Certificate of Incorporation - CMG Information Services Inc.
RESTATED
CERTIFICATE OF INCORPORATION
OF
CMG INFORMATION SERVICES, INC.
CMG INFORMATION SERVICES, INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the Delaware General Corporation Law, does
hereby certify that the Board of Directors of the Corporation, by a resolution
adopted at a meeting of the Board of Directors on November 8, 1993, and by a
written consent of the stockholders of the Corporation dated November 8,1993,
approved and adopted, pursuant to Section 242 of the Delaware General
Corporation Law, this Restated Certificate of Incorporation, which restates,
integrates and amends the Certificate of Incorporation of the Corporation in its
entirety pursuant to Section 245 of the Delaware General Corporation Law.
Written notice of the adoption of this Restated Certificate of Incorporation has
been given as provided by Section 228 of the General Corporation Law of the
State of Delaware to every stockholder entitled to such notice. The Certificate
of Incorporation of the Corporation was originally filed with the Secretary of
State of Delaware on May 5, 1986, under the name CMG Holdings, Inc. The full
text of the Restated Certificate of Incorporation is set forth below:
FIRST: The name of the Corporation is CMG Information Services, Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The aggregate number of shares of all classes of stock which the
Corporation is authorized to issue is fifteen million (15,000,000) shares of
which five million (5,000,000) shall be shares of Preferred Stock, par value
$.01 per share, (the "Preferred Stock") and ten million (10,000,000) shall be
shares of Common Stock, par value $.01 per share (the "Common Stock").
On the effective date of this Restated Certificate of Incorporation, each issued
share of the Corporation's Series A Convertible Preferred Stock, par value $1.00
per share, outstanding as of said effective date, shall without any action on
the part of the holders thereof, be reclassified and changed into one fully paid
and nonassessable share of the Corporation's Preferred Stock, par value $.01 per
share, subject to all powers, designations, preferences and relative,
participating, optional or other special rights of such Preferred Stock as set
forth in Section 3 hereof.
Any and all such shares issued for which the full consideration has been
paid or delivered, shall be deemed fully paid stock and the holder of such
shares shall not be liable for any further call or assessment or any other
payment thereon.
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No holder of any of the shares of any class of stock of the Corporation,
whether now or hereafter authorized or issued, shall be entitled as of right to
purchase or subscribe for (i) any unissued stock of any class whatsoever of
stock of the Corporation, or (ii) any new or additional share of any class
whatsoever of stock of the Corporation to be issued by reason of any increase of
the authorized stock of the Corporation, or of any class of such stock, or (iii)
bonds, certificates of indebtedness, debentures or other securities convertible
into stock of any class of the Corporation or carrying any right to purchase
stock of any class of the Corporation, but any such unissued stock, or
additionally authorized issue of any stock, or other securities convertible into
stock of the Corporation may be issued and disposed of pursuant to a resolution
or resolutions of the Board of Directors to such persons, firms, corporations,
associations or other entities and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its sole discretion.
SECTION 1. COMMON STOCK.
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The powers, preferences, rights, qualifications, limitations and
restrictions relating to the Common Stock are as follows:
(a) The Common Stock is junior to the Preferred Stock and is subject to all
the powers, rights, privileges, preferences and priorities of the Preferred
Stock designated herein or in any resolution or resolutions adopted by the Board
of Directors pursuant to authority expressly vested in it by the provisions of
Section 2 of this Article FOURTH.
(b) The Common Stock shall have voting rights for the election of directors
and for all other purposes (subject to the powers, rights, privileges,
preferences and priorities of the Preferred Stock as provided above), each
holder of Common Stock being entitled to one vote for each share thereof held by
such holder, except as otherwise required by law.
SECTION 2. PREFERRED STOCK.
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The Board of Directors is expressly authorized to provide for the issuance
of all or any part of the shares of the Preferred Stock in one or more classes
or series, and to fix for each such class or series such voting powers, full or
limited or fractional or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors in
its sole discretion providing for the issuance of such class or series and as
may be permitted by the Delaware General Corporation Law including, without
limitation, the authority to determine with respect to the shares of any such
class or series (i) whether such shares shall be redeemable, and, if so, the
terms and conditions of such redemption, whether for cash, property or rights,
including securities of any other corporation, and whether at the option of
either the Corporation or the holder or both, including the date or dates or the
event or events upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (ii) whether such shares shall be
entitled to receive dividends (which may be cumulative or noncumulative) at such
rates, on such conditions, and at such times, and payable in preference to, or
in such relation to, the dividends payable on any other class or classes or an
other series; (iii) the rights of such shares in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of such shares, (iv) whether
such shares shall be convertible into, or
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exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock whether at the option
of either the Corporation or the holder or both, and, if so, the terms and
conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors shall determine; (v)
whether the class or series shall have a sinking fund for the redemption or
purchase of such shares, and, if so, the terms and amount of such sinking fund,
or (vi) provisions as to any other voting, optional, and/or special or relative
rights, preferences, limitations, or restrictions; and (vii) the number of
shares and designation of such class or series.
SECTION 3. SERIES A CONVERTIBLE PREFERRED STOCK.
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CMG INFORMATION SERVICES, INC., a Delaware corporation (the "Corporation"
or the "Company"), pursuant to authority conferred on the Board of Directors of
the Corporation by the Certificate of Incorporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, certifies that the Board of Directors of the Corporation, by unanimous
consent dated May 5, 1986, has duly adopted the following resolution providing
for the establishment and issuance of a series of Preferred Stock to be
designated "Series A Convertible Preferred Stock" and to consist of 250 shares
as follows:
RESOLVED: that, pursuant to the authority expressly granted and vested in the
- -------- Board of Directors of this Corporation in accordance with the
provisions of its Certificate of Incorporation, a series of Preferred
Stock of the Corporation hereby is established, consisting of 250
shares, to be designated "Series A Convertible Preferred Stock"
(hereinafter "Series A Preferred Stock"); the Board of Directors be
and hereby is authorized to issue such shares of Series A Preferred
Stock from time to time and for such consideration and on such terms
as the Board of Directors shall determine, and subject to the
limitations provided by law and by the Certificate of Incorporation,
the powers, designations, preferences and relative, participating,
optional or other special rights of, and the qualifications,
limitations or restrictions upon, the Series A Preferred Stock shall
be as follows:
1. DESIGNATION. This series of Preferred Stock, $.01 par value per share,
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shall be designated the "Series A Convertible Preferred Stock" (hereinafter
"Series A Preferred Stock").
2. DIVIDENDS. When, as and if declared by the Board of Directors, the
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holders of the outstanding shares of Series A Preferred Stock shall be entitled
to receive out of funds legally available therefor dividends payable at the
discretion of the Board of Directors. Notwithstanding the foregoing, dividends
shall be declared and set aside for any shares of the Series A Preferred Stock
in the event that the Board of Directors of the Company shall declare a dividend
payable upon the then outstanding shares of the Common Stock, $.01 par value
(the "Common Stock"), of the Company in which event the holders of the Series A
Preferred Stock shall be entitled to the amount of dividends per share of Series
A Preferred Stock as would be declared payable on the largest number of whole
shares of Common Stock into which each share of Series A Preferred Stock held by
each holder thereof could be converted pursuant to the provisions of Section 5
hereof, such number determined as of the record date for the determination of
holders of Common Stock entitled to received such dividend.
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3. LIQUIDATION, DISSOLUTION OR WINDING UP.
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(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, holders of each share of Series A
Preferred Stock shall be entitled to be paid first out of the assets of the
Company available for distribution to holders of the Company's capital stock of
all classes, whether such assets are capital, surplus, or earnings, before any
sums shall be paid or any assets distributed among the holders of shares of
Common Stock, an amount equal to the greater of (i) $1,000 per share of Series A
Preferred Stock plus all accrued and unpaid dividends thereon, whether or not
earned or declared, up to and including the date full payment, shall be tendered
to the holders of the Series A Preferred Stock with respect to such liquidation,
dissolution or winding up, or (ii) such amount per share of Series A Preferred
Stock as would have been payable had each such share plus all accrued and unpaid
dividends thereon, whether or not earned or declared, up to and including the
date of full payment, been converted to Common Stock immediately prior to such
event of liquidation, dissolution or winding up pursuant to the provisions of
Section 5 hereof; before any sums shall be paid or any assets distributed among
the holders of the shares of Common Stock. If the assets of the Company shall
be insufficient to permit the payment in full to the holders of the Series A
Preferred Stock of the amount thus distributable, then the entire assets of the
Company available for such distribution shall be distributed ratably among the
holders of the Series A Preferred Stock. After such payment shall have been
made in full to the holders of the Series A Preferred Stock or funds necessary
for such payment shall have been set aside by the Company in trust for the
account of holders of the Series A Preferred Stock so as to be available for
such payment, holders of the Series A Preferred Stock shall be entitled to no
further participation in the distribution of the assets of the Company and shall
have no further rights of conversion, and the remaining assets available for
distribution shall be distributed ratably among the holders of the Common Stock.
(b) A consolidation or merger of the Company or a sale of all or
substantially all of the assets of the Company shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company within the
meaning of this Section 3; provided however, that each holder of Series A
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Preferred Stock shall have the right to elect the benefits of the provisions of
Section 5(h) hereof in lieu of receiving payment in liquidation, dissolution or
winding up of the Company pursuant to this Section 3. Each holder of Series A
Preferred Stock shall notify the Company in advance of its election to obtain
the benefits of this Section 3(b) or of Section 5(h), which notification shall
be given not later than a date specified in writing to each holder by the
Company to be three (3) days or fewer prior to the effective date of such
consolidation, merger or sale. If a holder fails to make any election, he shall
be deemed to have elected the benefits of this Section 3(b).
(c) Whenever the distribution provided for herein shall be paid in
property other than cash, the value of such distribution shall be the fair
market value of such property as determined in good faith by the Board of
Directors of the Company.
4. VOTING POWER. Except as otherwise expressly provided in Section 8
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hereof, or as required by law, each holder of Series A Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Series A Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof (taking into account all accrued and unpaid
dividends, if any, and interest with respect to such Series A Preferred Stock),
at the record date
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for the determination of shareholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited. Except as otherwise expressly provided
herein or as required by law, the holders of shares of Series A Preferred Stock
and Common Stock shall be entitled to vote together as a class on all matters.
5. CONVERSION RIGHTS. The holders of the Series A Preferred Stock shall
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have the following conversion rights:
(a) GENERAL.
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(i) Subject to and in compliance with the provisions of this
Section 5, any shares of the Series A Preferred Stock and, at the option of the
holder, all accrued and unpaid dividends thereon, whether or not earned or
declared, up to and including the date of conversion, may, at the option of the
holder, be converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 5(c)) by the number of shares of Series A Preferred Stock
being converted.
(ii) Notwithstanding the foregoing, the holders of Series A
Preferred Stock shall have the right to convert all or any portion of any
accrued but unpaid dividends hereunder into shares of Common Stock at any time
upon written notice to the Company. The number of shares of Common Stock
issuable upon any such conversion shall be the number of shares equal to the
amount of the accrued but unpaid dividends and interest being so converted
divided by the Applicable Conversion Value then in effect, determined in
accordance with Section 5 hereof. Upon receipt of any such notice, the Company
shall promptly issue a certificate in the name of the holder of Series A
Preferred Stock for the number of shares of Common Stock so issuable, together
with a check representing cash in lieu of any fractional share.
(b) CONVERSION FOLLOWING UNDERWRITTEN PUBLIC OFFERING.
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(i) All outstanding shares of Series A Preferred Stock and, at
the option of the holder, all accrued and unpaid dividends thereon, whether or
nor earned or declared, up to and including the date of conversion, shall, at
the option of the Company and upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offering and sale of Common Stock for the
account of the Company in which the Common Stock is sold at a price to the
public of not less than $3.85 per share as of the date of this Restated
Certificate of Incorporation (such amount to be equitably adjusted whenever
there shall occur a stock split, combination, reclassification or other similar
event affecting the Common Stock) and in which the aggregate gross proceeds to
the Company exceed $7,000,000, be converted automatically into the number of
shares of Common Stock to which a holder of Series A Preferred Stock shall be
entitled upon conversion pursuant to Section 5(a) hereof without any further
action by such holders and whether or not the certificates representing such
shares are surrendered to the Company or its transfer agent for the Common
Stock.
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(ii) Upon the occurrence of the conversion specified in Section
5(b)(i), the holders of such Series A Preferred Stock shall surrender the
certificates representing such shares at the office of the Company or of its
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to such holder a certificate or certificates for the number of shares
of Common Stock into which the shares of the Series A Preferred Stock
surrendered were convertible on the date on which such conversion occurred. The
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing such
shares of the Series A Preferred Stock being converted are either delivered to
the Company or any such transfer agent or the holder notifies the Company or any
such 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 therewith. In addition, the Company
may, if the Board of Directors deems it reasonably necessary, require the holder
to post a bond in connection with such indemnity agreement.
(c) APPLICABLE CONVERSION RATE. The conversion rate in effect at any
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time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing the sum of (i) $1,000 and (ii) at the election of the holder, an amount
equal to the amount of accrued and unpaid dividends per share of Series A
Preferred Stock, whether or not earned or declared, as well as all accrued and
unpaid interest thereon, by the Applicable Conversion Value, calculated as
provided in Section 5(d).
(d) APPLICABLE CONVERSION VALUE. The Applicable Conversion Value in
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effect from time to time, except as adjusted in accordance with Section 5(e)
hereof, shall be $0.389423 as of the date of this Restated Certificate of
Incorporation.
(e) ADJUSTMENTS TO APPLICABLE CONVERSION VALUE.
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(i) UPON SALES OF COMMON STOCK. If the Company shall while
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there are any shares of Series A Preferred Stock outstanding, issue or sell
shares of its Common Stock without consideration or at a price per share less
than the Applicable Conversion Value in effect immediately prior to such
issuance or sale, then in each such case such Applicable Conversion Value upon
each such issuance or sale, except as hereinafter provided, shall be adjusted to
an amount determined by multiplying the Applicable Conversion Value by a
fraction:
(A) the numerator of which shall be (a) the number of shares
of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock, plus (b) the number of
shares of Common Stock which the net aggregate consideration
received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at the
Applicable Conversion Value, and
(B) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock, plus (b) the
number of such additional shares of Common Stock so issued.
The Corporation's issuance of up to an aggregate of 569,933 shares of Common
Stock (as adjusted as of the date of this Restated Certificate of
Incorporation), or options exercisable therefor, pursuant to any stock purchase
or stock option plan or other employee incentive
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program approved by the Board of Directors to the corporation's employees,
directors, officers or consultants shall not be deemed an issuance of additional
shares of Common Stock and shall have no effect on the calculations contemplated
by this Section 5(e).
For the purposes of this Section 5(e), the issuance of any warrants, options,
subscriptions or purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options or any rights with respect to
such convertible or exchangeable securities) shall be deemed an issuance at such
time of such Common Stock if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Company for such Common Stock shall be
less than the Applicable Conversion Value at the time of such issuance. Any
obligation, agreement or understanding to issue warrants, options, subscriptions
or purchase rights at any time in the future shall be deemed to be an issuance
at any time such obligation, agreement or undertaking is made or arises. No
adjustment of the Applicable Conversion Value shall be made under this Section
5(e) upon the issuance of any shares of Common Stock which are issued pursuant
to the exercise of any warrants, options, subscriptions or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the issuance
of any such warrants, options or subscriptions or purchase rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value with respect to this paragraph which relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded if, as, and when all of such warrants,
options, subscriptions or purchase rights expire or are canceled without being
exercised, so that the Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Conversion
Value in effect at the time of the issuance of the expired or canceled warrants,
options, subscriptions or purchase rights, with such additional adjustments as
would have been made to that Applicable Conversion Value had the expired or
canceled warrants, options, subscriptions or purchase rights not been issued.
For purposes of this paragraph, the "Net Consideration Per Share" which may be
received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any, received by
the Company for the issuance of such warrants, options,
subscriptions or other purchase rights or convertible or
exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or
conversion thereof, divided by the aggregate number of shares of
Common Stock that would be issued if all such warrants, options,
subscriptions or other purchase rights or convertible or
exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received
by the Company shall be determined in each instance as of the
date of issuance of warrants, options, subscriptions or other
purchase rights or convertible or exchangeable securities without
giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
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For purposes of this Section 5(e), if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5(e)
consists of property other than cash, the Company at its expense will promptly
cause independent public accountants of recognized standing selected by the
Company to value such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with respect to
receipt of such property.
This Section 5(e) shall not apply under any of the circumstances which
would constitute an Extraordinary Common Stock Event (as hereinafter defined in
Section 5(e)(ii)).
(ii) Upon the happening of an Extraordinary Common Stock Event (as
hereinafter defined), the Applicable Conversion Value (and all other conversion
values set forth in paragraph (e)(i) above) shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the then effective Applicable Conversion Value by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such Extraordinary Common Stock Event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock event, and the product so obtained shall thereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of additional
shares of the Common Stock as a dividend or other distribution on outstanding
Common Stock, (ii) subdivision of outstanding shares of Common Stock into a
greater number of shares of the Common Stock, or (iii) combination of
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock.
(f) DIVIDENDS. In the event the Company shall make or issue, or fix a
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record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock or in assets (excluding cash dividends or
distributions), then and in each such event provisions shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Company which they would have
received had their Series A Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the daze
of such event to and including the Conversion Date (as that term is hereafter
defined in Section 5(j)), retained such securities or such other assets
receivable by them us aforesaid during such period, giving application to all
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Series A Preferred Stock.
(g) RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock
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issuable upon the conversion of the Series A Preferred Stock shall be changed
into the same or different number of shares of any class or classes of stock of
the Corporation, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each such
event the holder of each
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share of Series A Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such share of
Series A Preferred Stock might have been converted (taking into account all
accrued and unpaid dividends and interest with respect to such Series A
Preferred Stock) immediately prior to such reorganization, reclassification or
change, all subject to further adjustment as provided herein.
(h) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time
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or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties and assets to any other person, then, as a part
of such reorganization, merger, consolidation or sale, provision shall be made
so that the holders of the Series A Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Preferred Stock, the number of shares
of stock or other securities or property of the Company, or of the successor
corporation resulting from such merger, consolidation or sale, to which a holder
of Common Stock issuable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Series A
Preferred Stock after the reorganization, merger, consolidation or sale to the
end that the provisions of this Section 5 (including adjustment of the
Applicable Conversion Value then in effect and the number of shares purchasable
upon conversion of the Series A Preferred Stock) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
Each holder of Series A Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Company, or the sale of all or
substantially all its assets and properties as such events are more fully set
forth in the first paragraph of this Section 5(h), shall have the option of
electing treatment of his shares of Series A Preferred Stock under either this
Section 5(h) or Section 3(b) hereof, notice of which election shall be submitted
in writing to the Company at its principal offices no later than five (5) days
before the effective date of such event.
(i) ACCOUNTANT'S CERTIFICATE AS TO ADJUSTMENTS. In each case of an
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adjustment or readjustment of the Applicable Conversion Rate, the Company will
furnish each holder of Series A Preferred Stock with a certificate, prepared by
its chief financial officer showing such adjustment or readjustment, and stating
in detail the acts upon which such adjustment or readjustment is based. Upon
the request of any holder, the Company will cause its independent public
accountants to confirm the accuracy of such adjustment or readjustment.
(j) EXERCISE OF CONVERSION PRIVILEGE. To exercise his conversion
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privilege, a holder of Series A Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at that office
that such holder elects to convert such shares. Such notice shall also state
the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series A Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. The date when such written notice is
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received by the Company, together with the certificate or certificates
representing the shares of Series A Preferred Stock being converted, shall be
the "Conversion Date". As promptly as practicable after the Conversion Date, the
Company shall issue and shall deliver to the holder of the shares of Series A
Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Series A Preferred Stock in
accordance with the provisions of this Section 5, cash in the amount of all
accrued and unpaid dividends on such shares of Series A Preferred Stock, whether
or not earned or declared, up to and including the Conversion Date, and cash, as
provided in Section 5(k), in respect of any fraction of a share of Common Stock
issuable upon such conversion. Such conversion shall be deemed to have been
effected immediately prior to the close of business on the Conversion Dare, and
at such time the rights of the holder as holder of the converted shares of
Series A Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(k) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
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Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Company shall pay to the holder of the shares of
Series A Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the total number of shares of Series A Preferred Stock being
converted at any one time by any holder thereof; not upon each share of Series A
Preferred Stock being converted.
(l) PARTIAL CONVERSION. In the event some but not all of the shares
------------------
of Series A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Series A Preferred Stock which were not
converted.
(m) RESERVATION OF COMMON STOCK. 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 A Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock,
the Company shall take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
6. MANDATORY REDEMPTION.
--------------------
(a) Beginning on April 30, 1992 and on the 30th day of April in each
year thereafter (the "Redemption Date"), the Company shall redeem twenty-five
percent (25%) of all of the shares of Series A Preferred Stock outstanding on
May 7,1986 (or such later date as shall
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be the date of original issuance of the Series A Preferred Stock); provided,
however, that the Company's redemption obligation shall be reduced by the number
of shares of Series A Preferred Stock that have been converted prior to any such
Redemption Date, and such reduction shall apply first to the Redemption Date
immediately following such conversion and thereafter any balance shall apply to
any Subsequent Redemption Dates. The redemption price for each share of Series A
Preferred Stock redeemed pursuant to this Section 6 shall be $1,000 per share of
Series A Preferred Stock plus all accrued and unpaid dividends on such share,
whether or not earned or declared as well as all accrued and unpaid interest
thereon, up to and including the date fixed for redemption (the "Redemption
Price"). Each redemption of Series A Preferred Stock shall be made so that the
number of shares of Series A Preferred Stock held by each registered owner shall
be reduced in an amount which shall bear the same ratio to the total number of
shares of Series A Preferred Stock then held by such registered owner bears to
the aggregate number of shares of Series A Preferred Stock then outstanding.
(b) The Redemption Price set forth in this Section 6 shall be subject
to equitable adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series A Preferred Stock.
(c) At least 45 days before any Redemption Date pursuant to Section
6(a), written notice (hereinafter referred to as the "Redemption Notice") shall
be mailed, postage prepaid, to each holder of record of the Series A Preferred
Stock which is to be redeemed, at its address shown on the records of the
Company, provided, however, that the giving of such Redemption Notice shall not
affect the conversion rights of such holder pursuant to Section 5 hereof;
provided, further, that the Company's failure to give such Redemption Notice
shall in no way affect its obligation to redeem the shares of Series A Preferred
Stock as provided in Sections 6(a) or 6(b) hereof. The Redemption Notice shall
contain the following information:
(i) The number of shares of Series A Preferred Stock held by the
holder which shall be redeemed by the Company and the total number of shares of
Series A Preferred Stock held by all holders to be so redeemed,
(ii) The Redemption Date and the applicable Redemption Price, and
(iii) That the holder is to surrender to the Company, at the
place designated therein, its certificate or certificates representing the
shares of Series A Preferred Stock to be redeemed.
(d) Each holder of shares of Series A Preferred Stock to be redeemed
shall surrender the certificate or certificates representing such shares to the
Company at the place designated in the Redemption Notice, and thereupon the
applicable Redemption Price for such shares as set forth in this Section 6 shall
be paid to the order of the person whose name appears on such certificate or
certificates and each surrendered certificate shall be canceled and retired.
(e) If any shares of Series A Preferred Stock are not redeemed solely
because a holder fails to surrender the certificate or certificates representing
such shares pursuant to Section 6(e) hereof then, from and after the Redemption
Date, such shares of Series A Preferred Stock thereupon subject to redemption
shall not be entitled to any further accrual of any dividends pursuant to
Section 2 hereof or to the conversion provisions set forth in Section 5 hereof.
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<PAGE>
7. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of
-----------------------------------------
Series A Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Series A Preferred Stock accordingly.
8. RESTRICTIONS AND LIMITATIONS.
----------------------------
(a) Except as expressly provided herein or as required by law, so long
as any shares of the Series A Preferred Stock remain outstanding, the Company
shall not, and shall not permit any subsidiary (which shall mean any corporation
or trust of which the Company directly or indirectly owns at the time all of the
outstanding shares of every class of such corporation or trust other than
directors' qualifying shares) to, without the vote or written consent by the
holders of at least a majority of the then outstanding shares of the Series A
Preferred Stock, each share of Series A Preferred Stock to be entitled to one
vote in each instance:
(i) Redeem, purchase or otherwise acquire for value (or pay in)
to or set aside for a sinking fund for such purpose), any share or shares of
Series A Preferred Stock;
(ii) Authorize or issue, or obligate itself to authorize or
issue, any other equity security senior to or on a parity with the Series A
Preferred Stock as to liquidation preferences, conversion rights, voting rights
or otherwise; or
(iii) Effect any sale, lease, assignment, transfer or other
conveyance of all or substantially all of the assets of the Company or any
subsidiary thereof, or any consolidation or merger involving the Company or any
subsidiary thereof or any reclassification or other change of stock, or any
recapitalization or any dissolution, liquidation or winding up of the Company.
(b) The Company shall not amend its Certificate of Incorporation
without the approval by vote or written consent by the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock, each share
of Series A Preferred Stock to be entitled to one vote in each instance, if such
amendment would change any of the rights, preferences, privileges of or
limitations provided for herein for the benefit of any shares of Series A
Preferred Stock. Without limiting the generality of the next preceding
sentence, the Company will not amend its Certificate of Incorporation without
the approval by the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock if such amendment would:
(i) Change the relative seniority rights of the holders of
Series A Preferred Stock as to the payment of dividends in relation to the
holders of any other capital stock of the Company; or
(ii) Reduce the amount payable to the holders of Series A
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the relative seniority of the liquidation
preferences of the holders of Series A Preferred Stock to the rights upon
liquidation of the holders of any other capital stock of the Company or change
the dividend rights of the holders of Series A Preferred Stock; or
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<PAGE>
(iii) Cancel or modify the conversion rights of the holders of
Series A Preferred Stock provided for in Section 5 herein
9. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
-------------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Series A Preferred Stock set forth herein, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Series A Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(a) will not increase the par value of any shares of stock receivable on the
conversion of the Series A Preferred Stock above the amount payable therefor on
such conversion, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of stock on the conversion of all Series A Preferred
Stock from time to time outstanding, (c) will not issue any capital stock of any
class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding up of the
Company, unless the rights of the holders thereof shall be limited to a fixed
sum or percentage of par value in respect of participation in dividends and in
any such distribution of assets, and (d) will not transfer all or substantially
all of its properties and assets to any other person (corporate or otherwise),
or consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Series A Preferred Stock set forth herein.
10. NOTICES OF RECORD DATE. In the event of
----------------------
(a) 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 any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company; or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company,
then and in each such event the Company shall mail or cause to be mailed to each
holder of Series A Preferred Stock a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, (iii) the time, 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 reorganization, reclassification.,
recapitalization, transfer, consolidation, merger, dissolution,
13
<PAGE>
liquidation or winding up. Such notice shall be mailed at least 30 days prior to
the date specified in such notice on which such action is to be taken.
SECTION 4. SHARES ENTITLES TO MORE OR LESS THAN ONE VOTE.
---------------------------------------------
If any class or series of the Corporation's capital stock shall be entitled
to more or less than one vote per share, on any matter, every reference in this
Restated Certificate of Incorporation or in any resolution or resolutions
adopted by the Board of Directors pursuant to authority expressly vested in it
by the provisions of Section 2 of this Article FOURTH with respect to the
Preferred Stock or in any relevant provision of law or in any rule or
regulation, to a majority or other proportion of stock shall be deemed to refer
to such majority or other proportion of the votes of such stock.
SECTION 5. AMENDMENT.
---------
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, Section 2 of
this Article FOURTH. For the purposes of this Restated Certificate of
Incorporation, "Voting Stock" shall mean the outstanding shares or capital stock
of the Corporation entitled to vote generally in the election of directors.
FIFTH: In furtherance of, and not in limitation of, the powers conferred
by statute, the Board of Directors is expressly authorized and empowered:
(a) to manage, or direct the management of, the business and affairs
of the Corporation and to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject, nevertheless, to
the provisions of the Delaware General Corporation Law, this Restated
Certificate of Incorporation and the By-Laws of the Corporation; and
(b) from time to time to determine to what extent, and at what times
and places, and under what conditions and regulations, the accounts and books of
the Corporation, or any of them, shall be open to inspection by stockholders;
and no stockholder shall have any right to inspect any account, book or document
of the Corporation except as conferred by applicable law.
The Corporation may in its By-Laws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
FIFTH.
SIXTH: Subject to the rights of the holders of any class or series of
stock having a preference expressly vested in it by the provisions of Section 2
of Article FOURTH with respect to the Preferred Stock:
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<PAGE>
(a) any action required or permitted to be taken by the stockholders
of the Corporation must be effected only at a duly called annual or special
meeting of stockholders of the Corporation and may not, after the effective date
of this Restated Certificate of Incorporation, be effected by any consent in
writing of such stockholders;
(b) special meetings of the stockholders of the Corporation may be
called only (i) by the Chairman of the Board of Directors, (ii) pursuant to a
resolution approved by a majority of the Whole Board (as hereinafter defined),
or (iii) pursuant to a written request of the holders of 20% of the Voting
Stock; and
(c) the business permitted to be conducted at any special meeting of
the stockholders is limited to the business brought before the meeting (i) by
the Chairman of the Board of Directors, or (ii) at the request of a majority of
the Whole Board, or (iii) as specified in the written request of the holders of
20% of the Voting Stock.
Advance notice of the business to be brought by stockholders before an
annual meeting shall be given by such stockholders in the manner provided in the
By-Laws of the Corporation.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of at least 75 percent of
the Voting Stock, voting together as a single class, shall be required to amend,
repeal, or adopt any provision inconsistent with, this Article SIXTH. For the
purposes of this Restated Certificate of Incorporation, "Whole Board" shall mean
the total number of Directors which the Corporation would have if there were no
vacancies.
SEVENTH: SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS.
---------------------------------------
Subject to the rights of the holders of any class or series of stock having
a preference expressly vested in it by the provisions of Section 2 of Article
FOURTH with respect to the Preferred Stock, the number of Directors of the
Corporation shall be fixed by the By-Laws of the Corporation and may be
increased or decreased from time to time in such a manner as may be prescribed
by the By-Laws, but in no case shall the number be less than three nor more than
fifteen.
The Directors shall be divided into three classes, as nearly equal in
number as possible. One class of Directors (`Class I") has been initially
elected for a term expiring at the annual meeting of stockholders to be held in
1994, another class ("Class II") has been initially elected for a term expiring
at the annual meeting of stockholders to be held in 1995, and another class
("Class III") has been initially elected for a term expiring at the annual
meeting of stockholders to be held in 1996 with members of each class to hold
office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Corporation, the successors of the
class of Directors whose term expires at that meeting shall be elected by
plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.
SECTION 2. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES.
---------------------------------------------
Advance notice of stockholder nominations for the election of Directors
shall be given by such stockholders in the manner provided in the By-Laws of the
Corporation.
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<PAGE>
SECTION 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
-----------------------------------------
Subject to the rights of the holders of any class or series of stock having
a preference expressly vested in it by the provisions of Section 2 of Article
FOURTH with respect to the Preferred Stock, newly created directorships
resulting from any increase in the number of directors and any vacancy on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled solely 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, or by a sole remaining Director. 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. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of an incumbent Director.
SECTION 4. REMOVAL OF DIRECTORS.
--------------------
Subject to the rights of the holders of any class or series of stock having
a preference expressly vested in it by the provisions of Section 2 of Article
FOURTH with respect to the Preferred Stock, any Director may be removed from
office only by the stockholders in the manner provided in this Section 4 of
Article SEVENTH. At any annual meeting of the stockholders of the Corporation
or at any special meeting of the stockholders of the Corporation, the notice of
which shall state that the removal of a Director or Directors is among the
purpose of the meeting, the affirmative vote of the holders of at least 75
percent of the Voting Stock, voting together as a single class, may remove such
Director or Directors. In any vote required by or provided for in this Article
SEVENTH, each share of Voting Stock shall have the number of votes granted to it
generally in the election of Directors.
SECTION 5. AMENDMENT.
---------
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
SEVENTH.
EIGHTH: No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director; provided, however, that a Director of the Corporation shall
be liable (i) for breach of the Director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) to the extent provided
under Section 174 of the Delaware General Corporation Law, relating to
prohibited dividends or distributions or the repurchase or redemption of stock,
or (iv) for any transaction from which the Director derives an improper personal
benefit. If the Delaware General Corporation Law is hereafter amended to permit
further limitation on or elimination of the personal liability of the
Corporation's Directors for breach of fiduciary duty, then a Director of the
Corporation shall be exempt from such liability for any such breach to the
fullest extent permitted by the Delaware General Corporation Law as so amended
from time to time. Any repeal or modification of the foregoing provisions of
this Article EIGHTH, or the adoption of any provision inconsistent herewith,
shall not adversely affect any right or protection of a Director of the
Corporation
16
<PAGE>
hereunder in respect of any act or omission of such Director occurring prior to
such repeal, modification or adoption of an inconsistent provision.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
EIGHTH.
NINTH: The Corporation shall indemnify, defend and hold harmless any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, including appeals, by reason
of the fact that he or she is or was a Director or officer of the Corporation,
or is or was serving at the express written request of the Corporation as a
Director, trustee, partner, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, to the fullest extent authorized by Section
145 of the Delaware General Corporation Law, as amended from time to time,
against all expenses, liabilities and losses (including attorneys' fees,
judgments, fines. ERISA excise taxes and penalties, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that, except with respect to proceedings seeking
to enforce the rights to indemnification granted herein, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding (or
part thereof) was specifically authorized by the Board of Directors of the
Corporation. Without limiting the generality or the effect of the foregoing,
the Corporation may enter into one or more agreements with any person which
provide for indemnification on greater or different than that provided in this
Article NINTH. Any repeal or modification of the provisions of this Article
NINTH, or the adoption of any provision inconsistent herewith, shall not
adversely affect any right or protection existing hereunder immediately prior to
such repeal, modification or adoption of an inconsistent provision.
Notwithstanding the foregoing, all indemnification provided for in this Article
NINTH shall not be deemed exclusive of any other rights to which those entitled
to receive indemnification or reimbursement hereunder may be entitled under any
By-Law of the Corporation agreement, vote of stockholders or Directors or
otherwise.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
NINTH.
TENTH: The Board of Directors of the Corporation, in determining whether
the interests of the Corporation, its subsidiaries and its stockholders will be
served by any offer of another person to (i) make a tender or exchange offer for
any equity security of the Corporation or any subsidiary of the Corporation,
(ii) merge or consolidate the Corporation or any of its subsidiaries with or
into another corporation, or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation or any of its
subsidiaries, may take into account factors in addition to potential economic
benefits to stockholders. Such factors may include, without limitation, (a)
comparison of the proposed consideration to be received by stockholders, in
relation to the then current market price of the capital stock, to the estimated
current value of the Corporation or any of its subsidiaries in a freely
negotiated transaction, and to the estimated future value of the Corporation or
any of its subsidiaries as an independent entity; (b) the impact of such a
transaction on the customers and employees of the Corporation or
17
<PAGE>
any of its subsidiaries, and its effect on the communities in which the
Corporation or any of its subsidiaries operates; and (c) the ability of the
Corporation or any of its subsidiaries to fulfill its objectives and obligations
under applicable statutes and regulations.
The terms "offer" as used in this Article TENTH includes every offer to buy
or acquire, solicitation of an offer to sell, tender offer for, or request or
invitation for tender of, a security or interest in a security for value.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
TENTH.
ELEVENTH: The Corporation may not purchase any shares of its stock from
any person, entity or group that beneficially owns 5% or more of the Voting
Stock at a price exceeding the average closing price for the twenty trading
business days prior to the purchase date, unless a majority of the Corporation's
Disinterested Stockholders (as hereinafter defined) approve the transaction.
The restrictions on purchases by the Corporation set forth in this Article
ELEVENTH do not apply (i) to any offer to purchase shares of a class of the
Corporation's stock which is made on the same terms and conditions to all
holders of that class of stock, or (ii) to any purchase of stock owned by such a
5% stockholder occurring more than two years after such stockholder's last
acquisition of the Corporation's stock, or (iii) to any purchase of the
Corporation's stock in accordance with the terms of any stock option or employee
benefit plan, or (iv) to any purchase at prevailing market prices pursuant to a
stock purchase program.
For purposes of this Article ELEVENTH, the term "Disinterested
Stockholders" means those holders each of whom owns less than 5% of the Voting
Stock.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
ELEVENTH.
TWELFTH: Any vote or votes authorizing liquidation of the Corporation or
proceedings for its dissolution may provide, subject to the rights of creditors
and the rights expressly provided for particular classes or series of stock for
the distribution pro rata among the stockholders of the Corporation of the
assets of the Corporation, wholly or in part in kind, whether such assets be in
cash or other property,, and may authorize the Board of Directors of the
Corporation to determine the valuation of the different assets of the
Corporation for the purpose of such liquidation and may divide or authorize the
Board of Directors to divide such assets or any part thereof among the
stockholders of the Corporation, in such manner that every stockholder will
receive a proportionate amount in value (determined as aforesaid) of cash or
property of the Corporation upon such liquidation or dissolution even though
each stockholder may not receive a strictly proportionate part of each such
asset.
THIRTEENTH: No contract or transaction between the Corporation and one or
more of its Directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its Directors or officers are directors, officers or partners, or have a
financial interest, shall be void or voidable solely for this reason,
18
<PAGE>
or solely because the Director or officer is present at or participates in the
meeting of the Board of Directors, or Committee thereof, which authorizes the
contract or transaction, or solely because his, her or their votes are counted
for such purpose, if:
(a) the material facts as to his, her or their interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the Committee thereof, and the Board of Directors or Committee thereof, in good
faith authorizes the contract or transaction by a vote sufficient for such
purpose without counting the vote of the interested Director or Directors, even
though the disinterested Directors be less than a quorum, or
(b) the material facts as to his, her or their interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
Committee thereof, or the stockholders.
Interested Directors shall be counted in determining the presence of a
quorum at a meeting of the Board of Directors, or of a Committee thereof which
authorizes such contract or transaction. No Director or officer shall be liable
to account to the Corporation for any profit realized by him or her from or
through such contract or transaction solely by reason of the fact that he or she
or any other corporation, partnership, association, or other organization in
which he or she is a director or officer, or has a financial interest, was
interested in such contract or transaction.
FOURTEENTH: BUSINESS COMBINATIONS.
---------------------
Section 1. HIGHER VOTE FOR BUSINESS COMBINATIONS.
-------------------------------------
In addition to any affirmative vote required by law or by this Restated
Certificate of Incorporation, unless a Business Combination (as defined below)
shall have been approved by the affirmative vote of not less than a majority of
the Whole Board, any Business Combination shall require the affirmative vote of
the holders of record of outstanding shares representing at least seventy-five
percent (75%) of the Voting Stock, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
SECTION 2. NO EFFECT ON FIDUCIARY OBLIGATIONS.
----------------------------------
Nothing contained in this provision shall be construed to relieve the
members of the Board of Directors from any fiduciary obligations imposed by law.
SECTION 3. DEFINITION.
----------
For purposes of this Article FOURTEENTH "Business Combination" means:
(a) any merger or consolidation of the Corporation or any subsidiary;
or
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(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) of all or more than
ten percent (10%) of the total assets of the Corporation or any subsidiary, as
of the end of such corporation's recent fiscal year ending prior to the time the
determination is made; or
(c) the issuance or transfer by the Corporation or any subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any subsidiary; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or any spin-off or split-up of any kind of the
Corporation or any subsidiary; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any subsidiary or any other transaction which has the
effect, directly or indirectly, of increasing the percentage of the outstanding
shares of (i) any class of equity securities of the Corporation or any
subsidiary, or (ii) any class of securities of the Corporation or any subsidiary
convertible into equity securities of the Corporation or any subsidiary; or
(f) any agreement, contract or other arrangement providing for any one
or more of the actions specified in clauses (a) through (e) of Section 3 of this
Article FOURTEENTH.
SECTION 4. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW.
---------------------------------------------------
Nothing in this Article FOURTEENTH or elsewhere in this Restated
Certificate of Incorporation shall be construed as a waiver of any rights of the
Corporation to the provisions of Section 203 of the Delaware General Corporation
Law dealing with business combinations with interested stockholders; and the
Corporation hereby claims the full benefit of all such provisions or any other
similar provisions heretofore or hereafter enacted as part of the Delaware
General Corporation Law to the fullest extent in addition to the provisions of
this Article FOURTEENTH.
Section 5. AMENDMENT.
---------
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
FOURTEENTH.
FIFTEENTH: The By-Laws of the Corporation may be amended, altered, changed
or repealed, and a provision or provisions inconsistent with the provisions of
the By-Laws as they exist from time to time may be adopted, only by the majority
vote of the Whole Board or by the affirmative vote of the holders of at least 75
percent of the Voting Stock, voting together as a single class.
Notwithstanding anything contained in this Restated Certificate of
incorporation to the contrary, the affirmative vote of the holders of at least
75 percent of the Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with, this Article
FIFTEENTH.
20
<PAGE>
SIXTEENTH: The provisions of Section 2 of Article FOURTH and the provisions
of Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH, ELEVENTH, FOURTEENTH,
FIFTEENTH and this Article SIXTEENTH, shall not be amended, altered, changed or
repealed, and no provision inconsistent with any of them shall be adopted,
except by the affirmative vote of the holders of at least seventy-five percent
(75%) of the Voting Stock, voting together as a single class. The Corporation
reserves the right to amend, alter, change or repeal any other provision
contained in this Restated Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders are
granted subject to this reservation.
This Restated Certificate of Incorporation was duly adopted in accordance
with the applicable provisions of Sections 242, 245 and 228 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, CMG Information Services, Inc. has caused its
corporation seal to be affixed hereto and this Certificate to be signed by David
S. Wetherell, its President, and attested by William Willams, II, its Assistant
Secretary this 8th day of November, 1993.
CMG INFORMATION SERVICES, INC.
By: /s/ David S. Wetherell
-----------------------
David S. Wetherell, President
ATTEST:
By: /s/ William Williams II
------------------------
William Williams II, Assistant Secretary
[Corporate Seal]
21
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CMG INFORMATION SERVICES, INC.
CMG INFORMATION SERVICES, INC. a corporation organized and existing under the
laws of the State of Delaware, does hereby certify as follows:
FIRST: That the Board of Directors of said Corporation by unanimous vote
pursuant to Section 141 of the General Corporation Law of Delaware adopted a
resolution proposing and declaring advisable the following amendment to the
Restated Certificate of Incorporation of the Corporation and directing that said
amendment be submitted to the stockholders for their review and consent:
VOTED: That the Board of Directors of CMG Information Services,
Inc. hereby approves and declares advisable an amendment to
the Restated Certificate of Incorporation of this
Corporation as follows:
That ARTICLE FOURTH (a) of the Restated Certificate of
Incorporation of this Corporation be and it is hereby
amended to increase the number of authorized shares of
capital stock of the Corporation from 15,000,000 to
45,000,000 so that said ARTICLE FOURTH (a) shall be and read
as follows:
FOURTH. (a) The total number of shares of capital stock which the
Corporation is authorized to issue is 45,000,000, of which 40,000,000 shares
shall be common stock, par value $.01 per share ("Common Stock") and 5,000,000
shares shall be preferred stock, par value $.01 per share ("Preferred Stock").
and further,
VOTED: That the foregoing amendment to the Restated Certificate
of Incorporation of this Corporation be submitted to the
stockholders of this Corporation for their approval at the
1996 Special Meeting of Stockholders.
SECOND: That thereafter, pursuant to the resolution of the Board of
Directors, the 1996 Special Meeting of the Stockholders of the Corporation was
duly called and held, upon notice in accordance with Section 222 of the General
Corporation Law of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
22
<PAGE>
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation law of Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or by
reason of the aforesaid amendment.
IN WITNESS WHEREOF, CMG INFORMATION SERVICES, INC. has caused this Certificate
to be signed by David S. Wetherell, its President, and William Williams II, its
Assistant Secretary, this 22nd day of March, 1996.
(SEAL) CMG INFORMATION SERVICES, INC.
By: /s/ David S. Wetherell
-----------------------
David S. Wetherell, President
ATTEST: /s/ William Williams II
------------------------
William Williams II, Assistant Secretary
23
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CMG INFORMATION SERVICES, INC.
CMG INFORMATION SERVICES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify as
follows:
FIRST: That the Board of Directors of said Corporation by unanimous vote
pursuant to Section 141 of the General Corporation Law of Delaware adopted
resolutions proposing and declaring advisable the following amendments to the
Restated Certificate of Incorporation of the Corporation and directing that said
amendments be submitted to the stockholders of the Corporation for their review
and consent:
VOTED: That the Board of Directors of CMG Information Services, Inc.
hereby approves and declares advisable an amendment to the
Restated Certificate of Incorporation of this Corporation as
follows:
That ARTICLE FIRST of the Restated Certificate of Incorporation
of this Corporation be and it is hereby amended to change the
name of the Corporation from CMG Information Services, Inc. to
CMGI, Inc. so that said ARTICLE FIRST shall be and read as
follows:
FIRST: The name of the Corporation is CMGI, Inc.
and further,
VOTED: That the Board of Directors of CMG Information Services, Inc.
hereby approves and declares advisable an amendment to the
Restated Certificate of Incorporation of this Corporation as
follows:
That ARTICLE FOURTH (a) of the Restated Certificate of
Incorporation of this Corporation be and it is hereby amended to
increase the authorized shares of capital stock of the
Corporation from 45,000,000 to 105,000,000 so that said ARTICLE
FOURTH (a) shall be and read as follows:
FOURTH: (a) The total number of shares of capital stock which the
Corporation is authorized to issue is one hundred and five million (105,000,000)
shares of which one hundred million (100,000,000) shares shall be common stock,
par value $0.01 per share ("Common Stock") and 5,000,000 shares shall be
preferred stock, par value $0.01 per share ("Preferred Stock").
24
<PAGE>
and further,
VOTED: That the foregoing amendments to the Restated Certificate of
Incorporation of this Corporation are advisable and in the best
interest of the Corporation and that they be submitted to the
stockholders of this Corporation for their consideration and
approval at the 1998 Annual Meeting of Stockholders.
SECOND: That thereafter, pursuant to the resolution of the Board of
Directors, the 1998 Annual Meeting of Stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of the aforesaid amendments.
[The remainder of this page intentionally left blank.]
25
<PAGE>
IN WITNESS WHEREOF, CMG INFORMATION SERVICES, INC. has caused this
Certificate to be signed by David S. Wetherell, its President, and William
Williams II, its Assistant Secretary, this 17th day of December, 1998.
CMG INFORMATION SERVICES, INC.
By: /s/ David S. Wetherell
-----------------------
David S. Wetherell, President
ATTEST: /s/ William Williams II
------------------------
William Williams II,
Assistant Secretary
26
<PAGE>
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
CMGI, INC.
(Pursuant to Section 151 of the
Delaware Corporation Law)
CMGI, INC., a corporation organized and existing under the Delaware General
Corporation Law (the "CORPORATION"), hereby certifies that the following
resolutions were adopted by the Board of Directors of the Corporation on
December 17, 1998 pursuant to authority of the Board of Directors as required by
Section 151(g) of the Delaware Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in the Board of
Directors of this Corporation (the "BOARD OF DIRECTORS" or the "BOARD") in
accordance with the provisions of its Articles of Incorporation, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"), and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:
Series B Convertible Preferred Stock:
27
<PAGE>
I. DESIGNATION AND AMOUNT
----------------------
The designation of this series, which consists of 50,000 shares of Preferred
Stock, is Series B Convertible Preferred Stock (the "SERIES B PREFERRED STOCK")
and the stated value shall be One Thousand Dollars ($1,000) per share (the
"STATED VALUE").
II. RANK
----
The Series B Preferred Stock shall rank (i) prior to the Corporation's common
stock, par value $.01 per share (the "COMMON STOCK"); (ii) prior to any class or
series of capital stock of the Corporation hereafter created (unless, with the
consent of the holders of Series B Preferred Stock obtained in accordance with
Article X hereof, such class or series of capital stock specifically, by its
terms, ranks senior to or pari passu with the Series B Preferred Stock)
---- -----
(collectively, with the Common Stock, "JUNIOR SECURITIES"); (iii) pari passu
---- -----
with any class or series of capital stock of the Corporation hereafter created
(with the consent of the holders of Series B Preferred Stock obtained in
accordance with Article X hereof) specifically ranking, by its terms, on parity
with the Series B Preferred Stock ("PARI PASSU SECURITIES"); and (iv) junior to
---- -----
any class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series B Preferred Stock obtained in accordance
with Article X hereof) specifically ranking, by its terms, senior to the Series
B Preferred Stock ("SENIOR SECURITIES"), in each case as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
III. DIVIDENDS
---------
The Series B Preferred Stock shall not bear any dividends. Except as provided
below, in no event, so long as any Series B Preferred Stock shall remain
outstanding, shall any dividend whatsoever be declared or paid upon, nor shall
any distribution be made upon, any Junior Securities, nor shall any shares of
Junior Securities be purchased or redeemed by the Corporation nor shall any
moneys be paid to or made available for a sinking fund for the purchase or
redemption of any Junior Securities (other than a distribution of Junior
Securities), without, in each such case, the written consent of the holders of a
majority of the outstanding shares of Series B Preferred Stock, voting together
as a class. Notwithstanding the foregoing, the Corporation may (i) declare or
pay upon any Junior Securities any dividend payable in equity interests of a
subsidiary of the Corporation; provided that, the holders of the Series B
--------
Preferred Stock then outstanding shall have first received, or simultaneously
received, a like distribution on each outstanding share of Series B Preferred
Stock, based on the number of shares of Common Stock into which each share of
Series B Preferred Stock is convertible on the record date for such distribution
(without regard to any limitations on conversion and based upon the then
prevailing Conversion Price (as defined below) using the record date as the
Conversion Date (as defined below)) or (ii) redeem shares of Common Stock which
had been issued as restricted stock pursuant to a stock option plan approved by
the stockholders of the Corporation.
28
<PAGE>
IV. LIQUIDATION PREFERENCE
----------------------
A. LIQUIDATION EVENT. If the Corporation shall commence a voluntary case
-----------------
under the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"LIQUIDATION EVENT"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto, the holders of
shares of Series B Preferred Stock, subject to Article VI, shall have received
the Liquidation Preference (as defined in Article IV.C) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series B Preferred Stock and
holders of Pari Passu Securities (including any dividends or distribution paid
---- -----
on any Pari Passu Securities after the date of filing of this Certificate of
---- -----
Designation) shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series B Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
---- -----
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
Any prior dividends or distribution made after the date of filing of this
Certificate of Designation shall offset, dollar for dollar, the amount payable
to the class or series to which such distribution was made.
B. CERTAIN ACTS DEEMED LIQUIDATION EVENT. At the option of the holders of a
-------------------------------------
majority-in-interest of the then outstanding shares of Series B Preferred Stock,
the sale, conveyance or disposition of all or substantially all of the assets of
the Corporation, the effectuation by the Corporation of a transaction or series
of related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person (as defined below)
or Persons when the Corporation is not the survivor shall either: (i) be deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
which the Corporation shall be required to distribute upon consummation of and
as a condition to such transaction an amount equal to the sum of (a)118% of the
Stated Value plus (b) four percent (4%) per annum of such Stated Value for the
period beginning on the date of issuance of the Series B Preferred Stock (the
"ISSUE DATE") and ending on the date of final distribution to the holder thereof
(prorated for any portion of such period) with respect to each outstanding share
of Series B Preferred Stock or (ii) be treated pursuant to Article VI.C(b)
hereof. "PERSON" shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.
29
<PAGE>
C. LIQUIDATION PREFERENCE. For purposes hereof, the "LIQUIDATION PREFERENCE"
----------------------
with respect to a share of the Series B Preferred Stock shall mean an amount
equal to the sum of (i) the Stated Value thereof plus (ii) and amount equal to
four percent (4%) per annum of such Stated Value for the period beginning on the
Issue Date and ending on the date of final distribution to the holder thereof
(prorated for any portion of such period). The liquidation preference with
respect to any Pari Passu Securities shall be as set forth in the Certificate of
---- -----
Designation filed in respect thereof.
V. REDEMPTION
----------
A. MANDATORY REDEMPTION. If any of the following events (each, a "MANDATORY
--------------------
REDEMPTION EVENT") shall occur:
(i) The Corporation fails to issue shares of Common Stock to
the holders of Series B Preferred Stock upon exercise by the holders of their
conversion rights in accordance with the terms of this Certificate of
Designation (for a period of at least sixty (60) days if such failure is solely
as a result of the circumstances governed by the second paragraph of Article
VI.E below and the Corporation is using its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or to cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series B Preferred Stock as and when required by
this Certificate of Designation or the Registration Rights Agreement, dated as
of December 21, 1998, by and among the Corporation and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), fails to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the holders of Series B
Preferred Stock upon conversion of the Series B Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
dated as of December 21, 1998, by and between the Corporation and the other
signatories thereto (the "PURCHASE AGREEMENT") or the Registration Rights
Agreement, or fails to fulfill its obligations pursuant to Sections 4(c), 4(e),
4(h), 4(i), 4(j) or 5 of the Purchase Agreement (or makes any announcement,
statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any
announcement, statement or threat not to honor its obligations shall not be
rescinded in writing) for ten (10) business days after the Corporation shall
have been notified thereof in writing by any holder of Series B Preferred Stock;
(ii) The Corporation fails to obtain effectiveness with the
Securities and Exchange Commission (the "SEC") prior to May 22, 1999 of the
Registration Statement (as defined in the Registration Rights Agreement)
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement, or fails to obtain the effectiveness of any additional Registration
Statement (required pursuant to Section 3(b) of the Registration Rights
Agreement) within one hundred fifty (150) days after the date the Corporation
reasonably first determined (or reasonably should have determined) the need
therefor, or any such Registration Statement, after its initial effectiveness,
lapses in effect or sales of all of the Registrable Securities (as defined in
the Registration Rights Agreement) otherwise cannot be made thereunder (whether
by reason of the Corporation's failure to amend or supplement the prospectus
included therein in accordance with
30
<PAGE>
the Registration Rights Agreement, the Corporation's failure to file and obtain
effectiveness with the SEC of an additional Registration Statement required
pursuant to Section 3(b) of the Registration Rights Agreement or otherwise) for
more than thirty (30) consecutive days or more than sixty (60) days in any
twelve (12) month period after such Registration Statement becomes effective;
(iii) The Corporation or any "significant subsidiary" as such
term is defined in Rule 1-02(w) of Regulation S-X promulgated under the
Securities Act of 1933, as amended (a "SIGNIFICANT SUBSIDIARY") of the
Corporation shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for all or
substantially all of its property or business; or such a receiver or trustee
shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any Significant Subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the listing of the
Common Stock on the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap
Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE") or the American
Stock Exchange ("AMEX"); or
(vi) The Corporation (a) files a notification of registration
under the Investment Company Act of 1940 (the "40 ACT"); (b) files a
registration statement relating to its shares of Common Stock (or any other
equity security) on Forms N-1A or N-2 or any other form prescribed for use by
investment companies under regulations promulgated by the SEC; (c) is informed
by the staff of the SEC's Division of Investment Management that (1) the staff
will not support the Corporation's application for an order of exemption filed
pursuant to Section 3(b)(2) under the 40 Act, or (2) the staff will not agree to
recommend to the SEC that it extend the period of time under the statute during
which the Corporation is exempted from the 40 Act; provided that the Corporation
--------
has failed, within forty-five (45) days of such event, to reduce the amount of
its "investment securities" (as defined in Section 3(a)(2) of the 40 Act) to
less than 40% of its total assets or to have such staff position withdrawn or
does not, at the time of such event, qualify for the exception provided by Rule
3a-2 promulgated under the 40 Act; (d) is named in a complaint, filed by the
SEC, seeking to compel the Corporation to register under the 40 Act; provided
--------
such complaint remains undismissed for a period of forty-five (45) days; or (e)
is named in a complaint filed by or on behalf of the Corporation or any
shareholder or group of shareholders thereof, where any one count thereof avers
or alleges that the Corporation is an Investment Company required to register
under the 40 Act; provided such complaint remains undismissed for a period of
--------
forty-five (45) days,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii), (v) or (vi), at the
option of the holders of at least 50% of the then outstanding shares of Series B
Preferred Stock by written notice (the "MANDATORY REDEMPTION NOTICE") to the
Corporation of such Mandatory Redemption Event, or upon the occurrence of any
Mandatory Redemption Event specified in subparagraphs (iii) or (iv), the
Corporation shall purchase each holder's shares of Series B Preferred Stock for
an amount per
31
<PAGE>
share equal to the greater of (1) the sum of (a) Mandatory Redemption Percentage
(as defined below) multiplied by the Stated Value of the shares to be redeemed
plus (b) an amount equal to four percent (4%) per annum of such Stated Value for
the period beginning on the Issue Date and ending on the date of payment of the
Mandatory Redemption Amount (the "MANDATORY REDEMPTION DATE"), and (2) the
"PARITY VALUE" of the shares to be redeemed, where parity value means the
product of (a) the highest number of shares of Common Stock issuable upon
conversion of such shares in accordance with Article VI below (without giving
any effect to any limitations on conversions of shares contained herein, and
treating the Trading Day (as defined in Article VI.B) immediately preceding the
Mandatory Redemption Date as the "CONVERSION DATE" (as defined in Article
VI.B(a)) for purposes of determining the lowest applicable Conversion Price,
unless the Mandatory Redemption Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price (as defined below)
for the Common Stock during the period beginning on the date of first occurrence
of the Mandatory Redemption Event and ending one day prior to the Mandatory
Redemption Date (the greater of such amounts being referred to as the "MANDATORY
REDEMPTION AMOUNT"). "MANDATORY REDEMPTION PERCENTAGE" means 115% for purposes
of subparagraphs (iii) and (iv) above, 118% for purposes of subparagraphs (ii)
and (v) above and 120% for all other purposes. "CLOSING PRICE," as of any date,
means the last sale price of the Common Stock on Nasdaq as reported by Bloomberg
Financial Markets or an equivalent reliable reporting service mutually
acceptable to and hereafter designated by the holders of a majority in interest
of the shares of Series B Preferred Stock and the Corporation ("BLOOMBERG") or,
if Nasdaq is not the principal trading market for such security, the last sale
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last sale price of such security in the over-the-
counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no last sale price of such security is available in the over-
the-counter market on the electronic bulletin board for such security or in any
of the foregoing manners, the average of the bid prices of any market makers for
such security that are listed in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Price cannot be calculated for such security on such
date in the manner provided above, the Closing Price shall be the fair market
value as mutually determined by the Corporation and the holders of a majority in
interest of shares of Series B Preferred Stock being converted for which the
calculation of the Closing Price is required in order to determine the
Conversion Price of such Series B Preferred Stock.
B. TRADING MARKET REDEMPTION. If the Series B Preferred Stock ceases to be
-------------------------
convertible by any holder as a result of the limitations described in Article
VI.A(c) below (a "TRADING MARKET REDEMPTION EVENT"), and the Corporation has not
prior to, or within forty-five (45) days of, the date that such Trading Market
Redemption Event arises, (i) obtained the Stockholder Approval (as defined in
Article VI.A(c)) or (ii) eliminated any prohibitions under applicable law or
the rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Corporation or any
of its securities on the Corporation's ability to issue shares of Common Stock
in excess of the Maximum Share Amount (as defined in Article VI.A(c)), then the
Corporation shall be obligated to redeem immediately all of the then outstanding
Series B Preferred Stock, in accordance with this Article V.B. An irrevocable
redemption notice (the "TRADING MARKET REDEMPTION NOTICE") shall be delivered
promptly to the holders of Series B Preferred Stock at their registered address
32
<PAGE>
appearing on the records of the Corporation and shall state (i) that the Maximum
Share Amount (as defined in Article VI.A) has been issued upon exercise of the
Series B Preferred Stock, (ii) that the Corporation is obligated to redeem all
of the outstanding Series B Preferred Stock and (iii) the Mandatory Redemption
Date, which shall be a date within five (5) business days of the earlier of (a)
the date of the Redemption Notice or (b) the date on which the holders of the
Series B Preferred Stock notify the Corporation of the occurrence of a Trading
Market Redemption Event. On the Mandatory Redemption Date, the Corporation
shall make payment of the Mandatory Redemption Amount (as defined in Article V.A
above) in cash.
C. OPTIONAL REDEMPTION. Notwithstanding anything to the contrary contained
-------------------
in this Article V, so long as (i) no Mandatory Redemption Event or Trading
Market Redemption Event shall have occurred and be continuing, (ii) any
Registration Statement required to be filed and be effective pursuant to the
Registration Rights Agreement is then in effect and has been in effect and sales
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) can be made thereunder for at least twenty (20) days prior to the
Optional Redemption Date (as defined below) and (iii) the Corporation has a
sufficient number of authorized shares of Common Stock reserved for issuance
upon full conversion of the Series B Preferred Stock, then at any time after
December 21, 1999, on any day on which, and for a period of ten (10) consecutive
Trading Days prior thereto, the Closing Bid Price (as defined in Article
VI.B(a)) is less than $73.00 (as adjusted for stock splits, stock dividends and
similar events, the "REDEMPTION THRESHOLD"), the Corporation shall have the
right, exercisable on not less than fifteen (15) Trading Days prior written
notice to the holders of Series B Preferred Stock (which notice may not be sent
to the holders of the Series B Preferred Stock until the Corporation is
permitted to redeem the Series B Preferred Stock pursuant to this Article V.C),
to redeem all of the outstanding shares of Series B Preferred Stock in
accordance with this Article V. Any notice of redemption hereunder (an
"OPTIONAL REDEMPTION") shall be delivered to the holders of Series B Preferred
Stock at their registered addresses appearing on the books and records of the
Corporation and shall state (1) that the Corporation is exercising its right to
redeem all of the outstanding shares of Series B Preferred Stock and (2) the
date of redemption (the "OPTIONAL REDEMPTION NOTICE"). On the date fixed for
redemption (the "OPTIONAL REDEMPTION DATE"), the Corporation shall make payment
of the Optional Redemption Amount (as defined below) to or upon the order of the
holders as specified by the holders in writing to the Corporation at least one
(1) business day prior to the Optional Redemption Date. If the Corporation
exercises its right to redeem the Series B Preferred Stock, the Corporation
shall make payment to the holders of an amount in cash (the "OPTIONAL REDEMPTION
AMOUNT") equal to the sum of (i) 115% multiplied by the Stated Value of the
shares of Series B Preferred Stock to be redeemed and (ii) an amount equal to
four percent (4%) per annum of such Stated Value for the period beginning on the
Issue Date and ending on the Optional Redemption Date, for each share of Series
B Preferred Stock then held. Notwithstanding notice of an Optional Redemption,
the holders shall at all times prior to the Optional Redemption Date maintain
the right to convert all or any shares of Series B Preferred Stock in accordance
with Article VI and any shares of Series B Preferred Stock so converted after
receipt of an Optional Redemption Notice and prior to the Optional Redemption
Date set forth in such notice and payment of the aggregate Optional Redemption
Amount shall be deducted from the shares of Series B Preferred Stock which are
otherwise subject to redemption pursuant to such notice. If the Corporation
delivers an Optional Redemption Notice and fails to pay the Optional Redemption
Amount due to the holders of the Series B Preferred Stock within two (2)
business days following the Optional Redemption Date,
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the Corporation shall forever forfeit its right to redeem the Series B Preferred
Stock pursuant to this Article V.C. On the Optional Redemption Date, against
delivery of the Optional Redemption Amount, the holders of such redeemed shares
of Series B Preferred Stock shall surrender the certificates representing such
shares of Series B Preferred Stock in escrow to counsel designated by such
holders with such shares to be released to the Corporation by such counsel upon
receipt of the Optional Redemption Amount by such holders.
D. REDEMPTION IN LIEU OF AUTOMATIC CONVERSION. Notwithstanding anything to
------------------------------------------
the contrary contained in this Article V and subject to the terms of this
Article V.D, if on the Automatic Conversion Date (as defined in Article VIII)
the Corporation is unable to issue shares of Common Stock upon conversion of the
Series B Preferred Stock as a result of the Cap Amount being issued, the
Corporation shall, in lieu of issuing shares of Common Stock to the holders upon
Automatic Conversion in accordance with the terms of Article VIII below, redeem
all of such shares of Series B Preferred Stock which the Corporation is unable
to convert as a result of the Cap Amount being issued for an amount in cash
equal to the sum of (i) the Stated Value of the shares of Series B Preferred
Stock to be redeemed and (ii) an amount equal to four (4%) per annum of such
Stated Value beginning on the Issue Date and ending on the Automated Conversion
Date, for each share of Series B Preferred Stock being redeemed (the "REDEMPTION
IN LIEU OF AUTOMATIC CONVERSION AMOUNT"). The Corporation shall effect a
redemption pursuant to this Article V.D. by sending written notice to the
holders of the Series B Preferred Stock at least fifteen (15) Trading Days prior
to the Automatic Conversion Date of its election to redeem the shares of Series
B Preferred Stock eligible for redemption pursuant to this Article V.D. (the
"REDEMPTION IN LIEU OF AUTOMATIC CONVERSION NOTICE").
E. QUALIFIED PUBLIC OFFERING REDEMPTION. Notwithstanding anything to the
------------------------------------
contrary contained in this Article V, so long as (i) no Mandatory Redemption
Event or Trading Market Redemption Event shall have occurred and be continuing,
(ii) any Registration Statement required to be filed and to be effective
pursuant to the Registration Rights Agreement is then in effect and has been in
effect and sales of all of the Registrable Securities (as defined in the
Registration Rights Agreement) can be made thereunder for at least twenty (20)
days prior to the date the Qualified Public Offering Redemption Notice (as
defined below) is sent and at all times through and including the Qualified
Public Offering Redemption Date (as defined below) and (iii) the Corporation has
a sufficient number of authorized shares of Common Stock reserved for issuance
upon full conversion of the Series B Preferred Stock, then at any time after the
Issue Date, if the underwriters in such Qualified Public Offering (as defined in
the Registration Rights Agreement) so request, the Corporation shall have the
right, exercisable on not less than fifteen (15) Trading Days prior written
notice to the holders of Series B Preferred Stock, to redeem all of the
outstanding shares of Series B Preferred Stock in accordance with this Article
V. Any notice of redemption hereunder (a "QUALIFIED PUBLIC OFFERING
REDEMPTION") shall be delivered to the holders of Series B Preferred Stock at
their registered addresses appearing on the books and records of the Corporation
and shall state (1) that the Corporation is exercising its right to redeem all
of the outstanding shares of Series B Preferred Stock and (2) the date of
redemption which shall be the date of the consummation of the Qualified Public
Offering (the "QUALIFIED PUBLIC OFFERING REDEMPTION NOTICE"). On the date of
consummation of the Qualified Public Offering (the "QUALIFIED PUBLIC OFFERING
REDEMPTION DATE"), the Corporation shall make payment of the Qualified Public
Offering Redemption Amount (as defined below) to or upon the order of the
holders as specified by the holders in writing to the Corporation at least one
(1)
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<PAGE>
business day prior to the Qualified Public Offering Redemption Date. If the
Corporation exercises its right to redeem the Series B Preferred Stock, the
Corporation shall make payment to the holders of an amount in cash (the
"QUALIFIED PUBLIC OFFERING REDEMPTION AMOUNT") equal to the sum of (i) 118%
multiplied by the Stated Value of the shares of Series B Preferred Stock to be
redeemed and (ii) an amount equal to four percent (4%) per annum of such Stated
Value for the period beginning on the Issue Date and ending on the Qualified
Public Offering Redemption Date, for each share of Series B Preferred Stock then
held. Notwithstanding notice of an Qualified Public Offering Redemption, the
holders shall at all times prior to the Qualified Public Offering Redemption
Date maintain the right to convert all or any shares of Series B Preferred Stock
in accordance with Article VI and any shares of Series B Preferred Stock so
converted after receipt of an Qualified Public Offering Redemption Notice and
prior to the Qualified Public Offering Redemption Date set forth in such notice
and payment of the aggregate Qualified Public Offering Redemption Amount shall
be deducted from the shares of Series B Preferred Stock which are otherwise
subject to redemption pursuant to such notice. If the Corporation delivers an
Qualified Public Offering Redemption Notice and fails to pay the Qualified
Public Offering Redemption Amount due to the holders of the Series B Preferred
Stock within two (2) business days following the Qualified Public Offering
Redemption Date, the Corporation shall forever forfeit its right to redeem the
Series B Preferred Stock pursuant to this Article V.E. On the Qualified Public
Offering Redemption Date, against delivery of the Qualified Public Offering
Redemption Amount, the holders of such redeemed shares of Series B Preferred
Stock shall surrender the certificates representing such shares of Series B
Preferred Stock in escrow to counsel designated by such holders with such
shares to be released to the Corporation by such counsel upon receipt of the
Qualified Public Offering Redemption Amount by such holders.
F. FAILURE TO PAY REDEMPTION AMOUNTS. In the case of a Mandatory Redemption
---------------------------------
Event or the delivery of an Optional Redemption Notice, Redemption In Lieu of
Automatic Conversion Notice or a Qualified Public Offering Redemption Notice, if
the Corporation fails to pay the Mandatory Redemption Amount, Optional
Redemption Amount, Redemption In Lieu of Automatic Conversion Amount or
Qualified Public Offering Redemption Amount, as applicable, within five (5)
business days of written notice that such amount is due and payable, then
(assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series B Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, or at any time
after delivery of an Optional Redemption Notice, Redemption In Lieu of Automatic
Conversion Notice or a Qualified Public Offering Redemption Notice, to require
the Corporation, upon written notice, to immediately issue (in accordance with
and subject to the terms of Article VI below), in lieu of the Mandatory
Redemption Amount, Optional Redemption Amount, Redemption In Lieu of Automatic
Conversion Amount or Qualified Public Offering Redemption Amount, as applicable,
the number of shares of Common Stock of the Corporation equal to such applicable
redemption amount divided by any Conversion Price, as chosen in the sole
discretion of the holder of Series B Preferred Stock, in effect from the date of
the Mandatory Redemption Event (or the date of delivery of an Optional
Redemption Notice, Redemption In Lieu of Automatic Conversion Notice or a
Qualified Public Offering Redemption Notice) until the date such holder elects
to exercise its rights pursuant to this Article V.E.
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<PAGE>
VI. CONVERSION AT THE OPTION OF THE HOLDER
--------------------------------------
A. OPTIONAL CONVERSION
-------------------
(a) CONVERSION AMOUNT. Each holder of shares of Series B Preferred
-----------------
Stock may, at its option at any time and from time to time, upon surrender of
the certificates therefor, convert any or all of its shares of Series B
Preferred Stock into Common Stock as set forth below (an "OPTIONAL CONVERSION").
Each share of Series B Preferred Stock shall be convertible into such number of
fully paid and nonassessable shares of Common Stock as such Common Stock exists
on the Issue Date, or any other shares of capital stock or other securities of
the Corporation into which such Common Stock is thereafter changed or
reclassified, as is determined by dividing (1) the sum of (a) the Stated Value
thereof plus (b) the Premium Amount (as defined below), by (2) the then
effective Conversion Price (as defined below); provided, however, that in no
-------- -------
event (other than pursuant to the Automatic Conversion (as defined in Article
VII)) shall a holder of shares of Series B Preferred Stock be entitled to
convert any such shares in excess of that number of shares upon conversion of
which the sum of (x) the number of shares of Common Stock beneficially owned by
the holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Series B Preferred Stock or the unexercised or unconverted portion
of any other securities of the Corporation subject to a limitation on conversion
or exercise analogous to the limitations contained herein) and (y) the number of
shares of Common Stock issuable upon the conversion of the shares of Series B
Preferred Stock with respect to which the determination of this proviso is being
made, would result in beneficial ownership by a holder and such holder's
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (x) of such proviso. The "PREMIUM AMOUNT" means the
product of the Stated Value, multiplied by .04, multiplied by (N/365), where "N"
equals the number of days elapsed from the Issue Date to and including the
Conversion Date (as defined in Article VI.B).
(b) LIMITATION OF NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED.
-----------------------------------------------------------
Subject to waiver by the Corporation, the maximum number of shares of Common
Stock to be issued upon conversion of the Series B Preferred Stock shall be
1,041,667 shares (as adjusted for stock splits, stock dividends and similar
events, the "CAP AMOUNT"). If the Corporation has issued a number of shares of
Common Stock upon conversion of the Series B Preferred Stock equal to the Cap
Amount, unless the Corporation waives the limitations set forth in this Article
VI.A(b) and issues shares of Common Stock upon conversion of the Series B
Preferred Stock in excess of the Cap Amount, on the Automatic Conversion Date
(as defined in Article VIII) the Corporation shall be required to redeem the
outstanding shares Series B Preferred Stock in accordance with Article V.D.
(c) TRADING MARKET LIMITATION. Unless (i) permitted by the
-------------------------
applicable rules and regulations of the principal securities market on which the
Common Stock is listed or traded or (ii) the Corporation has obtained approval
of the issuance of the Common Stock upon conversion of the Series B Preferred
Stock in accordance with applicable law and the rules and regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities
(the "STOCKHOLDER APPROVAL"), in no event shall the total number of shares of
Common Stock issued upon
36
<PAGE>
conversion of the Series B Preferred Stock (including any shares of capital
stock or rights to acquire shares of capital stock issued by the Corporation
which are aggregated or integrated with the Common Stock issued or issuable upon
conversion of the Series B Preferred Stock for purposes of any such rule or
regulation) exceed the maximum number of shares of Common Stock that the
Corporation can so issue pursuant to any rule of the principal United States
securities market on which the Common Stock trades (including Rule 4460(i) of
the Nasdaq Stock Market or any successor rule)(the "MAXIMUM SHARE AMOUNT")
which, as of the Issue Date, shall be 4,614,296 (19.99% of the total shares of
Common Stock outstanding on the Issue Date), subject to equitable adjustments
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the Issue Date. With respect to each holder of Series B Preferred Stock, the
Maximum Share Amount shall refer to such holder's pro rata share thereof
--------
determined in accordance with Article XI below. In the event that (a) the
aggregate number of shares of Common Stock actually issued upon conversion of
the Series B Preferred Stock represents at least twenty percent (20%) of the
Maximum Share Amount and (b) the sum of (x) the aggregate number of shares of
Common Stock actually issued upon conversion of the outstanding Series B
Preferred Stock plus (y) the aggregate number of shares of Common Stock that
----
remain issuable upon conversion of Series B Preferred Stock at the then
effective Conversion Price, represents at least one hundred percent (100%) of
the Maximum Share Amount (the "TRIGGERING EVENT"), the Corporation will use its
best efforts to seek and obtain Stockholder Approval (or obtain such other
relief as will allow conversions hereunder in excess of the Maximum Share
Amount) as soon as practicable following the Triggering Event.
B. CONVERSION PRICE.
----------------
(a) CALCULATION OF CONVERSION PRICE. Subject to subparagraph (b)
-------------------------------
below, the "CONVERSION PRICE" shall be (i) prior to the earliest of (A) December
22, 1999, (B) the date the Corporation makes a public announcement that it
intends to merge or consolidate with any other corporation (other than a merger
in which the Corporation is the continuing Corporation and the capital stock of
the Corporation remains unchanged) or sell or transfer substantially all of the
assets of the Corporation, (C) the date any person, group or entity (including
the Corporation) publicly announces a tender offer to purchase 50% or more of
the Corporation's Common Stock (or any other takeover scheme), (D) the date
there is a material adverse change in the business, operations, assets,
financial condition or prospects of the Corporation or its subsidiaries, taken
as a whole or (E) the occurrence of any Mandatory Redemption Event or after
delivery of any Qualified Public Offering Redemption Notice by the Corporation
(the earliest of such dates being hereafter referred to as the "MARKET PRICE
TRIGGER DATE"), the Fixed Conversion Price and (ii) beginning on the Market
Price Trigger Date, the lesser of the Market Price and the Fixed Conversion
Price; provided, however, that in the event the Market Price Trigger Date arises
-----------------
as a result of the delivery of a Qualified Public Offering Redemption Notice
prior to December 22, 1999, then, during the period beginning on the date the
Qualified Public Offering Redemption Notice is delivered to the holders of the
Series B Preferred Stock and ending on the earlier of (x) the Qualified Public
Offering Redemption Date and (y) December 21, 1999, the average Conversion Price
for the shares of Series B Preferred Stock converted during such period shall be
no less than the price of the Common Stock offered in the Qualified Public
Offering (with an adjustment to be made after the consummation of the Qualified
Public Offering, if necessary, in the number of shares of Common Stock issued
upon
37
<PAGE>
conversion of the Series B Preferred Stock by the Corporation and the holders of
the Series B Preferred Stock who have converted during such period). The
Conversion Price shall be subject to adjustments pursuant to the provisions of
Article VI.C below. "MARKET PRICE" shall mean the average of the Closing Bid
Prices for any three (3) consecutive Trading Days (the "MARKET PRICE DAYS")
during the ten (10) Trading Day period ending one (1) Trading Day prior to the
date (the "CONVERSION DATE") the Notice of Conversion (as defined in Article
VI.E) is sent by a holder to the Corporation via facsimile (the "PRICING
PERIOD"). The Market Price Days shall be designated by the converting holder at
the time of conversion (from among the days comprising the Pricing Period) and
such designation shall be set forth in the Conversion Notice. "FIXED CONVERSION
PRICE" shall mean $104.00. "CLOSING BID PRICE" means, for any security as of any
date, the closing bid price on Nasdaq as reported by Bloomberg or, if Nasdaq is
not the principal trading market for such security, the closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the closing bid price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price of such security is available in the over-the-counter
market on the electronic bulletin board for such security or in any of the
foregoing manners, the average of the bid prices of any market makers for such
security that are listed in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date in the manner provided above, the Closing Bid Price shall be the fair
market value as mutually determined by the Corporation and the holders of a
majority in interest of shares of Series B Preferred Stock being converted for
which the calculation of the Closing Bid Price is required in order to determine
the Conversion Price of such Series B Preferred Stock. "TRADING DAY" shall mean
any day on which the Common Stock is traded for any period on Nasdaq, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
(b) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS. Notwithstanding
-------------------------------------------
anything contained in subparagraph (a) of this Paragraph B to the contrary, in
the event the Corporation (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Corporation is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of the
Corporation or (ii) any person, group or entity (including the Corporation)
publicly announces a tender offer to purchase 50% or more of the Corporation's
Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price that would otherwise be in
effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in subparagraph (a) of this
Article VI.B. For purposes hereof, "ADJUSTED CONVERSION PRICE TERMINATION DATE"
shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this
subparagraph (b) has been made, the date upon which the Corporation (in the case
of clause (i) above) or the person, group or entity (in the case of clause (ii)
above) consummates or publicly announces the termination or abandonment of the
proposed transaction or tender offer (or takeover scheme) which caused this
subparagraph (b) to become operative.
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<PAGE>
C. ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price shall be
-------------------------------
subject to adjustment from time to time as follows:
(a) ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK SPLIT, STOCK
--------------------------------------------------------
DIVIDEND, ETC. If at any time when Series B Preferred Stock is issued and
- --------------
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Trading Price (as defined below) to all holders of
Common Stock or other similar event, which event shall have taken place during
the reference period for determination of the Conversion Price for any Optional
Conversion or Automatic Conversion of the Series B Preferred Stock, then the
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event. In
such event, the Corporation shall notify the Transfer Agent of such change on or
before the effective date thereof. "TRADING PRICE," which shall be measured as
of the record date in respect of the rights offering, means (i) the average of
the last reported sale prices for the shares of Common Stock on Nasdaq as
reported by Bloomberg, as applicable, for the five (5) Trading Days immediately
preceding such date, or (ii) if Nasdaq is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Trading Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, (b) at the option of a majority-in-interest of the holders of
the outstanding Series B Preferred Stock by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Corporation.
(b) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time
---------------------------------------------
when Series B Preferred Stock is issued and outstanding and prior to the
conversion of all Series B Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation, then the holders of Series B Preferred Stock shall thereafter have
the right to receive upon conversion of the Series B Preferred Stock, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the holders of Series B Preferred Stock would
have been entitled to receive in such transaction had the Series B Preferred
Stock been converted in full immediately prior to such transaction (without
regard to any limitations on conversion contained herein), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series B Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares of Common Stock issuable upon conversion of
the Series B Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities or assets thereafter deliverable
upon the
39
<PAGE>
conversion of Series B Preferred Stock. The Corporation shall not effect any
transaction described in this subsection (b) unless (a) it first gives, to the
extent practical, thirty (30) days' prior written notice (but in any event at
least fifteen (15) business days prior written notice) of the record date of the
special meeting of stockholders to approve, or if there is no such record date,
the consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the holders of Series B Preferred Stock shall be entitled to
convert the Series B Preferred Stock) and (b) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this subsection (b). The above provisions shall similarly apply
to successive consolidations, mergers, sales, transfers or share exchanges.
(c) ADJUSTMENT FOR UNDERWRITERS' LOCK-UP. In the event the holders
------------------------------------
of Series B Preferred Stock are required to enter into a Lock-Up Agreement (as
defined in Section 4(f) of the Registration Rights Agreement), from the
beginning of such Underwriters' Lock-Up Period (as defined in Section 4(f) of
the Registration Rights Agreement) until the fifth (5th) Trading Day following
the last day of such Underwriters' Lock-Up Period, the Conversion Price shall
not exceed the lesser of (i) the Fixed Conversion Price and (ii) the Market
Price in effect one (1) Trading Day prior to the beginning of such Underwriters'
Lock-Up Period.
(d) ADJUSTMENT DUE TO DISTRIBUTION. Subject to Article III, if the
------------------------------
Corporation shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or distribution
to the Corporation's shareholders in cash or shares (or rights to acquire
shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "DISTRIBUTION"),
then the holders of Series B Preferred Stock shall be entitled, upon any
conversion of shares of Series B Preferred Stock after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the holder with respect to the
shares of Common Stock issuable upon such conversion had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.
(e) PURCHASE RIGHTS. Subject to Article III, if at any time when
---------------
any Series B Preferred Stock is issued and outstanding, the Corporation issues
any convertible securities or rights to purchase stock, warrants, securities or
other property (the "PURCHASE RIGHTS") pro rata to the record holders of any
class of Common Stock, then the holders of Series B Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Series B Preferred Stock (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
(f) ADJUSTMENT FOR RESTRICTED PERIODS. In the event that (i) the
---------------------------------
Corporation fails to obtain effectiveness with the Securities and Exchange
Commission of any Registration Statement (as defined in the Registration Rights
Agreement) required to be filed pursuant to the Registration Rights Agreement on
or prior to the date on which such Registration
40
<PAGE>
Statement is required to become effective pursuant to the terms of the
Registration Rights Agreement, or (ii) any such Registration Statement lapses in
effect, or sales of all of the Registrable Securities (as defined in the
Registration Rights Agreement) otherwise cannot be made thereunder, whether by
reason of the Corporation's failure or inability to amend or supplement the
prospectus (the "PROSPECTUS") included therein in accordance with the
Registration Rights Agreement or otherwise, after such Registration Statement
becomes effective (including, without limitation, during an Allowed Delay (as
defined in Section 3(f) of the Registration Rights Agreement), then, if any
holder of Series B Preferred Stock elects to convert the shares of Series B
Preferred Stock held by such holder into Common Stock at any time during the
period beginning on the first day of the Restricted Period (as defined below)
and ending one (1) Trading Day after the end of such Restricted Period, at the
election of each holder of Series B Preferred Stock, the Pricing Period shall be
comprised of, (x) in the case of an event described in clause (i), the ten (10)
Trading Days preceding the date on which such Registration Statement is required
to become effective pursuant to the terms of the Registration Rights Agreement
plus all Trading Days through and including the third (3rd) Trading Day
following the actual date of effectiveness of the Registration Statement; and
(y) in the case of an event described in clause (ii), the ten (10) Trading Days
preceding the date on which the holder of the Series B Preferred Stock is first
notified that sales may not be made under the Prospectus, plus all Trading Days
through and including the third (3rd) Trading Day following the date on which
the Holder is first notified that such sales may again be made under the
Prospectus (such periods described in clauses (x) and (y) shall be referred to
as the "RESTRICTED PERIODS"). If a holder of Series B Preferred Stock determines
that sales may not be made pursuant to the Prospectus (whether by reason of the
Corporation's failure or inability to amend or supplement the Prospectus or
otherwise) it shall so notify the Corporation in writing and, unless the
Corporation provides such holder with a written opinion of the Corporation's
counsel to the contrary, such determination shall be binding for purposes of
this paragraph.0
(g) NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
---------------------
readjustment of the Conversion Price pursuant to this Article VI.C, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series B Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series B Preferred Stock.
D. MECHANICS OF CONVERSION. In order to convert Series B Preferred Stock
-----------------------
into full shares of Common Stock, a holder of Series B Preferred Stock shall:
(i) submit a copy of the fully executed notice of conversion in the form
attached hereto as Exhibit A ("NOTICE OF CONVERSION") to the Corporation by
facsimile dispatched on the Conversion Date (or by other means resulting in, or
reasonably expected to result in, notice to the Corporation on the Conversion
Date) at the office of the Corporation or its designated Transfer Agent for the
Series B Preferred Stock that the holder elects to convert the same, which
notice shall specify the number of shares of Series B Preferred Stock to be
converted, the applicable Conversion Price and a calculation of the number of
shares of Common Stock issuable upon such conversion
41
<PAGE>
(together with a copy of the first page of each certificate to be converted)
prior to Midnight, New York City time (the "CONVERSION NOTICE DEADLINE") on the
date of conversion specified on the Notice of Conversion; and (ii) surrender the
original certificates representing the Series B Preferred Stock being converted
(the "PREFERRED STOCK CERTIFICATES"), duly endorsed, along with a copy of the
Notice of Conversion to the office of the Corporation or the Transfer Agent for
the Series B Preferred Stock as soon as practicable thereafter. The Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
Certificates are delivered to the Corporation or its Transfer Agent as provided
above, or the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within two (2) business days of receipt of the Notice of
Conversion. The accountant shall audit the calculations and notify the
Corporation and the holder of the results no later than 48 hours from the time
it receives the disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
(a) LOST OR STOLEN CERTIFICATES. Upon receipt by the Corporation
----------------------------
of evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series B Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Corporation shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date.
(b) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the surrender of
-----------------------------------------
certificates as described above together with a Notice of Conversion, the
Corporation shall issue and, within two (2) business days after such surrender
(or, in the case of lost, stolen or destroyed certificates, after provision of
agreement and indemnification pursuant to subparagraph (a) above) (the "DELIVERY
PERIOD"), deliver (or cause its Transfer Agent to so issue and deliver) in
accordance with the terms hereof and the Purchase Agreement (including, without
limitation, in accordance with the requirements of Section 2(g) of the Purchase
Agreement) to or upon the order of the holder (i) that number of shares of
Common Stock for the portion of the shares of Series B Preferred Stock converted
as shall be determined in accordance herewith and (ii) a certificate
representing the balance of the shares of Series B Preferred Stock not
converted, if any. In addition to any other remedies available to the holder,
including actual damages and/or equitable relief, the Corporation shall pay to a
holder $2,000 per day in cash for each day beyond a two (2) day grace period
following the Delivery Period that the Corporation fails to deliver Common Stock
(a "DELIVERY DEFAULT") issuable upon surrender of shares of Series B Preferred
Stock with a Notice of Conversion until such time as the Corporation has
delivered all such Common Stock (the "DELIVERY DEFAULT PAYMENTS"). Such Delivery
Default Payments shall be paid to such holder by the fifth day of the month
following the month in which it has accrued or, at the option of the holder (by
written notice to the Corporation by the first day of the month following the
month in which it has accrued), shall be convertible into Common Stock in
accordance with the terms of this Article VI.
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In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Corporation's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the holder and its compliance with
the provisions contained in Article VI.A and in this Article VI.D, the
Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) CASH IN LIEU OF FRACTIONAL SHARES. If any conversion of Series
---------------------------------
B Preferred Stock would result in a fractional share of Common Stock or the
right to acquire a fractional share of Common Stock, the Corporation shall pay
to the holder of such fractional share, cash in lieu of such fractional share in
an amount equal to such fraction multiplied by the Closing Price of the Common
Stock on the Conversion Date.
(d) CONVERSION DATE. The "CONVERSION DATE" shall be the date
----------------
specified in the Notice of Conversion, provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Corporation or its Transfer Agent before Midnight,
New York City time, on the Conversion Date. The person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the record holder or holders of such securities as of the
Conversion Date and all rights with respect to the shares of Series B Preferred
Stock surrendered shall forthwith terminate except the right to receive the
shares of Common Stock or other securities or property issuable on such
conversion and except that the holders preferential rights as a holder of Series
B Preferred Stock shall survive to the extent the Corporation fails to deliver
such securities.
E. RESERVATION OF SHARES. A number of shares of the authorized but unissued
---------------------
Common Stock sufficient to provide for the conversion of the Series B Preferred
Stock outstanding (based on the lesser of the then current Market Price and the
Fixed Conversion Price) shall at all times be reserved by the Corporation, free
from preemptive rights, for such conversion or exercise. As of the date of
issuance of the Series B Preferred Stock, 2,083,332 authorized and unissued
shares of Common Stock have been duly reserved for issuance upon conversion of
the Series B Preferred Stock (the "RESERVED AMOUNT"). The Reserved Amount shall
be increased from time to time in accordance with the Company's obligations
pursuant to Section 4(h) of the Purchase Agreement. In addition, if the
Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Preferred Stock shall be convertible, the Corporation
shall at the same time also make proper provision so that thereafter there shall
be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Series B Preferred
Stock.
If at any time a holder of shares of Series B Preferred Stock submits a Notice
of Conversion, and the Corporation does not have sufficient authorized but
unissued shares of Common Stock available to effect such conversion in
accordance with the provisions of this Article VI (a "CONVERSION DEFAULT"),
subject to Article XI, the Corporation shall issue to the
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<PAGE>
holder all of the shares of Common Stock which are available to effect such
conversion. The number of shares of Series B Preferred Stock included in the
Notice of Conversion which exceeds the amount which is then convertible into
available shares of Common Stock (the "EXCESS AMOUNT") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by the holder in respect thereof. The Corporation shall
use its best efforts to effect an increase in the authorized number of shares of
Common Stock as soon as possible following the earlier of (i) such time that a
holder of Series B Preferred Stock notifies the Corporation or that the
Corporation otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof and
(ii) a Conversion Default. In addition, the Corporation shall pay to the holder
payments ("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in the amount
of (a) .24, multiplied by (b) the sum of the Stated Value plus the Premium
Amount per share of Series B Preferred Stock held by such holder through the
Authorization Date (as defined below), multiplied by (c) (N/365), where N = the
number of days from the day the holder submits a Notice of Conversion giving
rise to a Conversion Default (the "CONVERSION DEFAULT DATE") to the date (the
"AUTHORIZATION DATE") that the Corporation authorizes a sufficient number of
shares of Common Stock to effect conversion of the full number of shares of
Series B Preferred Stock. The Corporation shall send notice to the holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of holder's accrued Conversion Default Payments. The accrued
Conversion Default Payment for each calendar month shall be paid in cash or
shall be convertible into Common Stock at the applicable Conversion Price, at
the holder's option, as follows:
(a) In the event the holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event the holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of Conversion) at any time after the
fifth day of the month following the month in which it has accrued in accordance
with the terms of this Article VI (so long as there is then a sufficient number
of authorized shares of Common Stock).
The holder's election shall be made in writing to the Borrower at any time
prior to 9:00 p.m, New York City Time, on the third (3rd) day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Corporation's
failure to maintain a sufficient number of authorized shares of Common Stock,
and each holder shall have the right to pursue all remedies available at law or
in equity (including a decree of specific performance and/or injunctive relief).
44
<PAGE>
F. NOTICE OF CONVERSION PRICE ADJUSTMENTS. Upon the occurrence of each
--------------------------------------
adjustment or readjustment of the Conversion Price pursuant to this Article VI,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of a share of
Series B Preferred Stock.
G. STATUS AS STOCKHOLDERS. Upon submission of a Notice of Conversion by a
----------------------
holder of Series B Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed
such holder's allocated portion of the Reserved Amount or Maximum Share Amount)
shall be deemed converted into shares of Common Stock and (ii) the holder's
rights as a holder of such converted shares of Series B Preferred Stock shall
cease and terminate, excepting only the right to receive certificates for such
shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such holder because of a failure by the
Corporation to comply with the terms of this Certificate of Designation.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to a conversion of shares of
Series B Preferred Stock for any reason, then (unless the holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Corporation) the holder shall regain the rights of a holder of such shares of
Series B Preferred Stock with respect to such unconverted shares of Series B
Preferred Stock and the Corporation shall, as soon as practicable, return such
unconverted shares of Series B Preferred Stock to the holder or, if such shares
of Series B Preferred Stock have not been surrendered, adjust its records to
reflect that such shares of Series B Preferred Stock have not been converted.
In all cases, the holder shall retain all of its rights and remedies (including,
without limitation, (i) the right to receive Conversion Default Payments
pursuant to Article VI.E to the extent required thereby for such Conversion
Default and any subsequent Conversion Default and (ii) the right to have the
Conversion Price with respect to subsequent conversions determined in accordance
with Article VI.E.) for the Corporation's failure to convert the Series B
Preferred Stock.
VIIA CONVERSION BY THE CORPORATION
-----------------------------
Subject to the limitations on conversion set forth in Article VI.A(c) and so
long as (i) all of the shares of Common Stock issuable upon conversion of all
outstanding shares of Series B Preferred Stock are then (x) authorized and
reserved for issuance, (y) registered for re-sale under the 1933 Act by the
holders of the Series B Preferred Stock (or may otherwise be resold publicly
without restriction) and (z) eligible to be traded on Nasdaq, the NYSE, the AMEX
or Nasdaq SmallCap and (ii) there is not then a continuing Mandatory Redemption
Event or Trading Market Redemption Event, then, at any time after the one (1)
year anniversary of the date the Registration Statement required to be filed
pursuant to Section 2(a) of the Registration
45
<PAGE>
Rights Agreement is declared effective by the SEC (subject to extension for each
Trading Day following effectiveness that sales of all of the Registrable
Securities (as defined in the Registration Rights Agreement) cannot be made
pursuant to the Registration Statement (whether by reason of the Company's
failure to properly supplement or amend the prospectus included therein in
accordance with the terms of the Registration Rights Agreement, during an
Allowed Delay or otherwise), if the average Closing Bid Price of the Common
Stock during any twenty (20) consecutive Trading Day period is greater than 150%
of the Fixed Conversion Price (a "FORCED CONVERSION TRIGGER EVENT"), the
Corporation shall have the right, exercisable on not less than fifteen (15)
Trading Days prior written notice (the "CORPORATION CONVERSION NOTICE") to the
holders of the Series B Preferred Stock (which notice may not be sent to the
holders of the Series B Preferred Stock until the Corporation is permitted to
convert the Series B Preferred Stock pursuant to this Article VII but must be
sent withing five (5) Trading Days of a Forced Conversion Trigger Event), to
convert all of the outstanding shares of Series B Preferred Stock into shares of
Common Stock in accordance with this Article VII and Article VI; provided,
--------
however, that a Corporation Conversion shall not be permitted if during the
- -------
period beginning on the date the Corporation Conversion Notice is delivered to
the holders of the Series B Preferred Stock and ending on the Trading Day prior
to the Corporation Conversion Date the average Closing Bid Price of the Common
Stock for any five (5) consecutive Trading Days during such period is not
greater than 150% of the Fixed Conversion Price. Any conversion hereunder (a
"CORPORATION CONVERSION") shall be as of the date (the "CORPORATION CONVERSION
DATE") specified in the Corporation Conversion Notice (but in no event prior to
the fifteenth (15) trading day following the date of such notice). The
Corporation Conversion shall be delivered to the holders of Series B Preferred
Stock at their registered addresses appearing on the books and records of the
Corporation, which notice shall contain substantially the same information as
the Notice of Conversion described in Article VI.E. The Corporation Conversion
Date shall be the "Conversion Date" for purposes of determining the Conversion
Price and the time within which certificates representing the Common Stock must
be delivered to the holder upon a Corporation Conversion.
VIIIA AUTOMATIC CONVERSION
--------------------
Subject to the limitations on conversion set forth in Articles VI.A(b) and
VI.A(c) and so long as (i) all of the shares of Common Stock issuable upon
conversion of all outstanding shares of Series B Preferred Stock are then (x)
authorized and reserved for issuance, (y) registered for re-sale under the 1933
Act by the holders of the Series B Preferred Stock (or may otherwise be resold
publicly without restriction) and (z) eligible to be traded on Nasdaq, the NYSE,
the AMEX or Nasdaq SmallCap and (ii) there is not then a continuing Mandatory
Redemption Event or Trading Market Redemption Event, each share of Series B
Preferred Stock issued and outstanding on December 22, 2000 (the "AUTOMATIC
CONVERSION DATE"), automatically shall be converted into shares of Common Stock
on such date at the then effective Market Price in accordance with, and subject
to, the provisions of Article VI hereof (the "AUTOMATIC CONVERSION"). The
Automatic Conversion Date shall be delayed by one (1) Trading Day for each
Trading Day occurring prior thereto and prior to the full conversion of the
Series B Preferred Stock that (i) any Registration Statement required to be
filed and to be effective pursuant to the Registration Rights Agreement is not
effective or sales of all of the Registrable Securities (as defined in the
Registration Rights Agreement) otherwise cannot be
46
<PAGE>
made thereunder (whether by reason of the Company's failure to properly
supplement or amend the prospectus included therein in accordance with the terms
of the Registration Rights Agreement or otherwise, including any Allowed Delays
(as defined in Section 3(f) of the Registration Rights Agreement), (ii) any
Mandatory Redemption Event (as defined in Article V.A) or Trading Market
Redemption Event exists, without regard to whether any cure periods shall have
run, (iii) that the Corporation is in breach of any of its obligations pursuant
to Section 4(h) of the Purchase Agreement or (iv) at the option of each holder
of Series B Preferred Stock, such holder is subject to a Lock-Up Agreement (as
defined in the Registration Rights Agreement). The Automatic Conversion Date
shall be the Conversion Date for purposes of determining the Conversion Price
(using the Market Price as the Conversion Price) and the time within which
certificates representing the Common Stock must be delivered to the holder.
IXA VOTING RIGHTS
-------------
The holders of the Series B Preferred Stock have no voting power whatsoever,
except as otherwise provided by the Delaware General Corporation Law ("DGCL"),
in this Article IX, and in Article X below.
Notwithstanding the above, the Corporation shall provide each holder of Series
B Preferred Stock with prior notification of any meeting of the shareholders
(and copies of proxy materials and other information sent to shareholders). In
the event of any taking by the Corporation of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment of
any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the Series B
Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series B
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series B Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL holders
of the Series B Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series B Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion
Price is calculated. Holders of the Series B Preferred Stock shall be entitled
to notice of all shareholder meetings or
47
<PAGE>
written consents (and copies of proxy materials and other information sent to
shareholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.
XA PROTECTIVE PROVISIONS
---------------------
So long as shares of Series B Preferred Stock are outstanding, the Corporation
shall not, without first obtaining the approval (by vote or written consent, as
provided by the DGCL) of the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series B Preferred Stock or any capital stock of the Corporation so as to affect
adversely the Series B Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article II hereof, "SENIOR SECURITIES");
(c) create any new class or series of capital stock ranking pari
----
passu with the Series B Preferred Stock as to distribution of assets upon
- -----
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article II hereof, "PARI PASSU SECURITIES");
---- ----- ----------
(d) increase the authorized number of shares of Series B Preferred
Stock;
(e) issue any Senior Securities or Pari Passu Securities;
---- -----
(f) increase the par value of the Common Stock, or
(g) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event holders of at least a majority of the then outstanding shares of
Series B Preferred Stock agree to allow the Corporation to alter or change the
rights, preferences or privileges of the shares of Series B Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series B Preferred Stock,
then the Corporation will deliver notice of such approved change to the holders
of the Series B Preferred Stock that did not agree to such alteration or change
(the "DISSENTING HOLDERS") and Dissenting Holders shall have the right for a
period of thirty (30) days to convert pursuant to the terms of this Certificate
of Designation as they exist prior to such alteration or change or continue to
hold their shares of Series B Preferred Stock.
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XIA PRO RATA ALLOCATIONS
--------------------
The Maximum Share Amount, the Cap Amount and the Reserved Amount (including
any increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series B Preferred Stock based on the number of shares of Series B
Preferred Stock issued to each holder. Each increase to the Maximum Share
Amount, the Cap Amount and the Reserved Amount shall be allocated pro rata among
the holders of Series B Preferred Stock based on the number of shares of Series
B Preferred Stock held by each holder at the time of the increase in the Maximum
Share Amount, the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series B Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Maximum Share Amount, the Cap Amount and Reserved Amount. Any
portion of the Maximum Share Amount, the Cap Amount or Reserved Amount which
remains allocated to any person or entity which does not hold any Series B
Preferred Stock shall be allocated to the remaining holders of shares of Series
B Preferred Stock, pro rata based on the number of shares of Series B Preferred
Stock then held by such holders.
49
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of
the Corporation this 22nd day of December, 1998.
CMGI, INC.
By: /s/Andrew J. Hajducky III
-----------------------------
Andrew J. Hajducky III
Executive Vice President
50
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares of Series B
Preferred Stock, represented by stock certificate No(s). __________ (the
"PREFERRED STOCK CERTIFICATES") into shares of common stock ("COMMON STOCK") of
CMGI, Inc., a Delaware corporation (the "CORPORATION") according to the
conditions of the Certificate of Designation of Series B Preferred Stock, as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC
----
Transfer").
- --------
Name of DTC Prime Broker:
-------------------------------------------------
Account Number:
-------------------------------------------------
In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Corporation issue a certificate or certificates for the
number of shares of Common Stock set forth above (which numbers are based
on the Holder's calculation attached hereto) in the name(s) specified
immediately below or, if additional space is necessary, on an attachment
hereto:
Name:
------------------------------------------------------------------------
Address:
--------------------------------------------------------------------
--------------------------------------------------------------------
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series B Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "ACT"), or pursuant
to an exemption from registration under the Act.
Date of Conversion:
------------------------------------------------
Market Price Days:
------------------------------------------------
Applicable Conversion Price:
---------------------------------------
Number of Shares of
Common Stock to be Issued:
---------------------------------------
Signature:
---------------------------------------------------------
Name:
---------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
*The Corporation is not required to issue shares of Common Stock until the
original Series B Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments pursuant to the Certificate of Designation for the number of business
days such issuance and delivery is late.
51