EXHIBIT 99.3
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
CMGI, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
CMGI, Inc. (the "Corporation"), a corporation organized and existing under
the Delaware General Corporation Law (the "DGCL") hereby certifies that the
following resolution was adopted by the Board of Directors of the Corporation on
June 24, 1999 pursuant to authority of the Board of Directors as required by
Section 151(g) of the DGCL:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors") in accordance with
the provisions of its Amended and Restated Certificate of Incorporation, the
Board of Directors does hereby create, authorize and provide for the issuance of
a series of the Corporation's previously authorized Preferred Stock, par value
$0.01 per share (the "Preferred Stock"), and hereby states the number of shares
and the powers, designations, preferences and relative, participating, optional
or other rights or the qualifications, limitations or restrictions thereof are
as follows:
I. DESIGNATION AND AMOUNT
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The designation of this series is Series C Convertible Preferred Stock (the
"Series C Preferred Stock"). This series consists of three tranches of shares
totaling 375,000 shares as follows: "Tranche 1" consists of 125,000 shares;
"Tranche 2" consists of 125,000 shares; and "Tranche 3" consists of 125,000
shares (collectively, the "Tranches"). The initial stated value is $1,000 per
share of Series C Preferred Stock (the "Initial Stated Value Per Share"). Each
certificate representing Preferred Shares shall bear language designating the
Preferred Shares represented by such certificate as part of Tranche 1, Tranche 2
or Tranche 3.
II. RANK
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The Series C Preferred Stock shall rank (i) prior to the Corporation's
common stock, par value $0.01 per share (the "Common Stock") and the Series D
Preferred Stock (as defined below); (ii) prior to any class or series of capital
stock of the Corporation hereafter created (unless, with the consent of the
holders of Series C Preferred Stock obtained in accordance with Article VII
hereof, such class or series of capital stock specifically, by its terms, ranks
senior to or pari passu with the Series C Preferred Stock) (collectively, with
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the Common Stock, "Junior Securities"); (iii) junior to the Corporation's Series
B Convertible Preferred Stock, par value $0.01 per share ("Series B Preferred
Stock"); (iv) pari passu with any class or series of capital stock of the
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Corporation hereafter created (with the consent of the holders of Series C
Preferred Stock obtained in accordance with Article VII hereof) specifically
ranking, by its terms, on parity with the Series C Preferred Stock ("Pari Passu
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Securities"); and (v) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series C
Preferred Stock obtained in accordance with Article VII hereof) specifically
ranking, by its terms, senior to the Series C Preferred Stock (the "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
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A. The holders of the Series C Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on the Series C Preferred Stock equal to two
percent (2.00%) of the Initial Stated Value Per Share payable at the
Corporation's option (i) in cash on each
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Semiannual Dividend Payment Date (as defined below) or (ii) by an upward
adjustment (each an "Adjustment," collectively, the "Adjustments") (a) to the
Initial Stated Value Per Share on the Initial Semiannual Dividend Payment Date
and (b) to the Adjusted Stated Value Per Share on each Semiannual Dividend
Payment Date occurring after the Initial Semiannual Dividend Payment Date. The
Initial Stated Value per Share as cumulatively adjusted shall be referred to as
the "Adjusted Stated Value Per Share." The Corporation shall provide written
notice on the Semiannual Dividend Record Date (as defined below) as to whether
the Corporation elects to pay the dividend in accordance with subclause (i) or
subclause (ii) on each Semiannual Dividend Payment Date; provided, however, if
the Corporation elects to pay the dividend in accordance with subclause (i) and
such payment has not been credited to the account of the record holder (pursuant
to prior written instructions furnished to the Corporation) within five (5)
business days after the applicable Semiannual Dividend Payment Date or the
Corporation fails to give such notice on the Semiannual Dividend Record Date,
the Corporation shall be deemed to have elected to pay the dividend in
accordance with subclause (ii) and shall take all appropriate action to pay such
dividend in accordance with subclause (ii).
B. Dividends on the Series C Preferred Stock shall be cumulative and
shall accrue daily from the date of original issuance or the date that the
Corportion executes the Securities Purchase Agreement (as defined herein), if
earlier (the "Issue Date"). Dividends on the Series C Preferred Stock shall be
payable on June 30 and December 30 of each year (each such date being referred
to herein as a "Semiannual Dividend Payment Date"), commencing on December 30,
1999 (the "Initial Semiannual Dividend Payment") (and in the case of any accrued
but unpaid dividends, at such additional times and for such interim periods as
may be determined by the Board of Directors) to the holders of record as they
appear on the stock books of the transfer agent for the Corporation (the
"Transfer Agent") on such record dates, which shall be ten (10) business days
preceding each Semiannual Dividend Payment Date (each such date being referred
to herein as a "Semiannual Dividend Record Date"). The amount of dividends
payable per share of Series C Preferred Stock for each semiannual dividend
period shall be computed by multiplying the Initial Stated Value Per Share by
the annual dividend amount of two percent (2.00%) per share of Series C
Preferred Stock divided by two. The amount of dividends payable for the initial
dividend period and dividends payable for any other period that is shorter or
longer than a full semiannual dividend period shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. Holders of shares of Series C
Preferred Stock shall not be entitled to receive any dividends, whether payable
in cash or otherwise, which are in excess of the cumulative dividends provided
for herein. Accrued but unpaid dividends shall not bear interest.
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C. The Series C Preferred Stock shall rank, as to payment of dividends,
senior to the Common Stock and any other class or series of stock of the
Corporation which is not by its terms expressly made senior to, or on a parity
with, the Series C Preferred Stock as to dividends, except as provided in
Section (D) below.
D. Except as provided in this section (D), in no event, so long as any
shares of Series C 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 (collectively a "Junior
Securities Distribution") of any Junior Securities (other than a distribution of
Junior Securities), without the written consent of the holders of a majority of
outstanding shares of Series C Preferred Stock obtained in accordance with
Article VII. Notwithstanding the foregoing, the Corporation may (i) make a
Junior Securities Distribution (other than an extraordinary distribution not
made in the ordinary course of business) on its Series D Preferred Stock (the
"Series D Preferred Stock") issuable in connection with that certain Purchase
and Contribution Agreement, dated as of June 29, 1999, by and among Compaq
Computer Corporation ("Compaq"), a Delaware corporation, Digital Equipment
Corporation ("Digital"), a Massachusetts corporation and a wholly owned
subsidiary of Compaq, AltaVista Company, a Delaware corporation and a wholly
owned subsidiary of Digital, the Corporation and Xoom New Co Inc., a Delaware
corporation and a wholly owned subsidiary of the Corporation pursuant to the
terms and subject to the conditions of a Certificate of Designations,
Preferences and Rights in respect of the Series D Preferred Stock, in each case,
with no right of participation in such dividend or distribution by the holders
of Series C Preferred Stock notwithstanding this Section (D) and Article V.C(ii)
and (iii), (ii) 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 C Preferred Stock then outstanding shall have first
received, or simultaneously received, a like distribution on each outstanding
share of Series C Preferred Stock, based on the number of shares of Common Stock
into which each share of Series C Preferred Stock is convertible on the record
date for such distribution (without regard to any limitations on conversion and
based upon the then Applicable Conversion Price (as defined below) using the
record date as the Conversion Date (as defined below)) or (iii) 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. No dividends shall
be declared, set aside or paid in respect of shares of the Series C Preferred
Stock unless the Corporation complies with Section 170 and Section 173 of the
DGCL.
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E. For purposes of the Series C Preferred Stock, the amount of dividends
which "accrue" on any share of Series C Preferred Stock as of any date shall be
calculated as the amount of any unpaid dividends accrued thereon to and
including the next preceding Semiannual Dividend Payment Date, plus an amount
calculated on the basis of the annual dividend rate fixed for the shares of
Series C Preferred Stock for the period after such next preceding Semiannual
Dividend Payment Date to and including the date as of which the calculation is
made.
IV. LIQUIDATION PREFERENCE
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A. Liquidation Event. If the Corporation shall commence a voluntary case
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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, 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 Series B Preferred Stock and Senior
Securities) upon liquidation, dissolution or winding up, unless prior thereto,
the holders of shares of Series C Preferred Stock, subject to Article V, shall
have received the Liquidation Preference (as defined in Article IV.C) with
respect to each share; provided, however, if upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series C Preferred Stock and holders of Pari Passu Securities
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(including any dividends or distribution payable on any shares of Series C
Preferred Stock and Pari Passu Securities after the date of filing of this
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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 C
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
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such shares in proportion to the ratio that the Liquida-
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tion Preference payable on each such share bears to the aggregate liquidation
preference payable on all such shares.
B. Certain Acts Deemed Liquidation Event. At the option of the holders
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of at least two-thirds (2/3) of the outstanding shares of Series C Preferred
Stock, (i) the sale, conveyance or disposition of all or substantially all of
the assets of the Corporation, (ii) 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 transferred or otherwise disposed of, unless,
as a result of such transaction, the Corporation has become a wholly owned
subsidiary of another corporation and at least fifty percent (50%) of the
beneficial ownership of such corporation immediately thereafter is held by
former stockholders of the Corporation or (iii) the consolidation, merger or
other business combination of the Corporation with or into any other Person (as
defined below) or Persons (other than (a) a consolidation, merger or other
business combination in which holders of the Corporation's voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, including
pursuant to a holding company merger effected under Section 251(g) of the DGCL
or any successor provision or (b) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the
Corporation) shall either: (x) 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 Liquidation Preference or (y) be treated
pursuant to Article V.C(ii) hereof. "Person" shall mean any individual,
corporation, limited liability company, partnership, joint venture, association,
trust or other entity or organization.
C. Liquidation Preference. For purposes hereof, the "Liquidation
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Preference" with respect to a share of Series C Preferred Stock shall mean an
amount equal to the sum of: (i) the Initial Stated Value Per Share; plus (ii)
all Adjustments plus; (iii) accrued but unpaid dividends with respect to which
no Adjustment has been made. The liquidation preference with respect to any Pari
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Passu Securities shall be as set forth in the Certificate of Designations filed
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in respect thereof.
V. CONVERSION
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A. Optional Conversion. Each holder of shares of Series C Preferred
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Stock may, at its option at any time and from time to time, upon surrender of
the certificates
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therefor, convert any or all of its shares of Series C Preferred Stock into
Common Stock as set forth below (an "Optional Conversion"). Each share of Series
C 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 (i) the Liquidation Preference by (ii) the then
Applicable Conversion Price; provided, however, that in no event (other than
pursuant to the Automatic Conversion as defined in Section (G)) shall a holder
of shares of Series C Preferred Stock be entitled to convert any such shares in
excess of that number of shares upon conversion of which the sum of (a) 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 C
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 (b) the number of shares of
Common Stock issuable upon the conversion of the shares of Series C 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 the Ownership Limitation Percentage (as defined below) 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
(a) of such proviso. For purposes of this Article V.A, "Ownership Limitation
Percentage" means (x) with respect to any shares of Series C Preferred Stock
which are held by any Person which holds shares of Series B Preferred Stock,
4.9%, and (y) with respect to any shares of Series C Preferred Stock which are
held by any Person which does not hold any shares of Series B Preferred Stock,
9.9%.
B. Conversion Price. Subject to adjustment pursuant to section (C)
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below, the "Applicable Conversion Price" for each Tranche shall be as follows:
(i) Each Tranche shall be convertible into Common Stock pursuant to
section (A) above at the Initial Conversion Price (as defined below) until the
conclusion of the pricing period in respect of a particular Tranche. Thereafter,
each Tranche shall be convertible into Common Stock at, in the case of Tranche
1, the Tranche 1 Conversion Price (as defined below), in the case of Tranche 2,
the Tranche 2 Conversion Price (as defined below), and, in the case of Tranche
3, the Tranche 3 Conversion Price (as defined below). The "Initial Conversion
Price" shall be one-hundred fifty percent (150%) of the Closing Price, subject
to adjustment as provided in Article V.C.
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The "Closing Price" shall be the average of the Closing Bid Prices (as defined
below) over the ten (10) consecutive Trading Days (as defined below) ending on
the Trading Day immediately preceding the Issue Date. "Closing Bid Price" means,
for the Common Stock, the closing bid price on the Nasdaq National Market
("Nasdaq") as reported by Bloomberg Financial Services ("Bloomberg") or, if
Nasdaq is not the principal trading market for the Common Stock, the closing bid
price of the Common Stock on the principal securities exchange or trading market
where the Common Stock is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the closing bid price of the Common Stock in the over-
the-counter market on the electronic bulletin board for the Common Stock as
reported by Bloomberg, or, if no closing bid price of the Common Stock is
available in the over-the-counter market on the electronic bulletin board for
the Common Stock or in any of the foregoing manners, the average of the bid
prices of any market makers for the Common Stock 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
Board of Directors and the holders of a majority of outstanding shares of Series
C Preferred Stock being converted for which the calculation of the Closing Bid
Price is required in order to determine the Applicable Conversion Price of such
Series C 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.
(ii) The pricing period in respect of Tranche 1 (the "Tranche 1
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the fifteenth (15th) calendar day after the Issue Date; provided,
however if such fifteenth (15th) calendar day is not a Trading Day, the Tranche
1 Pricing Period shall begin on the next calendar day that is a Trading Day. The
"Tranche 1 Conversion Price" shall be equal to the product of (a) the average of
the Closing Bid Prices during the Tranche 1 Pricing Period (subject to
adjustment for stock splits, stock dividends, combinations or other similar
transactions) and (b) 90.75%; provided, however, in the event that the Tranche 1
Conversion Price as calculated pursuant to this subsection exceeds the Initial
Conversion Price, the Tranche 1 Conversion Price shall be reduced so that it
equals the Initial Conversion Price (as defined in Article V.B(i)).
(iii) The pricing period in respect of Tranche 2 (the "Tranche 2
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the forty-fifth (45th) calendar day after the Issue Date; provided,
however if such forty-fifth (45th) calendar day is not a Trading Day, the
Tranche 2 Pricing Period shall begin on the next calendar day that is a Trading
Day. The "Tranche 2 Conversion Price" shall be equal to
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the product of (a) the average of the Closing Bid Prices during the Tranche 2
Pricing Period (subject to adjustment for stock splits, stock dividends,
combinations or other similar transactions) and (b) 90.75%; provided, however,
in the event that the Tranche 2 Conversion Price as calculated pursuant to this
subsection exceeds the Initial Conversion Price, the Tranche 2 Conversion Price
shall be reduced so that it equals the Initial Conversion Price (as defined in
Article V.B(i)).
(iv) The pricing period in respect of Tranche 3 (the "Tranche 3
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the seventy-fifth (75th) calendar day after the Issue Date;
provided, however if such seventy-fifth (75th) calendar day is not a Trading
Day, the Tranche 3 Pricing Period shall begin on the next calendar day that is
Trading Day. The "Tranche 3 Conversion Price" shall be equal to the product of
(a) the average of the Closing Bid Prices during the Tranche 3 Pricing Period
(subject to adjustment for stock splits, stock dividends, combinations or other
similar transactions) and (b) 90.75%; provided, however, in the event that the
Tranche 3 Conversion Price as calculated pursuant to this subsection exceeds the
Initial Conversion Price, the Tranche 3 Conversion Price shall be reduced so
that it equals the Initial Conversion Price (as defined in Article V.B(i)).
(v) Notwithstanding anything to the contrary in this Article V.B,
(a) each of the Tranche 1 Pricing Period, the Tranche 2 Pricing Period and the
Tranche 3 Pricing Period shall be extended by one (1) Trading Day for each
Trading Day (an "Excluded Trading Day") in such period that the Common Stock is
(1) traded on Nasdaq (or the principal securities exchange or market on which
the Common Stock is then traded) for less than 4 1/2 hours, or (2) suspended
from trading on Nasdaq (or the principal securities exchange or market on which
the Common Stock is then traded) during the final hour of trading, and (b) each
such Excluded Trading Day shall be excluded from the calculation of the
Applicable Conversion Price for such pricing period.
C. Adjustments to Applicable Conversion Price. The Applicable Conversion
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Price shall be subject to adjustment from time to time as follows:
(i) Adjustment to Applicable Conversion Price Due to Stock Split,
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Stock Dividend, Etc. If at any time when Series C Preferred Stock is issued and
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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, then the Applicable Conversion Price shall
be adjusted to give appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar
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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 date as of which the purchase price is determined in the
rights offering, means (a) 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 (b) 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 (c) 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
(y) the Board of Directors or (z) at the option of a majority-in-interest of the
holders of the outstanding Series C Preferred Stock by an independent investment
bank of nationally recognized standing in the valuation of businesses similar to
the business of the Corporation.
(ii) Adjustment to Applicable Conversion Price Due to Merger,
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Consolidation, Etc. If at any time when Series C Preferred Stock is issued and
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outstanding, there shall be any merger, consolidation, share exchange,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock 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 Person, 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 (each a "Change of Control
Transaction"), then the holders of any Series C Preferred Stock shall thereafter
have the right to receive upon conversion of the Series C 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 C Preferred Stock would
have been entitled to receive in such transaction had the Series C 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 C Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Applicable
Conversion Price and of the number of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion of the Series C Preferred Stock. The Corporation
shall not effect any transaction described in this subsection (ii) unless (a) it
first gives, to the extent practical, thirty (30) days' prior written notice
(but in any event at least ten (10) business days prior written notice) of the
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record date of the special meeting of stockholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, share
exchange, recapitalization, reorganization or other similar event or sale of
assets (during which time the holders of Series C Preferred Stock shall be
entitled to convert the Series C Preferred Stock) and (b) the resulting
successor or acquiring Person (if not the Corporation) and, if an entity
different from the successor or acquiring entity, the entity whose capital stock
or assets the holders of the Common Stock are entitled to receive as a result of
such Change of Control Transaction, assumes by written instrument the
obligations of this Certificate of Designation including this subsection (ii).
The above provisions shall similarly apply to successive mergers,
consolidations, share exchanges, recapitalizations, reorganizations or other
similar events or sales of assets.
(iii) Adjustment to Applicable Conversion Price Due to Distribution.
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Subject to the limitations of Article III.D, 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
stockholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e., a spin-off)) (a "Distribution"), the holders of outstanding
Series C Preferred Stock shall be entitled to receive, on the date that such
Distribution is made to the Corporation's stockholders, the amount of such
assets which such holder would have been entitled to receive if such holder had
held the number of shares of Common Stock issuable upon complete conversion
(based on a conversion price equal to the Modified Applicable Conversion Price
(as defined in this subsection)) of the Series C Preferred Stock (without regard
to any limitations on conversions contained herein) immediately before the date
on which a record is taken for the determination of stockholders entitled to
such Distribution, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the Distribution. For
purposes of this Article V.C(ii), "Modified Applicable Conversion Price" shall
mean, with respect to any Tranche, (a) with respect to any Distribution for
which "ex-" trading of the Common Stock with respect to such Distribution begins
on a Trading Day other than a Trading Day during the pricing period for such
Tranche described in Article V.B(ii), (iii) or (iv), as applicable (a "Pricing
Period"), the Applicable Conversion Price then in effect, or (b) with respect to
any Distribution for which "ex-" trading of the Common Stock with respect to
such Distribution begins on a Trading Day during the Pricing Period for such
Tranche, the product of (x) the average of the Closing Bid Prices for each
Trading Day during such Pricing Period which is prior to the date that "ex-"
trading of the Common Stock with respect to such Distribution begins (subject to
adjustment for stock splits, stock dividends, combinations or other similar
transactions), and (y) 90.75%; provided, however, in the event that the Modified
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Applicable Conversion Price calculated pursuant to the immediately preceding
subclause (b) exceeds the Initial Conversion Price, then the Modified Applicable
Conversion Price determined pursuant to the immediately preceding subclause (b)
shall be reduced to the Initial Conversion Price.
(iv) Adjustment to Applicable Conversion Price Due to Purchase
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Rights. Subject to the limitations of Article III.D, if at any time when any
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Series C Preferred Stock is 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 Common Stock, the
holders of Series C Preferred Stock shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder would have been entitled to acquire if such holder had held the number of
shares of Common Stock issuable upon complete conversion (based on a conversion
price equal to the Modified Applicable Conversion Price (as defined in this
subsection)) of the Series C Preferred Stock (without regard to any limitations
on conversions 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, issuance or sale of such Purchase Rights. For
purposes of this Article V.C(iv), "Modified Applicable Conversion Price" shall
mean, with respect to any Tranche, (a) with respect to any Purchase Rights for
which "ex-" trading of the Common Stock with respect to such Purchase Rights
begins on a Trading Day other than a Trading Day during the Pricing Period for
such Tranche, the Applicable Conversion Price then in effect, or (b) with
respect to any Purchase Rights for which "ex-" trading of the Common Stock with
respect to such Purchase Rights begins on a Trading Day during the Pricing
Period for such Tranche, the product of (x) the average of the Closing Bid
Prices for each day during such Pricing Period which is prior to the date that
"ex-" trading of the Common Stock with respect to such Purchase Rights begins
(subject to adjustment for stock splits, stock dividends, combinations or other
similar transactions), and (y) 90.75%; provided, however, in the event that the
Modified Applicable Conversion Price determined pursuant to the immediately
preceding subclause (b) exceeds the Initial Conversion Price, then the Modified
Applicable Conversion Price calculated pursuant to the immediately preceding
subclause (b) shall be reduced to the Initial Conversion Price.
(v) Notice of Adjustments. Upon the occurrence of each adjustment
---------------------
or readjustment of the Applicable Conversion Price pursuant to this Article V.C,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series C Preferred Stock
a certificate setting forth (a) such adjustment or readjustment, (b) the
Applicable Conversion Price, as adjusted,
12
and (c) 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 C Preferred Stock.
D. Mechanics of Conversion. In order to convert Series C Preferred Stock
-----------------------
into full shares of Common Stock, a holder of Series C Preferred Stock shall:
(1) submit a copy of the fully executed notice of conversion in the form
attached hereto as Exhibit A ("Notice of Conversion") 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 Transfer Agent that the holder elects to convert the
same, which notice shall specify the number of shares of each Tranche of Series
C Preferred Stock to be converted, the Applicable Conversion Price and a
calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the first page of each certificate to be
converted) prior to 6:00 p.m., New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(2) surrender the original certificates representing the shares of each Tranche
of Series C 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 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 subsection (i) below). In the case of a dispute
as to the calculation of the Applicable Conversion Price, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subsection (ii) below. The Corporation shall submit the disputed
calculations to its outside accountant via facsimile within three (3) 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 three (3) business days from the time it receives the disputed
calculations. The accountant's calculation shall be deemed conclusive absent
manifest error.
(i) 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 C 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.
13
(ii) Delivery of Common Stock upon Conversion. Upon the surrender
----------------------------------------
of Preferred Stock Certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within three (3) business days
after such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of agreement and indemnification pursuant to subsection (i)
above) (the "Delivery Period"), deliver (or cause its Transfer Agent to so issue
and deliver) in accordance with the terms hereof and the Securities Purchase
Agreement, dated June 28, 1999 by and among the Corporation and the buyers named
on the signature pages thereto (the "Buyers") (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 (1) that
number of shares of Common Stock for the portion of the shares of Series C
Preferred Stock converted as shall be determined in accordance herewith and (2)
a certificate representing the balance of the shares of Series C Preferred Stock
not converted, if any. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the holder and its compliance with the
provisions contained in Article V.A and in this Article V.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 the holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission system.
(iii) Cash in Lieu of Fractional Shares. If any conversion of
---------------------------------
Series C 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 Bid Price on
the Conversion Date.
(iv) 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 6:00 p.m.,
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 C 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
C Preferred Stock shall survive to the extent the Corporation fails to deliver
such securities.
14
E. Reservation of Shares. The requisite number of shares of the
---------------------
authorized but unissued Common Stock sufficient to provide for the conversion of
the Series C Preferred Stock outstanding shall at all times be reserved by the
Corporation, free from preemptive rights. As of the date of issuance of the
Series C Preferred Stock, the requisite number of authorized and unissued shares
of Common Stock have been duly reserved for issuance upon conversion of the
Series C Preferred Stock (the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Corporation's obligations
pursuant to Section 4(F) 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 C 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 C Preferred
Stock.
F. Status as Stockholders. Upon receipt of a Notice of Conversion by the
----------------------
Corporation from a holder of Series C Preferred Stock in accordance with
subsection (ii) of section (D), (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed the
Optional Conversion limitation proviso in section (A)) shall be deemed converted
into shares of Common Stock and (ii) the holder's rights as a holder of such
converted shares of Series C 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 C 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 C Preferred Stock with respect to such unconverted shares
of Series C Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series C Preferred Stock to the holder or, if
such shares of Series C Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Series C Preferred Stock have not been
converted. In all cases, the holder shall retain all of its rights and remedies
at law and in equity.
G. Mandatory Conversion. So long as all of the shares of Common Stock
--------------------
issuable upon conversion of all outstanding shares of Series C Preferred Stock
are then (i) authorized and reserved for issuance, (ii) registered for resale
under the Securities Act
15
of 1933, as amended (the "Securities Act"), by the holders of the Series C
Preferred Stock (or may otherwise be resold publicly pursuant to Rule 144(k)
under the Securities Act (or any successor provision)), and (iii) eligible to be
traded on Nasdaq, the New York Stock Exchange, Inc. ("NYSE"), the American Stock
Exchange, Inc. ("AMEX"), or The Nasdaq SmallCap Market ("Nasdaq SmallCap"), each
share of Series C Preferred Stock issued and outstanding on June 30, 2002 (the
"Automatic Conversion Date"), automatically shall be converted into shares of
Common Stock on such date at the then Mandatory Applicable Conversion Price (as
defined below) in accordance with, and subject to, the provisions of this
Article V (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 C Preferred Stock that (x) any
Registration Statement (as defined in the Registration Rights Agreement, dated
June 28, 1999, by and among the Corporation and the Buyers (the "Registration
Rights Agreement") required to be filed and to be effective pursuant to the
Registration Rights Agreement in accordance with its terms is not effective or
sales of all of the Registrable Securities (as defined in the Registration
Rights Agreement) otherwise cannot be made thereunder or pursuant to Rule 144
under the Securities Act (or any successor provision) or (y) at the option of
each holder of Series C 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 effective date from which certificates representing
the Common Stock must be delivered to the holder pursuant to section (D) above.
The "Mandatory Applicable Conversion Price" shall be the average of the Closing
Bid Prices over the ten (10) consecutive Trading Days ending on the Trading Day
immediately preceding the Automatic Conversion Date.
H. No Reissuance of Series C Preferred Stock. Shares of Series C
-----------------------------------------
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
VI. VOTING RIGHTS
-------------
The holders of the Series C Preferred Stock have no voting power
whatsoever, including with respect to the issuance of the Series D Preferred
Stock except as otherwise provided by the DGCL and the limited protective
provisions in Article VII below.
Notwithstanding the above, the Corporation shall provide each holder of
Series C Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). In the event of any taking
16
by the Corporation of a record of its stockholders for the purpose of
determining stockholders 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 stockholders 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 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.
To the extent that under the DGCL the vote of the holders of the Series C
Preferred Stock, voting separately as a class, is required to authorize a given
action of the Corporation, the affirmative vote or consent of the holders of at
least a majority of outstanding shares of the Series C Preferred Stock
represented at a duly held meeting at which a quorum is present or by written
consent of a majority of outstanding shares of Series C Preferred Stock (except
as otherwise may be required under the DGCL) shall constitute the approval of
such action by the holders. To the extent that under the DGCL the holders of
the Series C Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series C 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 stockholders as the date as of which the Applicable
Conversion Price is calculated.
VII. PROTECTIVE PROVISIONS
---------------------
So long as shares of Series C 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
outstanding shares of Series C Preferred Stock:
A. alter or change the rights, preferences or privileges (provided that
in the case of a Change of Control Transaction this subsection shall not expand
or otherwise grant additional voting rights to the holders of Series C Preferred
Stock, whether voting separately as a class or together with the Common Stock,
from the rights provided in the DGCL) of (i) the Series C Preferred Stock or
(ii) any capital stock of the Corporation so as to affect adversely the Series C
Preferred Stock;
17
B. create any new class or series of capital stock having a preference
over the Series C Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation;
C. create any new class or series of capital stock ranking pari passu
---- -----
with the Series C 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 C Preferred Stock;
E. issue any Senior Securities or Pari Passu Securities; or
---- -----
F. increase the par value of the Common Stock.
In the event holders of at least a majority of outstanding shares of Series
C Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series C Preferred Stock, pursuant to
section (A) above, so as to affect adversely the Series C Preferred Stock, the
Corporation shall deliver notice of such approved change to the holders of the
Series C 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 ten (10) 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 C Preferred Stock; provided that upon expiration of the
above ten (10) day period, each adversely affected holder shall deliver to the
Corporation a certificate signed by an officer or other responsible party of the
holder acknowledging that the Corporation altered or amended the Certificate of
Designation in a manner which affected adversely the rights, preferences and
privileges of the Series C Preferred Stock and that such holder elected not to
exercise their conversion rights as they existed prior to such alteration or
amendment during the ten (10) day period.
VIII. 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 any holder
of Series C Preferred Stock upon exercise by such holder of its conversion
rights in accordance with the terms of this Certificate of Designation, fails to
transfer (electronically or in certificated form) any certificate for shares of
Common Stock issued to the holders upon
18
conversion of the Series C Preferred Stock as and when required by this
Certificate of Designation, the Registration Rights Agreement or the Purchase
Agreement, fails to remove any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate in respect of any
shares of Common Stock issued to the holders of Series C Preferred Stock upon
conversion of the Series C Preferred Stock as and when required by this
Certificate of Designation, the Registration Rights Agreement or 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 the Series C Preferred Stock; (ii) the Corporation or successor Person
in a Change of Control Transaction ceases to be a publicly traded corporation
whose equity interest is listed for trading on Nasdaq, Nasdaq Smallcap, NYSE or
AMEX (a "Listed Company"); provided, however, a holding company merger pursuant
-------- -------
to Section 251(g) of the DGCL or any successor provision in which a holding
company is a Listed Company and the holders of Series C Preferred Stock have the
right to receive the publicly traded securities of such Listed Company pursuant
to Article V(C)(ii) hereof, shall not trigger this mandatory redemption
provision, or (iii) at any time after June 30, 2000, and through the expiration
of the Registration Period (as defined in the Registration Rights Agreement),
sales of any Registrable Securities cannot be made pursuant to an effective
Registration Statement or pursuant to Rule 144 under the Securities Act, then
(x) upon the occurrence and during the period of any Mandatory Redemption Event
specified in subsection (ii) or subsection (iii) at the option of the holders of
at least two-thirds (2/3) of the then outstanding Series C Preferred Stock by
written notice to the Corporation (in each case, a "2/3 Mandatory Redemption
Notice") of such Mandatory Redemption Event, or (y) upon the occurrence and
during the period of any Mandatory Redemption Event specified in subsection (i),
at the option of any holder of outstanding Series C Preferred Stock by written
notice (an "Individual Mandatory Redemption Notice" and together with the (2/3)
Mandatory Redemption Notice collectively, the "Mandatory Redemption Notice") to
the Corporation of such Mandatory Redemption Event, the Corporation shall
purchase within five (5) business days of receipt of a Mandatory Redemption
Notice by the Corporation, such holder's shares of Series C Preferred Stock
submitted for redemption pursuant to a Mandatory Redemption Notice for an amount
per share equal to the Liquidation Preference on the date the Mandatory
Redemption Notice is received by the Corporation.
19
IX. REMEDIES
--------
The Corporation acknowledges that a breach by it of its obligations under
this Certificate of Designation will cause irreparable harm to each holder of
Series C Preferred Stock by vitiating the intent and purpose of the transactions
contemplated hereunder. Accordingly, the Corporation acknowledges that the
remedy at law for a breach of its obligations under this Certificate of
Designation will be inadequate and agrees, in the event of a breach or
threatened breach by the Corporation of any of the provisions of this
Certificate of Designation that each holder of Series C Preferred Stock shall be
entitled, in addition to all other available remedies in law or in equity, to an
injunction or injunctions to prevent or cure any breaches of the provisions of
this Certificate of Designation, and to enforce specifically the terms and
provisions of this Certificate of Designation without the necessity of showing
economic loss and without any bond or other security being required.
20
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this 29th day of June, 1999.
CMGI, INC.
By: /s/ Andrew J. Hajducky III
---------------------------------
Name: Andrew J. Hajducky III
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
21
Exhibit A
---------
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned (the "Holder") hereby irrevocably elects to convert ______
shares of Series C Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock, par
value $0.01 per share (the "Common Stock") of CMGI, Inc., a Delaware corporation
(the "Corporation") according to the terms and conditions of the Certificate of
Designation of Series C 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.
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 The Depository Trust Company ("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:
A-1
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 C Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Securities Act"),
or pursuant to an exemption from registration under the Securities Act.
Date of Conversion: ______________________________________
Tranche of Preferred Stock: ______________________________
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 C 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 the Holder or its designee not later than three
(3) business days following receipt of the original Preferred Stock
Certificate(s) to be converted.
A-2