EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
EXPEDIA, INC.
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
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Expedia, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "CORPORATION"),
hereby certifies that the following resolution was duly adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (hereinafter called the "BOARD OF
DIRECTORS" or the "BOARD") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of preferred
stock, par value $0.001 per share, of the Corporation (the "PREFERRED STOCK"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Section 1. DESIGNATION AND AMOUNT. The designation of such series of
Preferred Stock authorized by this resolution shall be the Series A Cumulative
Convertible Preferred Stock (the "SERIES A CONVERTIBLE PREFERRED STOCK"). The
number of shares of Series A Convertible Preferred Stock shall be 1,000. The
face value of the Series A Convertible Preferred Stock shall be $22.23 (the
"FACE VALUE").
Section 2. RANK AND TERM. All shares of Series A Convertible Preferred
Stock shall rank prior, both as to payment of dividends and as to distributions
of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, to all of the now or hereafter issued classes
of common stock, $0.001 par value per share, of the Corporation (the "COMMON
STOCK"). No other preferred stock of the Corporation shall rank senior to the
Series A Convertible Preferred Stock with respect to payment upon liquidation or
payment of dividends without the consent of the holders of record of the Series
A Convertible Preferred Stock (the "HOLDERS") representing a majority of the
Series A Convertible Preferred Stock then outstanding. At the close of business
on February 4, 2022 (the "EXPIRATION DATE"), without any further action on the
part of the Corporation or any Holder, but subject to payment of all accrued and
unpaid dividends on the Series A Convertible Preferred Stock, all then
outstanding shares of Series A Convertible Preferred Stock shall automatically
be converted to common stock in conformance
with the provisions of Section 6 and no shares of Series A Convertible Preferred
Stock shall thereafter be issued or outstanding.
Section 3. DIVIDENDS. The Holders shall be entitled to receive, whether or
not dividends are declared by the Board out of funds at the time legally
available therefor, annual dividends in the amount of (a) 1.99% of the Face
Value per annum per share of Series A Convertible Preferred Stock, plus (b) the
excess, if any, of the value of any dividends paid with respect to the number of
shares of Common Stock into which each outstanding share of the Series A
Convertible Preferred Stock is then convertible over the amount described in
clause (a), and no more. Dividends on the Series A Convertible Preferred Stock
shall be fully cumulative, shall accrue without interest from the date of first
issuance, and shall be payable quarterly in arrears on February 15, May 15,
August 15 and November 15 (each, a "DIVIDEND DATE") of each year (except that if
any such date is a Saturday, Sunday or Legal Holiday, then such dividend shall
be payable on the next succeeding day that is not a Saturday, Sunday or Legal
Holiday) to holders of record as they appear on the stock transfer books of the
Corporation on the close of business on the fifth Business Day prior to such
Dividend Date, it being understood that the first dividend payment hereunder
shall be made on November 15, 2005 and shall be made in respect of a full
quarterly dividend period. All dividends on the Series A Convertible Preferred
Stock are payable, at the Corporation's option, in cash, shares of Common Stock
or any combination thereof, with the Common Stock valued at the Market Price (as
defined below) as of the applicable Dividend Date. For purposes hereof, the term
"LEGAL HOLIDAY" shall mean any day on which banking institutions are authorized
to close in New York, New York. Dividends on account of arrears for any past
dividend period may be declared and paid at any time, without reference to any
regular dividend payment date. The amount of dividends payable per share of
Series A Convertible Preferred Stock with respect to the amounts determined
pursuant to clause (a) of this paragraph for each quarterly dividend period
shall be computed by dividing the annual amount determined pursuant to such
clause (a) by four. The amount of dividends payable for the initial dividend
period and any period shorter than a full quarterly dividend period shall be
computed on the basis of the number of days actually elapsed of a 360-day year,
provided that in no event shall the dividend amount for any period shorter than
a full quarterly dividend period be greater than the full quarterly dividend
amount.
If the Corporation elects to pay all or any portion of a dividend in
shares of Common Stock, the number of shares of Common Stock to be delivered by
the Corporation for each share of Series A Convertible Preferred Stock held by a
Holder shall equal (x) the cash value of the dividend (or portion of a dividend)
to be paid with Common Stock divided by (y) the Market Price. The "MARKET PRICE"
shall be equal to the average of the daily Closing Prices (as defined below) of
the Common Stock for the 10 consecutive Trading Days (as defined below) ending
on the second Trading Day immediately preceding the applicable Dividend Date (or
other date with respect to which the Market Price is to be determined). The
"CLOSING PRICE" for each Trading Day shall be the last reported sales price
regular way, during regular trading hours, or, in case no such reported sales
takes place on such day, the average of the closing bid and asked prices regular
way, during regular trading hours, for such day, in each case on The Nasdaq
Stock Market or, if not listed or quoted on such market, on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for the Common Stock as
published by the National Association of Securities Dealers Automated Quotation
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System ("NASDAQ"), or if such last sale price is not so published by NASDAQ or
if no such sale takes place on such day, the mean between the closing bid and
asked prices for the Common Stock as published by NASDAQ. If the shares of
Common Stock are not listed or admitted to trading on a national securities
exchange or quoted by NASDAQ, the Market Price shall be determined in good faith
by the Board of Directors of the Corporation or, if such determination cannot be
made, by a nationally recognized independent investment banking firm selected in
good faith by the Board of Directors of the Corporation. "TRADING DAY" shall
mean a day on which the securities exchange utilized for the purpose of
calculating the Market Price shall be open for business or, if the shares of
Common Stock shall not be listed on such exchange for such period, a day with
respect to which quotations of the character referred to in the next preceding
sentence shall be reported. In lieu of any fractional share of Common Stock
which would otherwise be issued in payment for a dividend on Series A
Convertible Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount in cash (computed to the
nearest cent) equal to the Market Price multiplied by the fractional interest
that otherwise would have been deliverable as a dividend on such Series A
Convertible Preferred Stock.
On each Dividend Date all dividends which shall have accrued on each
share of Series A Convertible Preferred Stock outstanding on such Dividend Date
shall accumulate and be deemed to become "due" whether or not there shall be
funds legally available for the payment thereof. Any dividend which shall not be
paid on the Dividend Date on which it shall become due shall be deemed to be
"past due" until such dividend shall be paid or until the share of Series A
Convertible Preferred Stock with respect to which such dividend became due shall
no longer be outstanding, whichever is the earlier to occur. No interest, sum of
money in lieu of interest, or other property or securities shall be payable in
respect of any dividend payment or payments which are past due. Dividends paid
on shares of Series A Convertible Preferred Stock in an amount less than the
total amount of such dividends at the time accumulated and payable on such
shares shall be allocated PRO RATA on a share-by-share basis among all such
shares at the time outstanding.
No dividends shall be paid or declared and set apart for payment on the
Corporation's Common Stock or on any class or series of the Corporation's
capital stock ranking, as to dividends, on a parity with the Series A
Convertible Preferred Stock (the "PARITY DIVIDEND STOCK") for any period unless
full cumulative dividends have been, or contemporaneously are, paid or declared
and set apart for such payment on the Series A Convertible Preferred Stock for
all dividend payment periods terminating on or prior to the date of payment of
such full cumulative dividends. No dividends shall be paid or declared and set
apart for payment on the Series A Convertible Preferred Stock for any period
unless cumulative dividends have been, or contemporaneously are, paid or
declared and set apart for payment on the Parity Dividend Stock for all dividend
periods terminating on or prior to the date of payment of such full cumulative
dividends. When dividends are not paid in full upon the Series A Convertible
Preferred Stock and the Parity Dividend Stock, all dividends paid or declared
and set aside for payment upon shares of Series A Convertible Preferred Stock
and the Parity Dividend Stock shall be paid or declared and set aside for
payment PRO RATA so that the amount of dividends paid or declared and set aside
for payment per share on the Series A Convertible Preferred Stock and the Parity
Dividend Stock shall in all cases bear to each other the same ratio that accrued
and
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unpaid dividends per share on the shares of Series A Convertible Preferred Stock
and the Parity Dividend Stock bear to each other.
Section 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Holders shall be entitled to receive out of the assets of the Corporation,
whether such assets are stated capital or surplus of any nature, an amount equal
to the dividends accrued and unpaid thereon to the date of final distribution to
such Holders, whether or not declared, without interest, plus a sum per share of
Series A Convertible Preferred Stock equal to the greater of (a) $22.23 and (b)
the liquidating distribution that would be paid with respect to the number of
shares of Common Stock into which a share of Series A Convertible Preferred
Stock is then convertible, and no more. Such final distribution on the shares of
the Series A Convertible Preferred Stock shall be made before any payment is
made or assets are distributed to the holders of Common Stock or any other class
or series of the Corporation's capital stock ranking junior as to liquidation
rights to the Series A Convertible Preferred Stock (the "JUNIOR LIQUIDATION
STOCK"). In the event the assets of the Corporation available for distribution
to stockholders upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to pay in
full the amounts payable with respect to the Series A Convertible Preferred
Stock and any other class or series of the Corporation's capital stock which may
hereafter be created having parity as to liquidation rights with the Series A
Convertible Preferred Stock (the "PARITY LIQUIDATION STOCK"), the Holders and
the holders of the Parity Liquidation Stock shall share ratably in any
distribution of assets of the Corporation in proportion to the full respective
preferential amounts to which they are entitled (but only to the extent of such
preferential amounts). After payment in full of the liquidation preferences of
the shares of Series A Convertible Preferred Stock, the Holders shall not be
entitled to any further participation in any distribution of assets by the
Corporation by virtue of their ownership of the Series A Convertible Preferred
Stock. Except as set forth in Section 6(i), neither a consolidation, merger or
other business combination of the Corporation with or into another corporation
or other entity nor a sale or transfer of all or part of the Corporation's
assets for cash, securities or other property or any combination thereof shall
be considered a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4 (unless in connection therewith the liquidation of
the Corporation is specifically approved).
A Holder shall not be entitled to receive any payment owed for such
shares under this Section 4 until such Holder shall cause to be delivered to the
Corporation (i) the certificate(s) representing such shares of Series A
Convertible Preferred Stock (or, in the event such certificate(s) have been lost
or destroyed, an affidavit of the Holder of loss or destruction reasonably
satisfactory to the Corporation as well as other support as reasonably requested
by the Corporation) and (ii) transfer instrument(s) reasonably satisfactory to
the Corporation and sufficient to transfer such shares of Series A Convertible
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on any payment upon liquidation after the due date thereof.
Section 5. REDEMPTION. (a) REDEMPTION AT THE OPTION OF THE CORPORATION.
Commencing on the tenth anniversary of the Effective Time (for the purposes
hereof, the "EFFECTIVE TIME" shall be February 4, 2002), the Corporation, at its
option, may from time to time redeem all or a portion of (but if a portion,
shares representing at least 25% of the originally
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issued aggregate Face Value, unless there shall remain outstanding less than 25%
of such amount, in which case all outstanding shares may be redeemed) of the
outstanding Series A Convertible Preferred Stock at a redemption price equal to
the Face Value plus all dividends on the Series A Convertible Preferred Stock
being redeemed that are accrued and unpaid thereon, whether or not declared or
due, to the date fixed for redemption (the "REDEMPTION DATE"), such sum being
hereinafter referred to as the "REDEMPTION PRICE". The Redemption Price may be
paid in cash, shares of Common Stock or a combination thereof, at the option of
the Corporation.
If the Corporation elects to pay the Redemption Price in Common Stock,
the number of shares of Common Stock to be paid per share of Series A
Convertible Preferred Stock being redeemed shall equal (x) the then-current
Redemption Price of the Series A Convertible Preferred Stock (or portion thereof
to be paid in shares of Common Stock), divided by (y) the Market Price as of the
date of the notice for redemption described below.
In case of the redemption pursuant to this Section 5(a) of less than
all of the then outstanding Series A Convertible Preferred Stock, the shares of
Series A Convertible Preferred Stock to be redeemed shall be redeemed pro rata
or by lot or in such other manner as the Board of Directors may determine.
Not more than 60 nor less than 20 days prior to the Redemption Date,
notice by first class mail, postage prepaid, shall be given to each Holder of
Series A Convertible Preferred Stock to be redeemed, at such Holder's address as
it shall appear upon the stock transfer books of the Corporation. Each such
notice of redemption shall specify the Redemption Date, the Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the certificate(s) evidencing the shares of Series A Convertible
Preferred Stock to be redeemed, that on and after the Redemption Date, dividends
will cease to accrue on such shares of Series A Convertible Preferred Stock to
be redeemed, the then effective conversion price pursuant to Section 6 and that
the right of holders to convert such shares of Series A Convertible Preferred
Stock to be redeemed shall terminate at the close of business on the Redemption
Date (unless the Corporation defaults in the payment of the Redemption Price).
Any notice that is mailed as provided in Section 13 shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice; and failure to give such notice by mail, or any defect in
such notice, to the Holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares of
Series A Convertible Preferred Stock. On or after the Redemption Date as stated
in such notice, each Holder of the shares called for redemption shall surrender
the certificate evidencing such shares to the Corporation at the place
designated in such notice and shall thereupon be entitled to receive payment of
the Redemption Price as herein provided. If less than all the shares represented
by any such surrendered certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. If, on the Redemption Date, shares of
Common Stock and/or funds, as the case may be, necessary for the redemption
shall be available therefor and shall have been irrecoverably deposited or set
aside, then, notwithstanding that the certificates evidencing any shares so
called for redemption shall not have been surrendered the dividends with respect
to the shares so called shall cease to accrue after the Redemption Date, the
shares shall no longer be deemed outstanding, the Holders thereof shall cease to
be Holders, and all rights whatsoever with respect to the shares so called for
redemption (except the right of
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the Holders to receive payment of the Redemption Price as herein provided
without interest upon surrender of their certificates therefor) shall terminate.
At the close of business on the Redemption Date, each Holder of Series A
Convertible Preferred Stock so redeemed (unless the Corporation defaults on its
obligations to deliver shares of Common Stock or cash) shall be, without any
further action, to the extent the Corporation elected to pay the Redemption
Price in shares of Common Stock, deemed a holder of the number of shares, if
any, of Common Stock for which such Series A Convertible Preferred Stock is
redeemable, and, to the extent the Corporation elected to pay the Redemption
Price in cash, entitled to receive payment of the Redemption Price in cash,
without interest.
The shares of Series A Convertible Preferred Stock shall not be subject
to the operation of any purchase, retirement, mandatory redemption (except as
specified in this Section) or sinking fund.
The Holder of any shares of Series A Convertible Preferred Stock
redeemed upon any exercise of the Corporation's redemption right shall not be
entitled to receive payment of the Redemption Price for such shares until such
Holder shall cause to be delivered to the place specified in the notice given
with respect to such redemption (i) the certificate(s) representing such shares
of Series A Convertible Preferred Stock redeemed (or, in the event such
certificate(s) have been lost or destroyed, an affidavit of the Holder of loss
or destruction reasonably satisfactory to the Corporation as well as other
support as reasonably requested by the Corporation) and (ii) transfer
instrument(s) reasonably satisfactory to the Corporation and sufficient to
transfer such shares of Series A Convertible Preferred Stock to the Corporation
free of any adverse interest. No interest shall accrue on the Redemption Price
of any share of Series A Convertible Preferred Stock after its Redemption Date
provided that the shares of Common Stock and/or funds sufficient for the
redemption shall have been made available therefor and shall have been
irrecoverably deposited or set aside.
In the event that, prior to a Redemption Date, any shares of Series A
Convertible Preferred Stock shall be converted into Common Stock pursuant to
Section 6, then (i) the Corporation shall not have the right to redeem such
shares and (ii) shares of Common Stock and any funds which shall have been
deposited for the payment of the Redemption Price for such shares of Series A
Convertible Preferred Stock shall be returned to the Corporation immediately
after such conversion (subject to declared dividends payable to Holders on the
record date for such dividends being so payable, to the extent set forth in
Section 6 hereof, regardless of whether such shares are converted subsequent to
such record date and prior to the related dividend payment date).
(b) REDEMPTION AT THE OPTION OF THE HOLDER. During the 20 Trading Day
period preceding each of the fifth, seventh, tenth and fifteenth anniversaries
of the Effective Time (each such period, a "HOLDER'S REDEMPTION PERIOD"), a
Holder may elect to cause the Corporation to redeem all or any of the shares of
Series A Convertible Preferred Stock held by such Holder. The Corporation shall
redeem each such share for the Face Value, plus all accrued and unpaid dividends
whether or not declared through the applicable anniversary (the "HOLDER'S
REDEMPTION CONSIDERATION"), for cash, shares of Common Stock or a combination
thereof, at the Corporation's option.
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For any shares of Series A Convertible Preferred Stock that the
Corporation elects to redeem for Common Stock, the amount of Common Stock to be
paid per share of Series A Convertible Preferred Stock so redeemed shall equal
(x) the Holder's Redemption Consideration (or portion thereof to be paid in
shares of Common Stock), divided by (y) the Market Price as of the applicable
anniversary date.
A Holder electing to redeem one or more shares of Series A Convertible
Preferred Stock shall provide notice in accordance with Section 13 to the
transfer agent designated by the Corporation for such purpose or, if there be
none, to the principal business offices of the Corporation (the "HOLDER'S
NOTICE"), postmarked (if not hand delivered) or received by the transfer agent
or principal business offices of the Corporation, as applicable (if hand
delivered), on a date within the applicable Holder's Redemption Period. Any
Holder's Notice that is mailed as herein provided, and includes the
documentation described in the next succeeding paragraph, shall be conclusively
presumed to have been duly given, and the shares of Series A Convertible
Preferred Stock shall be deemed to be subject to redemption by the Corporation
on the applicable anniversary upon receipt of such notice by the Corporation.
A Holder shall include with the Holder's Notice (i) the certificate(s)
representing such shares of Series A Convertible Preferred Stock redeemed (or,
in the event such certificate(s) have been lost or destroyed, an affidavit of
the Holder of loss or destruction reasonably satisfactory to the Corporation as
well as other support as reasonably requested by the Corporation) and (ii)
transfer instrument(s) reasonably satisfactory to the Corporation and sufficient
to transfer such shares of Series A Convertible Preferred Stock to the
Corporation free of any adverse interest. No interest shall accrue on the
Holder's Redemption Consideration for any share of Series A Convertible
Preferred Stock after its redemption date.
If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on or after the date the Corporation receives the
Holder's Notice, shares of Common Stock and/or funds necessary for the
redemption shall have been made available therefor and shall have been
irrecoverably deposited or set aside, then the dividends with respect to the
shares to be so redeemed shall cease to accrue after the date fixed for
redemption, the shares shall no longer be deemed outstanding, the Holders
thereof shall cease to be Holders of Series A Convertible Preferred Stock, and
all rights whatsoever with respect to the shares so requested to be redeemed
(except the right of the Holders to receive payment of the redemption price as
herein provided without interest upon surrender of their certificates therefor)
shall terminate.
Section 6. CONVERSION. (a) RIGHT OF CONVERSION/AUTOMATIC CONVERSION.
Subject to and upon compliance with the provisions of this Section 6, each share
of Series A Convertible Preferred Stock shall, at the option of the Holder, be
convertible at any time (unless such share is called for redemption, then to and
including but not after the close of business on the date fixed for such
redemption, unless the Corporation shall default in payment due upon redemption
thereof), into that number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) equal
to the quotient obtained by dividing $22.23 by the Conversion Price (as defined
in Section 6(d)) in effect at such time and by surrender of such share so to be
converted in the manner provided in Section 6(b).
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Each share of Series A Convertible Preferred Stock shall automatically
be converted into that number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) equal
to the quotient obtained by dividing $22.23 by the Conversion Price in effect as
of the Expiration Date.
(b) MANNER OF EXERCISE OF CONVERSION. In order to exercise the conversion
privilege (or, in the case of an automatic conversion, receive the Common Stock
into which the shares of Series A Convertible Preferred Stock have been
converted), the Holder of one or more shares of Series A Convertible Preferred
Stock to be converted (or that have been converted, in the case of an automatic
conversion) shall surrender the certificate(s) representing such shares (or, in
the event such certificate(s) have been lost or destroyed, an affidavit of the
Holder of loss or destruction reasonably satisfactory to the Corporation as well
as other support as reasonably requested by the Corporation) to the transfer
agent designated by the Corporation for such purpose or, if there be none, to
the principal business offices of the Corporation, accompanied by the funds, if
any, required by the last paragraph of this Section 6(b) and shall give written
notice of conversion in compliance with Section 13 in the form provided on such
shares of Series A Convertible Preferred Stock (or such other notice as is
acceptable to the Corporation) to the Corporation at such office or agency that
the Holder elects to convert the shares of Series A Convertible Preferred Stock
specified in said notice. Such notice shall also state the name or names,
together with address or addresses, in which the certificate or certificates for
shares of Common Stock which shall be issuable in such conversion shall be
issued. Each share of Series A Convertible Preferred Stock surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the same name as the name in which such share is registered, be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the Holder or his duly authorized attorney and an amount sufficient to pay
any transfer or similar tax. As promptly as practicable after the surrender of
such shares of Series A Convertible Preferred Stock and the receipt of such
notice, instruments of transfer and funds, if any, as aforesaid, the Corporation
shall issue and shall deliver at such office or agency to such Holder, or on his
written order, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such share of Series A Convertible
Preferred Stock in accordance with the provisions of this Section 6 and a check
or cash in respect of any fractional interest in a share of Common Stock arising
upon such conversion, as provided in Section 6(c).
Each conversion, other than an automatic conversion, shall be deemed to
have been effected immediately prior to the close of business on the date on
which such shares of Series A Convertible Preferred Stock shall have been
surrendered and such notice (and any applicable instruments of transfer and any
required taxes) is deemed received by the Corporation as aforesaid (such date,
the "CONVERSION DATE"). In the case of an automatic conversion, the Expiration
Date shall be the Conversion Date. The person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon a conversion, including an automatic conversion, shall be deemed to have
become the holder or holders of record of the shares represented thereby at the
close of business on the Conversion Date, and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the stock transfer
books of the Corporation shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date upon which such shares of
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Series A Convertible Preferred Stock shall have been surrendered and such notice
received by the Corporation.
(c) CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional shares or
scrip representing fractions of shares of Common Stock shall be issued upon
conversion of Series A Convertible Preferred Stock. If more than one share of
Series A Convertible Preferred Stock shall be surrendered for conversion at one
time by the same Holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate of $22.23 for
each such share so surrendered. In lieu of any fractional interest in a share of
Common Stock which would otherwise be deliverable upon the conversion of any
share of Series A Convertible Preferred Stock, the Corporation shall pay to the
Holder of such shares an amount in cash (computed to the nearest cent) equal to
the Closing Price on the Conversion Date (or the next Trading Day if such date
is not a Trading Day) multiplied by the fractional interest that otherwise would
have been deliverable upon conversion of such share.
(d) CONVERSION PRICE. The "CONVERSION PRICE" shall mean and be $30.01,
subject to adjustment by the Corporation on the applicable Conversion Date as
set forth in Section 6(e) below, and subject to adjustment by the Corporation
from time to time as set forth in Section 6(f), below.
(e) MARKET PRICE ADJUSTMENT TO CONVERSION PRICE. Solely with respect to
shares of Series A Convertible Preferred Stock being converted on an applicable
Conversion Date:
(i) If and only if the Market Price on the applicable Conversion Date
exceeds $31.22 (as such amount may be adjusted pursuant to Section 6(f)(v),
the "TRIGGER PRICE"), the Conversion Price with respect to the shares of
Series A Convertible Preferred Stock being converted on such Conversion
Date shall be adjusted as set forth in Section 6(e)(ii) (such adjustment,
the "MARKET PRICE ADJUSTMENT").
(ii) If the Market Price Adjustment is applicable pursuant to Section
6(e)(i) above, the Conversion Price on the applicable Conversion Date shall
be calculated as follows:
($22.23 x Market Price) D
Revised Conversion Price = X
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[(Market Price x A) + {B x (Market Price - C)}] $30.01
where:
A = 0.7408
B = 0.2396
C = Trigger Price
D = Conversion Price in effect after giving effect to any adjustments described
in Section 6(f) and without giving effect to this Section 6(e).
Any adjustment to the Conversion Price pursuant to this Section
6(e)(ii) shall not require any adjustment to the Trigger Price pursuant to
Section 6(f) below.
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(f) OTHER ADJUSTMENTS.
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, (B) subdivide
its outstanding shares of Common Stock into a greater number of shares, (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification, recapitalization or
reorganization of its Common Stock (other than a reorganization in which
the provisions of Section 6(i) apply) any shares of capital stock of the
Corporation, then in each such case the Conversion Price in effect
immediately prior to such action shall be equitably adjusted so that the
Holder of any share of Series A Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Corporation which such
Holder would have owned or been entitled to receive immediately following
such action had such share been converted immediately prior to the
occurrence of such event. An adjustment made pursuant to this subsection
(f)(i) shall become effective immediately after the record date, in the
case of a dividend or distribution, or immediately after the effective
date, in the case of a subdivision, combination, reclassification,
recapitalization or reorganization. If, as a result of an adjustment made
pursuant to this subsection (f)(i), the Holder of any share of Series A
Convertible Preferred Stock thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Corporation, the
Board of Directors in the exercise of its good faith judgment (whose
determination shall be described in a statement filed by the Corporation
with the stock transfer or conversion agent, as appropriate) shall
determine the allocation of the adjusted Conversion Price between or among
shares of such classes of capital stock or shares of Common Stock and other
capital stock.
(ii) In case the Corporation shall issue options, rights or warrants
to holders of its outstanding shares of Common Stock entitling them (for a
period expiring within 45 days after the date mentioned below) to subscribe
for or purchase shares of Common Stock or other securities convertible or
exchangeable for shares of Common Stock at a price per share less than the
Current Market Price (as determined pursuant to subsection (iv) of this
Section 6(f)) (other than pursuant to any stock option, restricted stock or
other incentive or benefit plan or stock ownership or purchase plan for the
benefit of employees, directors or officers or any dividend reinvestment
plan of the Corporation in effect at the time hereof or any other similar
plan adopted or implemented hereafter, it being agreed that none of the
adjustments set forth in this Section 6(f) shall apply to the issuance of
stock, options, rights, warrants or other property pursuant to any stock
option, restricted stock or other incentive or benefit plan or stock
ownership or purchase plan for the benefit of employees, directors or
officers or any dividend reinvestment plan for the Corporation in effect at
the time hereof or any other similar plan adopted or implemented
hereafter), then the Conversion Price in effect immediately prior thereto
shall be adjusted so that it shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants (immediately prior to such issuance)
plus the number of shares which the aggregate offering price of the total
number of shares so offered
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would purchase at such Current Market Price, and of which the denominator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants (immediately prior to such issuance)
plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever any rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants; provided, however, in the
event that all the shares of Common Stock offered for subscription or
purchase are not delivered upon the exercise of such rights or warrants,
upon the expiration of such rights or warrants the Conversion Price shall
be readjusted to the Conversion Price which would have been in effect had
the numerator and the denominator of the foregoing fraction and the
resulting adjustment been made based upon the number of shares of Common
Stock actually delivered upon the exercise of such rights or warrants
rather than upon the number of shares of Common Stock offered for
subscription or purchase. In determining whether any security covered by
this Section 6(f)(ii) entitles the holder thereof to subscribe for or
purchase shares of Common Stock at less than such Current Market Price, and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by the
Corporation for such rights, warrants or convertible or exchangeable
securities, plus the aggregate amount of additional consideration (as set
forth in the instruments relating thereto) to be received by the
Corporation upon the exercise, conversion or exchange of such securities,
the value of such consideration, if other than cash, to be determined by
the Board of Directors in the exercise of its good faith judgment (whose
determination shall be described in a statement filed by the Corporation
with the stock transfer or conversion agent, as appropriate).
(iii) In case the Corporation shall, by dividend or otherwise,
distribute to holders of its outstanding Common Stock that is not also
distributed to holders of its Series A Convertible Preferred Stock on an
as-converted basis as of the record date for the determination of
stockholders entitled to receive such distribution, evidences of its
indebtedness or assets (including securities and cash, but excluding any
regular periodic cash dividend of the Corporation and dividends or
distributions payable in stock for which adjustment is made pursuant to
subsection (i) of this Section 6(f)) or options, rights or warrants to
subscribe for or purchase securities of the Corporation (excluding those
referred to in subsection (ii) of this Section 6(f)), then in each such
case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect
immediately prior to the record date of such distribution by a fraction of
which the numerator shall be the Current Market Price as of the Time of
Determination less the fair market value on such record date (as determined
by the Board of Directors in the exercise of its good faith judgment, whose
determination shall be described in a statement filed by the Corporation
with the stock transfer or conversion agent, as appropriate) of the portion
of the capital stock or assets or the evidences of indebtedness or assets
so distributed to the holder of one share of Common Stock or of such
subscription rights or warrants applicable to one share of Common Stock,
and of which the denominator shall be such Current Market Price. Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
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(iv) For the purpose of any computation under subsections (ii) and
(iii) of this Section 6(f), the "CURRENT MARKET PRICE" per share of Common
Stock on any date shall be deemed to be the average of the daily Closing
Prices for the shorter of (A) 10 consecutive Trading Days ending on the day
immediately preceding the applicable Time of Determination (as defined
below) or (B) the period commencing on the date next succeeding the first
public announcement of the issuance of such rights or warrants or such
distribution through such last day prior to the applicable Time of
Determination. For purposes of the foregoing, the term "TIME OF
DETERMINATION" shall mean the time and date of the record date for
determining stockholders entitled to receive the rights, warrants or
distributions referred to in Section 6(f)(ii) and (iii).
(v) In any case in which this Section 6(f) shall require that an
adjustment be made to the Conversion Price, the Trigger Price shall be
adjusted as follows:
$31.22
Revised Trigger Price = Revised Conversion Price x -------------------
$30.01
(vi) In any case in which this Section 6(f) shall require that an
adjustment be made immediately following a record date or an effective
date, the Corporation may elect to defer (but only until the filing by the
Corporation with the stock transfer or conversion agent, as the case may
be, of the certificate required by subsection (viii)) issuing to the holder
of any share of Series A Convertible Preferred Stock converted after such
record date or effective date the shares of Common Stock issuable upon such
conversion over and above the shares of Common Stock issuable upon such
conversion on the basis of the Conversion Price prior to adjustment, and
paying to such holder any amount of cash in lieu of a fractional share.
(vii) No adjustment in the Conversion Price shall be required to be
made pursuant to this Section 6(f) unless such adjustment would require an
increase or decrease of at least 1% of such price; provided, however, that
any adjustments which by reason of this subsection (f)(vii) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 6(f) shall be
made to the nearest cent or to the nearest 1/1000th of a share, as the case
may be. Anything in this Section 6(f) to the contrary notwithstanding, the
Corporation shall be entitled to make such reduction in the Conversion
Price, in addition to those required by this Section 6(f), as it in its
discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights to purchase stock
or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Corporation to its
stockholders shall not be taxable to the recipients. Except as set forth in
subsections (f)(i), (f)(ii), and (f)(iii) and Section 6(e) above, the
Conversion Price shall not be adjusted for the issuance of Common Stock, or
any securities convertible into or exchangeable for Common Stock or
carrying the right to purchase any of the foregoing, in exchange for cash,
property or services.
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(viii) Whenever the Conversion Price is adjusted pursuant to this
Section 6(f), (A) the Corporation shall promptly file with the stock
transfer or conversion agent, as appropriate, a certificate setting forth
the Conversion Price after such adjustment and a brief statement of the
facts requiring such adjustment and the manner of computing the same, which
certificate shall, absent manifest error (including the failure to make any
other required adjustment under this Section 6(f)), be conclusive evidence
of the correctness of such adjustment, and (B) the Corporation shall also
mail or cause to be mailed by first class mail, postage prepaid, as soon as
practicable to each Holder a notice stating that the Conversion Price has
been adjusted and setting forth the adjusted Conversion Price. The stock
transfer or conversion agent, as the case may be, shall not be under any
duty or responsibility with respect to the certificate required by this
subsection (viii) except to exhibit the same to any Holder who requests to
inspect it.
(ix) In the event that at any time, as a result of an adjustment made
pursuant to subsections (i), (ii) or (iii) of this Section 6(f), the Holder
of any share of Series A Convertible Preferred Stock thereafter surrendered
for conversion shall become entitled to receive any shares of the
Corporation other than shares of Common Stock, thereafter the Conversion
Price of such other shares so receivable upon conversion of any share of
Series A Convertible Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to Common Stock contained in this Section.
(x) The Corporation from time to time in its sole discretion may
decrease the Conversion Price by any amount for any period of time if the
period is at least 20 days and if the decrease is irrevocable during the
period. Whenever the Conversion Price is so decreased, the Corporation
shall mail to all Holders a notice of the decrease at least 15 days before
the date the decreased Conversion Price takes effect, and such notice shall
state the decreased Conversion Price and the period it will be in effect.
(g) RESERVATION OF SHARES OF COMMON STOCK. The Corporation covenants that
it will at all times reserve and keep available, free from preemptive rights
(other than such rights as do not affect the ownership of shares issued to a
Holder), out of the aggregate of its authorized but unissued shares of Common
Stock or its issued shares of Common Stock held in its treasury, or both, for
the purpose of effecting conversions of shares of Series A Convertible Preferred
Stock, the full number of shares of Common Stock deliverable upon the conversion
of all outstanding shares of Series A Convertible Preferred Stock not
theretofore converted or redeemed and on or before taking any action that would
cause an adjustment of the Conversion Price resulting in an increase in the
number of shares of Common Stock deliverable upon conversion above the number
thereof previously reserved and available therefor, the Corporation shall take
all such action so required. For purposes of this Section 6(g), the number of
shares of Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series A Convertible Preferred Stock shall be computed as
if at the time of computation all outstanding shares of Series A Convertible
Preferred Stock were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of the shares of Series A Convertible Preferred
Stock, the Corporation shall
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take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.
(h) TRANSFER TAXES, ETC. The Corporation shall pay any and all documentary
stamp, issue or transfer taxes, and any other similar taxes payable in respect
of the issue or delivery of shares of Common Stock upon conversions of shares of
Series A Convertible Preferred Stock pursuant hereto; provided, however, that
the Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the holder of the shares of Series A
Convertible Preferred Stock to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue or delivery has paid
to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(i) CONSOLIDATION OR MERGER OR SALE OF ASSETS. For purposes of this
paragraph (i), a "SALE TRANSACTION" means any transaction or event, including
any merger, consolidation, sale of assets, tender or exchange offer,
reclassification, compulsory share exchange or liquidation, in which all or
substantially all outstanding shares of the Corporation's Common Stock are
converted into or exchanged for stock, other securities, cash or assets or
following which any remaining outstanding shares of Common Stock fail to meet
the listing standards imposed by each of the New York Stock Exchange, the
American Stock Exchange and the Nasdaq National Market at the time of such
transaction, but shall not include any transaction the primary purpose of which
is the reincorporation of the Corporation in another U.S. jurisdiction so long
as in such transaction each share of Series A Convertible Preferred Stock shall
convert into an equity security of the successor to the Corporation having
identical dividends, rights and preferences as the Series A Convertible
Preferred Stock. If a Sale Transaction occurs, then each Holder shall have the
right to elect one of the following: (i) such Sale Transaction shall be deemed a
liquidation for purposes of Section 4, and the amount of the liquidating
distribution to holders of Common Stock for purposes of calculating the
liquidation preference payable under Section 4 shall be deemed to be zero, (ii)
provision shall be made so that such Holder receives in exchange for each
outstanding share of Series A Convertible Preferred Stock held by such Holder
the kind and amount of securities, cash or other property receivable upon such
Sale Transaction by a holder of the number of shares of Common Stock into which
such share of Series A Convertible Preferred Stock might have been converted
immediately prior to such Sale Transaction assuming such holder of Common Stock
did not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such Sale Transaction
(provided that, if the kind or amount of securities, cash or other property
receivable upon such Sale Transaction is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("NON-ELECTING SHARE"), then for the purposes of this Section 6(i) the kind and
amount of securities, cash or other property receivable upon such Sale
Transaction for each Non-Electing Share shall be deemed to be the kind and
amount so receivable per share by a plurality of the Non-Electing Shares) or
(iii) to the extent permitted under applicable law, lawful provision shall be
made by the corporation, if any, formed by the Sale Transaction or the
corporation, if any, whose securities, cash or other property will immediately
after the Sale Transaction be owned, by virtue of such Sale Transaction, by the
holders of Common Stock immediately prior to such Sale Transaction, or the
corporation, if any, which shall have acquired (whether directly or indirectly)
in such Sale Transaction such assets or
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securities of the Corporation (collectively the "FORMED, SURVIVING OR ACQUIRING
CORPORATION"), as the case may be, providing that the Holder of each share of
Series A Convertible Preferred Stock then outstanding shall receive in exchange
for each such share of Series A Convertible Preferred Stock an equity security
of the Formed, Surviving or Acquiring Corporation having substantially
equivalent dividends, rights and preferences as the Series A Convertible
Preferred Stock ("MIRROR PREFERRED STOCK"), except that the Holder thereof shall
have the right thereafter to convert such Mirror Preferred Stock into the kind
and amount of securities, cash or other property receivable upon such Sale
Transaction by a holder of the number of shares of Common Stock into which such
share of Series A Convertible Preferred Stock might have been converted
immediately prior to such Sale Transaction assuming such holder of Common Stock
did not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such Sale Transaction. Each
Holder shall be provided notice of the Sale Transaction not later than twenty
(20) days prior to the effective date thereof, which notice shall detail the
material terms of the Sale Transaction, including without limitation the nature
and amount of consideration payable to the holders of Common Stock in such Sale
Transaction. In the event that a Holder elects option (iii) and such option is
not permitted under applicable law, at the option of the Corporation, (A) the
Formed, Surviving or Acquiring Corporation will cause a U.S. subsidiary of such
Formed, Surviving or Acquiring Corporation to issue a security satisfying the
terms described in option (iii) above or (B) such Sale Transaction shall be
deemed a liquidation for purposes of Section 4, and the amount of the
liquidating distribution to holders of Common Stock for purposes of calculating
the liquidation preference payable under Section 4 shall be deemed to be 20% of
the amount of the liquidation preference payable to a Holder of Series A
Convertible Preferred Stock pursuant to clause (a) of Section 4 hereof (i.e.,
initially $27.77), as such amount may be adjusted from time to time pursuant to
the terms of this Certificate. The Formed, Surviving or Acquiring Corporation
shall, if applicable, make provision in its certificate or articles of
incorporation or other constituent documents to the end that the provisions set
forth in this Section 6(i) shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of the Series A
Convertible Preferred Stock.
Notwithstanding anything to the contrary herein, there will be no
adjustment in connection with a Sale Transaction pursuant to Section 6(f) hereof
except as provided in this Section 6(i). The above provisions of this Section
6(i) shall similarly apply to successive Sale Transactions; provided, however,
that in no event shall a Holder of a share of Series A Convertible Preferred
Stock be entitled to more than one adjustment pursuant to this Section 6(i) in
respect of a series of related transactions.
Section 7. VOTING RIGHTS. The Holders shall not have any voting rights by
virtue of their ownership of the Series A Convertible Preferred Stock except as
set forth herein or as otherwise from time to time may be required by law. In
connection with any vote in which the holders of Common Stock are entitled to
vote (other than pursuant to Section C(4) of Article IV of the Restated
Certificate of Incorporation of the Corporation relating to the separate right
of the holders of Common Stock as a class to elect 25% of the Corporation's
directors), a Holder will have two votes for each share of Series A Convertible
Preferred Stock held, such votes to be cast together with the votes of the
holders of the Common Stock, voting together as a single class. Any shares of
Series A Convertible Preferred Stock held by the Corporation or any entity
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controlled by the Corporation shall not have voting rights hereunder and shall
not be counted in determining the presence of a quorum.
Section 8. OUTSTANDING SHARES. For purposes of this Certificate of
Designation, all shares of Series A Convertible Preferred Stock shall be deemed
outstanding except (i) from the date fixed for redemption pursuant to Section 5,
all shares of Series A Convertible Preferred Stock that have been so called for
redemption under Section 5 if shares of Common Stock and funds necessary for
payment of the redemption price, as the case may be, have been irrevocably set
apart; (ii) from the date of surrender of certificates representing shares of
Series A Convertible Preferred Stock, all shares of Series A Convertible
Preferred Stock converted into Common Stock; and (iii) from the date of
registration of transfer, all shares of Series A Convertible Preferred Stock
held of record by the Corporation or any subsidiary of the Corporation.
Section 9. STATUS OF ACQUIRED SHARES. Shares of Series A Convertible
Preferred Stock redeemed by the Corporation, received upon conversion pursuant
to Section 6, cancelled pursuant to Section 2 or otherwise acquired by the
Corporation will be restored to the status of authorized and unissued shares of
preferred stock, without designation as to series, and may thereafter be issued,
but not as shares of Series A Convertible Preferred Stock.
Section 10. PREEMPTIVE RIGHTS. The Series A Convertible Preferred Stock is
not entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
Section 11. COVENANT REGARDING SHARES OF COMMON STOCK. All shares of Common
Stock which may be delivered upon conversion or redemption of shares of Series A
Convertible Preferred Stock, or in connection with any dividend payment, will
upon delivery be duly and validly issued and fully paid and non-assessable, free
of all liens and charges and not subject to any preemptive rights (other than
rights which do not affect the Holder's right to own the shares of Common Stock
to be issued), and prior to the applicable Redemption Date, Dividend Date or
Conversion Date, the Corporation shall take any corporate action necessary
therefor. The issuance of all such shares of Common Stock shall, to the extent
permitted by law, be registered under the Securities Act of 1933, as amended.
Section 12. SEVERABILITY OF PROVISIONS. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
Section 13. NOTICES. Any notice to Holders or the Corporation required
pursuant to this Certificate of Designations shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, (iii) one (1) day
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after deposit with a nationally recognized overnight courier, specifying next
day delivery, with verification of receipt, and (iv) five (5) business days
after having been sent by first class mail, postage prepaid. All notices to
Holders shall be addressed to each Holder of record at the address of such
Holder appearing on the books of the Corporation.
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IN WITNESS WHEREOF, Expedia, Inc. has caused this Certificate of
Designations to be executed by its duly authorized officer on August 8, 2005.
EXPEDIA, INC.
By: /s/ Keenan M. Conder
------------------------------------
Name: Keenan M. Conder
Title: Senior Vice President