with an opinion as to the legality of the securities we are offering. Weil, Gotshal & Manges LLP, New York, New York, will serve as counsel to underwriters, dealers or agents purchasing any of the securities we are offering by this prospectus. EXPERTS The audited financial statements incorporated by reference in this prospectus and the schedule included elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. WHERE YOU CAN GET MORE INFORMATION We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with the SEC a registration statement on Form S-3 under the Securities Act with respect to the shares of common stock and debt securities we are offering under this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information with respect to us and the securities we are offering under this prospectus, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. You may read and copy the registration statement, as well as our reports, proxy statements and other information at the SEC's public reference rooms at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661 and at Seven World Trade Center, New York, New York 10048. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC's web site at "http://www.sec.gov." In addition, you can read and copy our SEC filings at the office of the National Association of Securities Dealers, Inc at 1735 K Street, N.W., Washington, D.C. 20006. 17 19 The SEC allows us to "incorporate by reference" information that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. This prospectus and the information that we file later with the SEC may update and supersede the information incorporated by reference. We incorporate by reference the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the termination of the offering of all securities to which this prospectus relates: - Annual Report on Form 10-K for the year ended December 31, 1998, as amended; - Quarterly Report on Form 10-Q for the quarter ended March 31, 1999; - Quarterly Report on Form 10-Q for the quarter ended June 30, 1999; - Quarterly Report on Form 10-Q for the quarter ended September 30, 1999; - Current Reports on Form 8-K filed with the SEC on July 9, 1999 and November 5, 1999; and - The description of our common stock contained in our registration statement on Form 8-A filed with the SEC on February 28, 1992. You may request of copy of these filings at no cost, by writing or telephoning us at the following address: Corporate Secretary Metricom, Inc. 980 University Avenue Los Gatos, California 94030 (408) 399-8200 18 20 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the offering of the Securities being registered. All the amounts shown are estimates, except for the registration fee. SEC Registration Fee....................................... $333,600 *Accounting fees and expenses............................... *Legal fees and expenses.................................... *Miscellaneous.............................................. -------- *Total................................................. $ ========
- --------------- * To be provided by amendment. Metricom will pay all fees and expenses associated with filing this registration statement. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Section 145 of the Delaware General Corporation Law, or the DGCL, authorizes a court to award or a corporation's board of directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act. Our Restated Certificate of Incorporation and Restated Bylaws provide for mandatory indemnification of our directors and permissive indemnification of officers, employees and other agents to the maximum extent permitted by the DGCL. We have entered into indemnification agreements with our directors. The indemnification agreements provide the registrant's directors with further indemnification to the maximum extent permitted by the DGCL. We also have obtained directors and officers insurance to insure our directors and officers against certain liabilities, including liabilities under the securities laws. The form of underwriting agreement filed as Exhibit 1.1 to the registration statement provides for indemnification by the underwriters of the registrant and its officers and directors for certain liabilities under the Securities Act or otherwise. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 1.1 Form of Underwriting Agreement.* 4.1 Restated Certificate of Incorporation. 4.2 Form of Senior Debt Indenture to be entered into between Metricom and a trustee to be named.* 4.3 Form of Subordinated Debt Indenture to be entered between Metricom and a trustee to be named.* 5.1 Opinion of Cooley Godward llp.* 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).*
II-1 21
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 24.1 Power of Attorney (included on signature page). 25.1 Statement of Eligibility and Qualification on Form T-1 of trustee to act as trustee under indenture.*
- --------------- * To be filed by amendment or as an exhibit to a report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. ITEM 17. UNDERTAKINGS The undersigned registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item 15 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. The undersigned registrant further undertakes that: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; II-2 22 provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Forms S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post -- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Gatos, State of California, on November 19, 1999. Metricom, Inc. By: /s/ TIMOTHY A. DREISBACH ------------------------------------ Timothy A. Dreisbach President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy A. Dreisbach, Dale W. Marquart and James E. Wall, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments and registration statements filed pursuant to Rule 462 to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ TIMOTHY A. DREISBACH President and Chief November 19, 1999 - --------------------------------------------------- Executive Officer (Principal Timothy A. Dreisbach Executive Officer) and Director /s/ JAMES E. WALL Chief Financial Officer November 19, 1999 - --------------------------------------------------- (Principal Financial and James E. Wall Accounting Officer) /s/ ROBERT S. CLINE Director November 19, 1999 - --------------------------------------------------- Robert S. Cline /s/ RALPH DERRICKSON Director November 18, 1999 - --------------------------------------------------- Ralph Derrickson /s/ ROBERT P. DILWORTH Director November 19, 1999 - --------------------------------------------------- Robert P. Dilworth /s/ JUSTIN L. JASCHKE Director November 19, 1999 - --------------------------------------------------- Justin L. Jaschke /s/ DAVID MOORE Director November 18, 1999 - --------------------------------------------------- David Moore /s/ WILLIAM D. SAVOY Director November 19, 1999 - --------------------------------------------------- William D. Savoy
II-4 24 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 1.1 Form of Underwriting Agreement.* 4.1 Restated Certificate of Incorporation. 4.2 Form of Senior Debt Indenture to be entered into between Metricom and a trustee to be named.* 4.3 Form of Subordinated Debt Indenture to be entered between Metricom and a trustee to be named.* 5.1 Opinion of Cooley Godward LLP.* 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).* 24.1 Power of Attorney (included on signature page). 25.1 Statement of Eligibility and Qualification on Form T-1 of trustee to act as trustee under indenture.*
- --------------- * To be filed by amendment or as an exhibit to a report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. EX-4.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 4.1 RESTATED CERTIFICATE OF INCORPORATION OF METRICOM, INC. Timothy A. Dreisbach and Dale W. Marquart hereby certify that: ONE: The original name of this corporation is Metricom (Delaware), Inc., and the date of filing the original Certificate of Incorporation of this corporation with the Secretary of State of the State of Delaware is October 24, 1991. TWO: They are the duly elected and acting President and Secretary, respectively, of Metricom, Inc., a Delaware corporation. THREE: The Certificate of Incorporation of this corporation is hereby amended and restated to read as follows: I. The name of the corporation is METRICOM, INC. (the "Corporation" or the "Company"). II. The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. III. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. IV. A. This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is two hundred thirty million (230,000,000) shares, one hundred fifty million (150,000,000) shares of which shall be Common Stock (the "Common Stock") and eighty million (80,000,000) shares of which shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par value of one tenth of one cent ($0.001) per share and the Common Stock shall have a par value of one tenth of one cent ($0.001) per share. B. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation (voting together on an as-if-converted basis). 1. 2 C. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within the limitations and restrictions stated in this Restated Certificate of Incorporation, to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and the number of shares constituting any such Series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series prior or subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. D. Thirty-six million (36,000,000) of the authorized shares of Preferred Stock are hereby designated "Series A1 Preferred Stock" (the "Series A1 Preferred") and thirty-six million (36,000,000) of the authorized shares of Preferred Stock are hereby designated "Series A2 Preferred" (the "Series A2 Preferred"). E. The rights, preferences, privileges, restrictions and other matters relating to the Series A1 Preferred are as follows: 1. DIVIDEND RIGHTS. a. The holders of record of shares of Series A1 Preferred shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative dividends payable, at the option of the Company, in cash or additional shares of Series A1 Preferred, at the annual rate per share of six and one-half percent (6.5%) of the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares). Dividends shall be payable annually, in arrears, on the 15th day of December in each year (each such date being referred to herein as a "Series A1 Preferred Dividend Payment Date"), commencing on the first Series A1 Preferred Dividend Payment Date which is at least fifteen (15) days after the date that the first share of Series A1 Preferred is issued. The rights of the holders of Series A1 Preferred to additional cumulative dividends under this paragraph (a) shall terminate on the third anniversary of the date that the first share of Series A1 Preferred was issued (the "Series A1 Preferred Dividend Termination Date"). The "Original Issue Price" of the Series A1 Preferred shall be ten dollars ($10.00). Dividends payable to the holders of the Series A1 Preferred shall be payable prior and in preference to any dividends to the holders of Series A2 Preferred and Common Stock. b. Dividends payable pursuant to paragraph (a) of this Section 1 shall begin to accrue on each share of Series A1 Preferred on a daily basis and shall be cumulative from the date that the first share of Series A1 Preferred is issued (the "Series A1 Preferred Original Issue Date"), whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve (12) 30-day months and a 360-day year. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A1 Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares of the Series A1 Preferred at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of 2. 3 Series A1 Preferred entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days prior to the date fixed for the payment thereof. c. Unless accrued dividends payable pursuant to paragraph (a) on all outstanding shares of Series A1 Preferred shall have been fully paid for all past dividend periods and the full dividends thereon payable pursuant to paragraph (a) for the dividend period current at the time shall have been paid or declared and funds set apart therefor, no dividend shall be paid upon or declared or set apart for the Series A2 Preferred or (except a dividend payable in Common Stock) for the Common Stock (collectively, the "Junior Stock"). d. Following the Series A1 Preferred Dividend Termination Date, dividends shall be payable on the Series A1 Preferred only when, as and if declared by the Board of Directors. Except as otherwise set forth in this Section 1, holders of Series A1 Preferred shall not be entitled to receive any dividends, whether in cash or property. 2. VOTING RIGHTS. a. GENERAL RIGHTS. The Series A1 Preferred shall not have any voting rights, except as otherwise provided herein or as required by law. b. SEPARATE VOTES OF SERIES A1 PREFERRED. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A1 Preferred (subject to adjustment for any stock dividend, split, combination or other similar event with respect to such shares) remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series A1 Preferred shall be necessary for effecting or validating the following actions: (i) Any amendment, alteration, or repeal of any provision of the Restated Certificate of Incorporation of the Company (including any filing of a Certificate of Designation), that alters or changes the voting powers, preferences, or other special rights or privileges, or restrictions of the Series A1 Preferred so as to affect the Series A1 Preferred adversely in a manner different from other classes or series of stock; (ii) Any issuance of any new class or series of stock or any other equity securities of the Company, in each case ranking senior to the Series A1 Preferred in right of liquidation preference or dividends or any issuance of debt securities of the Company convertible into equity securities of the Company at a conversion price below the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares); (iii) Any redemption or repurchase of Junior Stock, except for (A) acquisitions of Junior Stock (not to exceed one percent (1%) per year of the total of the then-outstanding Common Stock of the Company, determined on a fully diluted basis) by the Company at cost (plus an interest factor not to exceed ten percent (10%) per annum if applicable), pursuant to compensatory plans or agreements which permit the Company to 3. 4 repurchase such shares upon termination of services to the Company or (B) redemptions of the Series A2 Preferred pursuant to the terms of Section F.5. hereof; or (iv) Any declaration or payment of any dividend on outstanding Common Stock, unless funds legally available therefor are at least equal to the net operating income of the Company reported in its audited financial statements for its most recent fiscal year plus net operating income of the Company reported in its unaudited financial statements for any subsequent interim periods. c. ELECTION OF BOARD OF DIRECTORS. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A1 Preferred remain outstanding (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares) the holders of Series A1 Preferred, voting as a separate class, shall be entitled to elect one (1) member of the Company's Board of Directors and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director; provided, however, that the holders of the outstanding shares of Series A1 Preferred may waive such right from time to time and instead may designate an observer who shall have the right to receive reasonable notice of and to attend all meetings of the Company's Board of Directors and the Committees thereof, other than any committee or other meeting of the Independent Directors (as defined in Section V.A. hereof) or any meeting at which the Board or any Committee thereof may discuss or consider any matter for which attendance of such observer would not be in the best interests of the stockholders of the Company as determined by the Company's Chief Executive Officer. 3. LIQUIDATION RIGHTS. a. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of Series A1 Preferred shall be entitled to be paid out of the assets of the Company an amount per share of Series A1 Preferred equal to the greater of (i) the Series A1 Preferred Original Issue Price, plus all accrued but unpaid dividends on the Series A1 Preferred (as adjusted for any stock dividend, split, combination, or other similar event with respect to such shares) or (ii) the amount such holder would have received if such share had been converted to Common Stock pursuant to Section 4 hereof, for each share of Series A1 Preferred held by such holders. If, upon any such liquidation, distribution or winding up, the assets of the Company shall be insufficient to make payment in full to all holders of Series A1 Preferred of the liquidation preference set forth in this Section 3(a), then such assets shall be distributed among the holders of Series A1 Preferred at the time outstanding, ratably in proportion to the full amounts to which each such holder would otherwise be entitled. b. After the payment of the full liquidation preference of the Series A1 Preferred as set forth in Section 3(a) above, the remaining assets of the Company legally available for distribution, if any, shall be distributed to the holders of Junior Stock in accordance with this Restated Certificate of Incorporation. c. The following events shall be considered a liquidation under this Section: 4. 5 (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) (on an as-converted basis, assuming conversion of all outstanding shares of Series A1 and Series A2 Preferred) of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) (on an as-converted basis, assuming conversion of all outstanding shares of Series A1 and Series A2 Preferred) of the Company's voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company (an "Acquisition"); or (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company (an "Asset Transfer"). (iii) In any of such events, if the consideration received by the Company is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows: (a) Securities not subject to investment letter or other similar restrictions on free marketability covered by paragraph (b) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such quotation system over the 30-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors. (b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in paragraphs (a)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined by the Board of Directors. 4. CONVERSION. The Series A1 Preferred shall be subject to the following provisions with respect to the conversion of the Series A1 Preferred into shares of Common Stock: a. VOLUNTARY CONVERSION. Subject to and in compliance with the provisions of this Section 4, any shares of Series A1 Preferred may, at any time, at the option of the holder, be converted into fully paid and nonassessable shares of Common Stock, subject to 5. 6 the following limitations: no shares of Series A1 Preferred shall be convertible prior to the second anniversary of the Series A1 Preferred Original Issue Date. Commencing on the date that is six (6) months following such second anniversary, twenty-five percent (25%) of the shares of Series A1 Preferred issued on the Series A1 Preferred Original Issue Date shall become convertible into Common Stock and, on each 6-month anniversary thereafter, an additional twenty-five percent (25%) shall become convertible into Common Stock, until all such shares shall have become convertible into Common Stock. Such right to convert shall be allocated among the holders of Series A1 Preferred ratably in accordance with their holdings of Series A1 Preferred. Notwithstanding the above, the foregoing limitations shall terminate and be of no further force or effect and all shares of the Series A1 Preferred shall become immediately convertible at the option of the holder immediately prior to the occurrence of a Change in Control of the Company or a Major Acquisition by the Company (as defined elsewhere in this Section 4). The number of shares of Common Stock to which a holder of Series A1 Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "Series A1 Preferred Conversion Rate" then in effect (determined as provided in Section 4(b)) by the number of shares of Series A1 Preferred being converted. b. SERIES A1 PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A1 Preferred (the "Series A1 Preferred Conversion Rate") shall be the quotient obtained by dividing the Original Issue Price of the Series A1 Preferred by the "Series A1 Preferred Conversion Price," calculated as provided in Section 4(c). c. SERIES A1 PREFERRED CONVERSION PRICE. The conversion price for the Series A1 Preferred shall initially be the Original Issue Price of the Series A1 Preferred (the "Series A1 Preferred Conversion Price"). Such initial Series A1 Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 4. All references to the Series A1 Preferred Conversion Price herein shall mean the Series A1 Preferred Conversion Price as so adjusted. d. MECHANICS OF CONVERSION. Each holder of Series A1 Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 4 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A1 Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A1 Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) any accrued but unpaid dividends on the shares of Series A1 Preferred being converted and (ii) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A1 Preferred in cash (at the Common Stock's fair market value determined by the Board of Directors as of the date of conversion). Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A1 Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. 6. 7 e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at any time or from time to time after the Series A1 Preferred Original Issue Date effect a subdivision of the outstanding Common Stock without a corresponding subdivision of the Preferred Stock, the Series A1 Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Preferred Stock, the Series A1 Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series A1 Preferred Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series A1 Preferred Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A1 Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A1 Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the actual payment of such dividend or distribution. g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of the Series A1 Preferred is changed into the same or a different number of shares of any class or classes of stock or other securities or property, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 4), in any such event each holder of Series A1 Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A1 Preferred could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time after the Series A1 Preferred Original Issue Date, there is a 7. 8 capital reorganization of the Common Stock or a merger or consolidation of the Company with or into, or a sale of all or substantially all of the Company's assets to, another person, corporation or other entity (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4), as a part of such capital reorganization, merger, consolidation or sale of assets, provision shall be made so that the holders of the Series A1 Preferred shall thereafter be entitled to receive upon conversion of the Series A1 Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series A1 Preferred after the capital reorganization to the end that the provisions of this Section 4 (including adjustment of the Series A1 Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A1 Preferred) shall be applicable after that event and be as nearly equivalent as practicable. i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A1 Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A1 Preferred, if the Series A1 Preferred is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A1 Preferred at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the Series A1 Preferred Conversion Price at the time in effect, and (ii) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A1 Preferred. j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A1 Preferred at least ten (10) days prior to the earlier of the record date specified therein or the date on which any such action is to become effective (or such shorter period approved by a majority of the outstanding Series A1 Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or 8. 9 other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. k. AUTOMATIC CONVERSION. (i) Subject to Section 4(a), each share of Series A1 Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A1 Preferred Conversion Price, immediately upon the transfer of such share by the original purchaser of such share from the Company to a transferee that is not a Purchaser or an Affiliate of a Purchaser (as such terms are defined in the Preferred Stock Purchase Agreement, dated as of June 20, 1999, between the Company and the Purchasers named therein). Upon such automatic conversion, any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). (ii) Subject to Section 4(a), upon the occurrence of the event specified in Section 4(k)(i) above, the applicable shares of Series A1 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A1 Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A1 Preferred, the holders of Series A1 Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A1 Preferred. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A1 Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A1 Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A1 Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock's fair market value (as determined by the Board of Directors) on the date of conversion. m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company 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 A1 Preferred, 9. 10 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 A1 Preferred. 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 A1 Preferred, the Company 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 purpose. n. NOTICES. Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. o. PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A1 Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A1 Preferred so converted were registered. p. NO DILUTION OR IMPAIRMENT. Without the consent of the holders of then outstanding Series A1 Preferred as required under Section 2(b), the Company shall not amend its Restated Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series A1 Preferred against dilution or other impairment. 5. REDEMPTION. a. The Company shall redeem, from any funds legally available therefor, all of the outstanding shares of Series A1 Preferred on the date that is the tenth anniversary of the Series A1 Preferred Original Issue Date (the "Series A1 Preferred Redemption Date"). The Company shall effect such redemption on the Series A1 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A1 Preferred to be redeemed, a sum equal to the Original Issue Price per share of Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Series A1 Preferred Redemption Price"). b. Within a reasonable time following a "Change in Control" of the Company or a "Major Acquisition" by the Company, the Company shall provide written notice 10. 11 (the "A1 Offer Notice"), by first class mail, postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of Series A1 Preferred offering to redeem such shares at the option of the holder thereof and specifying a date not less than twenty (20) nor more than forty (40) days following the date of such notice on which the shares of Series A1 Preferred shall be redeemed (the "Optional Series A1 Preferred Redemption Date"). Each holder of Series A1 Preferred shall thereafter have the right to require the Company to redeem all, but not less than all, of the shares of Series A1 Preferred then held by such holder. A holder may exercise its right to require redemption of the Series A1 Preferred held by it by notifying the Company in writing, within ten (10) days following the date of the A1 Offer Notice by the Company, of its intent to exercise its right. The Company shall redeem, on the Optional Series A1 Preferred Redemption Date, all the shares of Series A1 Preferred of holders who have timely elected to participate in the redemption. The Company shall effect such redemption on the Optional Series A1 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A1 Preferred to be redeemed, a sum per share equal to one hundred and one percent (101%) of the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Optional Series A1 Preferred Redemption Price"). For the purposes hereof, a "Change of Control" of the Company shall mean an event or series of related events as a result of which any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")), other than Vulcan Ventures Incorporated, MCI WorldCom, Inc. and their respective affiliates, (i) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than thirty percent (30%) of the outstanding equity securities of the Company (determined on a fully diluted basis) or (ii) acquires the right to elect at least thirty percent (30%) of the Board of Directors of the Company. For the purposes hereof, a "Major Acquisition" by the Company shall mean the acquisition by the Company of more than fifty percent (50%) of the outstanding equity securities or all or substantially all of the assets of any corporation or other entity or the merger of the Company with another entity in which the Company is the surviving entity, in each case, in consideration of the issuance of equity securities of the Company which exceed, in the aggregate, twenty-five percent (25%) of the outstanding equity securities of the Company, determined on a fully diluted basis; provided, however, that a Major Acquisition shall not include any acquisition of equity securities or assets of any entity of which the Company owned, at the Series A1 Preferred Original Issue Date, at least fifty percent (50%) of its outstanding equity securities or assets. c. As used herein and in Sections 5(d) and 5(e) below, the term "A1 Redemption Date" shall refer to each of "Series A1 Preferred Redemption Date" and the "Optional Series A1 Preferred Redemption Date," and the term "A1 Redemption Price" shall refer to each of "Series A1 Preferred Redemption Price" and the "Optional Series A1 Preferred Redemption Price." At least twenty (20) but no more than forth (40) days prior to each Series A1 Preferred Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A1 Preferred to be redeemed, at the address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the A1 Redemption 11. 12 Date, the A1 Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, his certificate or certificates representing the shares to be redeemed (the "A1 Redemption Notice"). Except as provided in Section 5(d), on or after the A1 Redemption Date, each holder of Series A1 Preferred to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the A1 Redemption Notice or A1 Offer Notice, and thereupon the A1 Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. d. From and after the A1 Redemption Date, unless there shall have been a default in payment of the A1 Redemption Price, all rights of the holders of shares of Series A1 Preferred designated for redemption in the A1 Redemption Notice as holders of Series A1 Preferred (except the right to receive the A1 Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever. If the funds of the Company legally available for redemption of shares of Series A1 Preferred on any A1 Redemption Date are insufficient to redeem the total number of shares of Series A1 Preferred to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series A1 Preferred. The shares of Series A1 Preferred not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. If any of the A1 Redemption Price shall remain unpaid on the A1 Redemption Date, interest shall accrue on such unpaid amounts at the rate of eighteen percent (18%) per annum or, if lower, at the highest rate permitted by law. At any time thereafter when additional funds of the Company are legally available for the redemption of shares of Series A1 Preferred, such funds will immediately be used to redeem the balance of the shares which the Company has become obliged to redeem on any A1 Redemption Date, but which it has not redeemed, and to pay any interest thereon. No payment of the A2 Redemption Price or any interest thereon shall be made so long as any of the A1 Redemption Price or any interest thereon shall remain unpaid. e. On or prior to each A1 Redemption Date, the Company shall deposit the A1 Redemption Price of all shares of Series A1 Preferred designated for redemption in the A1 Redemption Notice and not yet redeemed with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the A1 Redemption Price for such shares to their respective holders on or after the A1 Redemption Date upon receipt of notification from the Company that such holder has surrendered his share certificate to the Company pursuant to Section 5(d) above. As of the A1 Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the A1 Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares 12. 13 and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the A1 Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any funds deposited by the Company pursuant to this Section 5(e) for the redemption of shares thereafter converted into shares of the Company's Common Stock pursuant to Section 4 hereof prior to the A1 Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any funds deposited by the Company pursuant to this Section 5(e) remaining unclaimed at the expiration of two (2) years following the A1 Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its Board of Directors. 6. NO REISSUANCE OF SERIES A1 PREFERRED. No share or shares of Series A1 Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued, and the Board of Directors is authorized pursuant to Section 243 of the Delaware General Corporation Law to retire any such share or shares. The retirement of any such share or shares shall not reduce the total authorized number of shares of Preferred Stock. F. The rights, preferences, privileges, restrictions and other matters relating to the Series A2 Preferred are as follows: 1. DIVIDEND RIGHTS. a. The holders of record of shares of Series A2 Preferred shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative dividends payable, at the option of the Company, in cash or additional shares of Series A2 Preferred, at the annual rate per share of six and one-half percent (6.5%) of the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares). Dividends shall be payable annually, in arrears, on the 15th day of December in each year (each such date being referred to herein as a "Series A2 Preferred Dividend Payment Date"), commencing on the first Series A2 Preferred Dividend Payment Date which is at least fifteen (15) days after the date that the first share of Series A2 Preferred is issued. The rights of the holders of Series A2 Preferred to additional cumulative dividends under this paragraph (a) shall terminate on the third anniversary of the date that the first share of Series A2 Preferred was issued (the "Series A2 Preferred Termination Date"). The "Original Issue Price" of the Series A2 Preferred shall be ten dollars ($10.00). Dividends payable to the holders of the Series A1 Preferred shall be prior and in preference to any dividends payable to the holders of Series A2 Preferred, and dividends payable to the holders of Series A2 Preferred shall be prior and in preference to any dividends payable to the holders of Common Stock. b. Dividends payable pursuant to paragraph (a) of this Section 1 shall begin to accrue on each share of Series A2 Preferred on a daily basis and shall be cumulative from the date that the first share of Series A2 Preferred is issued (the "Series A2 Preferred Original Issue Date"), whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve (12) 30-day months and a 360-day year. Accrued but 13. 14 unpaid dividends shall not bear interest. Dividends paid on the shares of Series A2 Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares of the Series A2 Preferred at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A2 Preferred entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days prior to the date fixed for the payment thereof. c. Unless accrued dividends payable pursuant to paragraph (a) on all outstanding shares of Series A2 Preferred shall have been fully paid for all past dividend periods and the full dividends thereon for the dividend period current at the time shall have been paid or declared and funds set apart therefor, no dividend (except a dividend payable in Common Stock) shall be paid upon or declared or set apart for the Common Stock. d. Following the Series A2 Preferred Dividend Termination Date, dividends shall be payable on the Series A2 Preferred only when, as and if declared by the Board of Directors. Except as otherwise set forth in this Section 1, holders of Series A2 Preferred shall not be entitled to receive any dividends, whether in cash or property. 2. VOTING RIGHTS. a. GENERAL RIGHTS. The Series A2 Preferred shall not have any voting rights, except as otherwise provided herein or as required by law. b. SEPARATE VOTES OF SERIES A2 PREFERRED. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A2 Preferred (subject to adjustment for any stock dividend, split, combination or other similar event with respect to such shares) remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series A2 Preferred shall be necessary for effecting or validating the following actions: (i) Any amendment, alteration, or repeal of any provision of the Restated Certificate of Incorporation of the Company (including any filing of a Certificate of Designation), that alters or changes the voting powers, preferences, or other special rights or privileges, or restrictions of the Series A2 Preferred so as to affect the Series A2 Preferred adversely in a manner different from other classes or series of stock; (ii) Any issuance of any new class or series of stock or any other equity securities of the Company, in each case ranking senior to the Series A2 Preferred in right of liquidation preference or dividends or any issuance of debt securities convertible into the equity securities of the Company at a conversion price below the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares); (iii) Any redemption or repurchase of Common Stock, except for acquisitions of Common Stock (not to exceed one percent (1%) per year of the total of the then-outstanding Common Stock of the Company, determined on a fully diluted basis) by the 14. 15 Company at cost (plus an interest factor not to exceed ten percent (10%) per annum if applicable), pursuant to compensatory plans or agreements which permit the Company to repurchase such shares upon termination of services to the Company; or (iv) Any declaration or payment of any dividend on outstanding Common Stock, unless funds legally available therefor are at least equal to the net operating income of the Company reported in its audited financial statements for its most recent fiscal year plus net operating income of the Company reported in its unaudited financial statements for any subsequent interim periods. c. ELECTION OF BOARD OF DIRECTORS. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A2 Preferred remain outstanding (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares) the holders of Series A2 Preferred, voting as a separate class, shall be entitled to elect one (1) member of the Company's Board of Directors and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director. 3. LIQUIDATION RIGHTS. a. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Common Stock, the holders of Series A2 Preferred shall be entitled to be paid out of the assets of the Company an amount per share of Series A2 Preferred equal to the greater of (i) the Series A2 Preferred Original Issue Price, plus all accrued but unpaid dividends on the Series A2 Preferred (as adjusted for any stock dividend, split, combination, or other similar event with respect to such shares) or (ii) the amount such holder would have received if such share had been converted to Common Stock pursuant to Section 4 hereof, for each share of Series A2 Preferred held by such holders. If, upon any such liquidation, distribution or winding up, the assets of the Company shall be insufficient to make payment in full to all holders of Series A2 Preferred of the liquidation preference set forth in this Section 3(a), then such assets shall be distributed among the holders of Series A2 Preferred at the time outstanding, ratably in proportion to the full amounts to which each such holder would otherwise be entitled. b. After the payment of the full liquidation preference of the Series A2 Preferred as set forth in Section 3(a) above, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of Common Stock. c. The following events shall be considered a liquidation under this Section: (i) an Acquisition; or (ii) an Asset Transfer. 15. 16 (iii) In any of such events, if the consideration received by the Company is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows: (a) Securities not subject to investment letter or other similar restrictions on free marketability covered by paragraph (b) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such quotation system over the 30-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors. (b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in paragraphs (a)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined by the Board of Directors. 4. CONVERSION. The Series A2 Preferred shall be subject to the following provisions with respect to the conversion of the Series A2 Preferred into shares of Common Stock: a. VOLUNTARY CONVERSION. Subject to and in compliance with the provisions of this Section 4, any shares of Series A2 Preferred may, at any time, at the option of the holder, be converted into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series A2 Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "Series A2 Preferred Conversion Rate" then in effect (determined as provided in Section 4(b)) by the number of shares of Series A2 Preferred being converted. b. SERIES A2 PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A2 Preferred (the "Series A2 Preferred Conversion Rate") shall be the quotient obtained by dividing the Original Issue Price of the Series A2 Preferred by the "Series A2 Preferred Conversion Price," calculated as provided in Section 4(c). c. SERIES A2 PREFERRED CONVERSION PRICE. The conversion price for the Series A2 Preferred shall initially be the Original Issue Price of the Series A2 Preferred (the "Series A2 Preferred Conversion Price"). Such initial Series A2 Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 4. All references to the 16. 17 Series A2 Preferred Conversion Price herein shall mean the Series A2 Preferred Conversion Price as so adjusted. d. MECHANICS OF CONVERSION. Each holder of Series A2 Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 4 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A2 Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A2 Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) any accrued but unpaid dividends on the shares of Series A2 Preferred being converted and (ii) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A2 Preferred in cash (at the Common Stock's fair market value determined by the Board of Directors as of the date of conversion). Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A2 Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at any time or from time to time after the Series A2 Preferred Original Issue Date effect a subdivision of the outstanding Common Stock without a corresponding subdivision of the Preferred Stock, the Series A2 Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Preferred Stock, the Series A2 Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series A2 Preferred Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series A2 Preferred Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A2 Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date 17. 18 and thereafter the Series A2 Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the actual payment of such dividend or distribution. g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of the Series A2 Preferred is changed into the same or a different number of shares of any class or classes of stock or other securities or property, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 4), in any such event each holder of Series A2 Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A2 Preferred could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time after the Series A2 Preferred Original Issue Date, there is a capital reorganization of the Common Stock or a merger or consolidation of the Company with, or a sale of all or substantially all of the Company's assets to, another person, corporation or other entity (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4), as a part of such capital reorganization, merger, consolidation or sale of assets, provision shall be made so that the holders of the Series A2 Preferred shall thereafter be entitled to receive upon conversion of the Series A2 Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series A2 Preferred after the capital reorganization to the end that the provisions of this Section 4 (including adjustment of the Series A2 Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A2 Preferred) shall be applicable after that event and be as nearly equivalent as practicable. i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A2 Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A2 Preferred, if the Series A2 Preferred is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A2 Preferred at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a 18. 19 statement of (i) the Series A2 Preferred Conversion Price at the time in effect, and (ii) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A2 Preferred. j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A2 Preferred at least ten (10) days prior to the earlier of the record date specified therein or the date on which any such action is to become effective (or such shorter period approved by a majority of the outstanding Series A2 Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. k. AUTOMATIC CONVERSION. (i) Each share of Series A2 Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A2 Preferred Conversion Price, immediately upon the transfer of such share by the original purchaser of such share from the Company to a transferee that is not a Purchaser or an Affiliate of a Purchaser (as such terms are defined in the Preferred Stock Purchase Agreement, dated as of June 20, 1999, between the Company and the Purchasers named therein). Upon such automatic conversion, any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). (ii) Upon the occurrence of the event specified in Section 4(k)(i) above, the applicable shares of Series A2 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A2 Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A2 Preferred, the holders of Series A2 Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A2 Preferred. Thereupon, there shall be issued and delivered to such holder 19. 20 promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A2 Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A2 Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A2 Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock's fair market value (as determined by the Board of Directors) on the date of conversion. m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company 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 A2 Preferred, 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 A2 Preferred. 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 A2 Preferred, the Company 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 purpose. n. NOTICES. Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. o. PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A2 Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A2 Preferred so converted were registered. p. NO DILUTION OR IMPAIRMENT. Without the consent of the holders of then outstanding Series A2 Preferred as required under Section 2(b), the Company shall not amend its Restated Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take any other voluntary 20. 21 action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series A2 Preferred against dilution or other impairment. 5. REDEMPTION. a. The Company shall redeem, from any funds legally available therefor, all of the outstanding shares of Series A2 Preferred on the date that is the tenth anniversary of the Series A2 Preferred Original Issue Date (the "Series A2 Preferred Redemption Date"). The Company shall effect such redemption on the Series A2 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A2 Preferred to be redeemed, a sum equal to the Original Issue Price per share of Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Series A2 Preferred Redemption Price"). b. Within a reasonable time following a "Change in Control" of the Company or a "Major Acquisition" by the Company, the Company shall provide written notice (the "A2 Offer Notice"), by first class mail, postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of Series A2 Preferred offering to redeem such shares at the option of the holder thereof and specifying a date not less than twenty (20) nor more than forth (40) days following the date of such notice on which the shares of Series A2 Preferred shall be redeemed (the "Optional Series A2 Preferred Redemption Date"). Each holder of Series A2 Preferred shall thereafter have the right to require the Company to redeem all, but not less than all, of the shares of Series A2 Preferred then held by such holder. A holder may exercise its right to require redemption of the Series A2 Preferred held by it by notifying the Company in writing, within ten (10) days following the date of the A2 Offer Notice by the Company, of its intent to exercise its right. The Company shall redeem, on the Optional Series A2 Preferred Redemption Date, all the shares of Series A2 Preferred of holders who have timely elected to participate in the redemption. The Company shall effect such redemption on the Optional Series A2 Redemption Date by paying in cash, in exchange for the shares of Series A2 Preferred to be redeemed, a sum per share equal to one hundred and one percent (101%) of the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Optional Series A2 Preferred Redemption Price"). For the purposes hereof, a "Change of Control" of the Company shall mean an event or series of related events as a result of which any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")), other than Vulcan Ventures, Incorporated, MCI WorldCom, Inc. and their respective affiliates, (i) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than thirty percent (30%) of the outstanding equity securities of the Company (determined on a fully diluted basis) or (ii) acquires the right to elect at least thirty percent (30%) of the Board of Directors of the Company. For the purposes hereof, a "Major Acquisition" by the Company shall mean the acquisition by the Company of more than fifty percent (50%) of the outstanding equity securities 21. 22 or all or substantially all of the assets of any corporation or other entity or the merger of the Company with another entity in which the Company is the surviving entity, in each case, in consideration of the issuance of equity securities of the Company which exceed, in the aggregate, twenty-five percent (25%) of the outstanding equity securities of the Company, determined on a fully diluted basis; provided, however, that a Major Acquisition shall not include any acquisition of equity securities or assets of any entity of which the Company owned, at the Series A2 Preferred Original Issue Date, at least fifty percent (50%) of its outstanding equity securities or assets. c. As used herein and in Sections 5(d) and 5(e) below, the term "A2 Redemption Date" shall refer to each of "Series A2 Preferred Redemption Date" and the "Optional Series A2 Preferred Redemption Date," and the term "A2 Redemption Price" shall refer to each of "Series A2 Preferred Redemption Price" and the "Optional Series A2 Preferred Redemption Price." At least twenty (20) but no more than forty (40) days prior to each A2 Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A2 Preferred to be redeemed, at the address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the A2 Redemption Date, the A2 Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, his certificate or certificates representing the shares to be redeemed (the "A2 Redemption Notice"). Except as provided in Section 5(d), on or after the A2 Redemption Date, each holder of Series A2 Preferred to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the A2 Redemption Notice or A2 Offer Notice, and thereupon the A2 Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. d. From and after the A2 Redemption Date, unless there shall have been a default in payment of the A2 Redemption Price, all rights of the holders of shares of Series A2 Preferred designated for redemption in the A2 Redemption Notice as holders of Series A2 Preferred (except the right to receive the A2 Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever. If the funds of the Company legally available for redemption of shares of Series A2 Preferred on any A2 Redemption Date are insufficient to redeem the total number of shares of Series A2 Preferred to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series A2 Preferred. The shares of Series A2 Preferred not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. If any of the A2 Redemption Price shall remain unpaid on the A2 Redemption Date, interest shall accrue on such unpaid amounts at the rate of eighteen percent (18%) per annum or, if lower, at the highest rate permitted by law. 22. 23 At any time thereafter when additional funds of the Company are legally available for the redemption of shares of Series A2 Preferred, such funds will immediately be used to redeem the balance of the shares which the Company has become obliged to redeem on any A2 Redemption Date, but which it has not redeemed, and to pay any interest thereon. No payment of the A2 Redemption Price or any interest thereon shall be made so long as any of the A1 Redemption Price or any interest thereon shall remain unpaid. e. On or prior to each A2 Redemption Date, the Company shall deposit the A2 Redemption Price of all shares of Series A2 Preferred designated for redemption in the A2 Redemption Notice and not yet redeemed with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the A2 Redemption Price for such shares to their respective holders on or after the A2 Redemption Date upon receipt of notification from the Company that such holder has surrendered his share certificate to the Company pursuant to Section 5(d) above. As of the A2 Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the A2 Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the A2 Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any funds deposited by the Company pursuant to this Section 5(e) for the redemption of shares thereafter converted into shares of the Company's Common Stock pursuant to Section 4 hereof prior to the A2 Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any funds deposited by the Company pursuant to this Section 5(e) remaining unclaimed at the expiration of two (2) years following the A2 Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its Board of Directors. 6. NO REISSUANCE OF SERIES A2 PREFERRED. No share or shares of Series A2 Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued, and the Board of Directors is authorized pursuant to Section 243 of the Delaware General Corporation Law to retire any such share or shares. The retirement of any such share or shares shall not reduce the total authorized number of shares of Preferred Stock. V. For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that: A. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The number of directors which shall constitute the 23. 24 whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. The directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the closing of the Corporation's initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock of the corporation (the "Initial Public Offering"), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Article, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes shall be filled by either (i) the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of voting stock of the corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class; or (ii) by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. Notwithstanding the foregoing, in the event of any vacancy on the Board of Directors resulting from the resignation, death, disability, removal or disqualification of any director serving on the Board of Directors both prior to and immediately after the closing of the transactions contemplated by the Common Stock Purchase Agreement, dated October 10, 1997, between the Company and the purchaser named therein, or any successor thereto, or successor of such successor (an "Independent Director"), a committee of the Board of Directors consisting of the remaining Independent Directors shall, pursuant to Section 141(a) of the Delaware General Corporation Law, fill such vacancy by a majority vote of such directors. Any director so elected by such committee shall be an "Independent Director" for purposes of this paragraph. 24. 25 B. The Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock. In furtherance and not in limitation of the power conferred by statute, the Board of Directors is expressly authorized to adopt, amend, supplement or repeal the Bylaws. C. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. D. No action shall be taken by the stockholders of the Corporation except at an annual or special meeting of stockholders called in accordance with the Bylaws and no action shall be taken by the stockholders by written consent; provided, however, that notwithstanding anything to the contrary contained herein, the stockholders may act without a meeting, without prior notice and without a vote solely in the election of directors to fill vacancies on the Board of Directors (other than a vacancy resulting from the resignation, death, disability, removal or disqualification of any Independent Director). E. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation. F. Any director, or the entire Board of Directors, may be removed from office at any time (i) with cause by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class; or (ii) without cause by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock. VI. A. The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent under applicable law. B. The Corporation is authorized to provide indemnification of agents (as defined in Section 145 of the Delaware General Corporation Law) for breach of duty to the Corporation and its stockholders through bylaw provisions, through agreements with the agents, and/or through stockholder resolutions, or otherwise, in excess of the indemnification otherwise permitted by Section 145 of the Delaware General Corporation Law. C. Any repeal or modification of this Article VI shall be prospective only and shall not effect the rights under this Article VI in effect at the time of the alleged occurrence of any action or omission to act giving rise to liability or indemnification. VII. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this 25. 26 Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Article V, Article VII or Article X. VIII. The Corporation is to have perpetual existence. IX. The Corporation elects not to be governed by Section 203 of the Delaware General Corporation Law, as the same may be amended from time to time. This election shall be effective as of the earliest date permitted by law. X. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in Article VII of this Certificate, and all rights conferred upon the stockholders herein are granted subject to this right. * * * * FOUR: This Restated Certificate of Incorporation has been duly approved by the Board of Directors of this Corporation. FIVE: This Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the Board of Directors and the stockholders of the Corporation. 26. 27 IN WITNESS WHEREOF, METRICOM, INC. has caused this Restated Certificate of Incorporation to be signed by the President and the Secretary in Los Gatos, California this 18th day of October 1999. METRICOM, INC. By: /s/ TIMOTHY A. DREISBACH ------------------------------------ Timothy A. Dreisbach President ATTEST: By: /s/ DALE W. MARQUART ------------------------------------ Dale W. Marquart Secretary 27. EX-23.1 3 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated February 1, 1999 (except with respect to the matter discussed in Note 12, as to which the date is November 17, 1999) included in the Metricom, Inc.'s Form 10-K/A for the year ended December 31, 1998, and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP San Jose, California November 17, 1999 -----END PRIVACY-ENHANCED MESSAGE-----