ARTICLES OF AMENDMENT
OF
INTER*ACT SYSTEMS, INCORPORATED
The undersigned corporation hereby submits pursuant to Sections 55-6-02 and
55-10-06 of the North Carolina General Statutes these Articles of Amendment for
the purpose of amending its Articles of Incorporation.
1. The name of the corporation is Inter*Act Systems, Incorporated.
2. The Articles of Incorporation of the corporation are hereby amended by
attaching thereto the Statement of Rights and Preferences of the 10% Series A
Mandatorily Convertible Preferred Stock attached hereto.
3. The foregoing amendment to the Articles of Incorporation was duly
adopted by the Board of Directors effective July 27, 1998.
4. The foregoing amendment was adopted without shareholder action pursuant
to the authority vested in the Board of Directors to establish one or more
series within the class of preferred stock and to establish the designations,
preferences, limitations and relative rights (including conversion rights) of
such shares, said authority having been duly granted in Article 2 of the
Articles of Incorporation of the corporation as reflected in the Articles of
Amendment filed with the Secretary of State of North Carolina on June 3, 1997.
This the 2nd day of September, 1998.
INTER*ACT SYSTEMS, INCORPORATED
By:/s/ Stephen R. Leeolouu
-------------------------
Stephen R. Leeolou, Chief
Executive Officer
Statement of Rights and Preferences of the
10% Series A Mandatorily Convertible Preferred Stock
of Inter*Act Systems, Incorporated
Section 1. Number and Designation. A series consisting initially of
400,000 shares of the authorized preferred stock of the corporation, no par
value, is designated "10% Series A Mandatorily Convertible Preferred Stock" (the
"Series A Preferred Stock"). The number of shares of Series A Preferred Stock
shall not be increased but may be decreased from time to time by resolution of
the Board of Directors; provided, that the number of authorized shares of Series
A Preferred Stock shall be increased by the number of shares of Series A
Preferred Stock issued in respect of dividends pursuant to Section 3(b) hereof.
Section 2. Ranking. For purposes of this Statement of Rights and
Preferences, any stock of any class or classes of the corporation shall be
deemed to rank:
(a) prior to the Series A Preferred Stock, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the corporation, as the case may be, in preference or priority
to the holders of Series A Preferred Stock;
(b) on a parity with Series A Preferred Stock (the "Parity Stock"), either
as to dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking fund
provisions, if any, shall be different from those of Series A Preferred Stock,
if the holders of such stock shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
corporation, as the case may be, without preference or priority, one over the
other, as between the holders of such stock and the holders of Series A
Preferred Stock; or
(c) junior to Series A Preferred Stock, either as to dividends or upon
liquidation, if such class shall be the common stock, no par value, of the
corporation (the "Common Stock") or if the holders of Series A Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the corporation, as the case may be,
in preference or priority to the holders of shares of such class or classes.
Section 3. Dividends and Distributions.
(a) For each quarterly dividend period (a "Dividend Period") dividends
payable on each share of Series A Preferred Stock shall be payable at a rate of
10% per annum of the initial liquidation preference of $100 per share divided by
four. Each Dividend Period shall commence on the January 1, April 1, July 1 and
October 1 following the last day of the preceding Dividend Period and shall end
on and include the day next preceding the first day of the next Dividend Period.
Dividends shall be cumulative from the date of original issue and shall be
payable, when, as and if declared by the Board of Directors or by a duly
authorized committee thereof, on
March 31, June 30, September 30 and December 31 of each year, commencing on
December 31, 1998. Each such dividend shall be paid to the holders of record of
shares of Series A Preferred Stock as they appear on the stock register of the
corporation on such record date, not exceeding 45 days preceding the payment
date thereof, as shall be fixed by the Board of Directors of the corporation or
by a duly authorized committee thereof. Dividends on account of arrears for any
past Dividend Periods may be declared and paid at any time, without reference to
any regular dividend payment date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed by the
Board of Directors of the corporation or by a duly authorized committee thereof.
(b) Dividends payable on shares of Series A Preferred Stock for any period
greater or less than a full Dividend Period, shall be computed on the basis of a
360-day year consisting of twelve 30-day months and the actual number of days
elapsed in the period. Notwithstanding paragraph (a) of this Section 3, the
corporation may, in its sole discretion, but is not obligated to, pay any or all
dividends, including without limitation any or all dividends in arrears, in
additional shares of Series A Preferred Stock. The corporation shall pay such
dividend by issuing to such holder of Series A Preferred Stock additional shares
of Series A Preferred Stock having an aggregate initial liquidation preference
equal to the amount of cash dividends otherwise payable to such holder.
(c) No full dividends shall be declared or paid or set apart for payment on
the Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to the Series A Preferred Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the Series
A Preferred 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, as aforesaid, upon the shares of Series A Preferred Stock and any other
series of Parity Stock, all dividends declared upon shares of this Series and
such other series of Parity Stock shall be declared pro rata so that the amount
of dividends declared per share on the Series A Preferred Stock and such other
Parity Stock shall in all cases bear to each other the same ratio that accrued
and unpaid dividends per share on the shares of Series A Preferred Stock and
such other Parity Stock bear to each other. Holders of shares of Series A
Preferred Stock shall not be entitled to any dividend, whether payable in cash,
property or stock, in excess of full cumulative dividends, as herein provided,
on the Series A Preferred Stock. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series A Preferred Stock which may be in arrears.
(d) So long as any shares of Series A Preferred Stock are outstanding, no
dividend (other than a dividend in Common Stock or in any other stock ranking
junior to this series as to dividends and upon liquidation and other than as
provided in paragraph (c) of this Section 3) shall be declared or paid or set
aside for payment or other distribution declared or made upon the Common Stock
or upon any other stock ranking junior to or on a parity with this Series as to
dividends or upon liquidation, nor shall any Common Stock or any other stock of
the corporation
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ranking junior to or on a parity with this Series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the corporation (except by
conversion into or exchange for stock of the corporation ranking junior to the
Series A Preferred Stock as to dividends and upon liquidation) unless, in each
case, the full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid or declared and set aside for payment for
all past Dividend Periods.
Section 4. Voting Rights.
(a) Except as otherwise expressly provided herein or as required by law,
the holders of each share of Series A Preferred Stock shall be entitled to ten
votes per share on all matters submitted to shareholders for voting, voting
together with the holders of Common Stock as a single group, and shall be
entitled to notice of any shareholders' meeting in accordance with applicable
law and the Bylaws of the corporation. Except as provided in the next succeeding
sentence, the approval of holders of 75% of the outstanding shares of Series A
Preferred Stock shall be required prior to the corporation's issuing any shares
of a class of preferred stock that ranks on a parity with or senior to the
Series A Preferred Stock. Notwithstanding the foregoing sentence, the
corporation may issue up to $90 million of Series A Preferred Stock and Parity
Stock without the approval of any holders of Series A Preferred Stock. The
corporation may not amend or alter any of this Statement of Rights and
Preferences without the approval of the holders of 75% of the outstanding Series
A Preferred Stock
Section 5. Conversion of Series A Preferred Stock. The holders of Series A
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the corporation or any transfer agent
for such stock, into ten fully paid and nonassessable shares of Common Stock.
(b) Mandatory Conversion. Each share of Series A Preferred Stock shall
automatically be converted into ten shares of Common Stock, upon (i) the closing
of the sale of the Common Stock in a Qualified Public Offering (defined below),
(ii) the closing of any Transaction (as defined in Section 5(g) below) in which
each holder of shares of Series A Preferred Stock is entitled to receive an
amount of cash or marketable securities having a current market value at least
equal to the Liquidation Preference of such shares of Series A Preferred Stock
(a "Qualified Transaction") or (iii) the vote or written consent of holders of
not less than 75% of the outstanding shares of Series A Preferred Stock. Notice
of any Qualified Public Offering or Qualified Transaction shall be given to each
holder of Series A Preferred Stock at least thirty days prior to anticipated
date of closing and conversion. "Qualified Public Offering" means a firm
commitment, public offering of the Common Stock pursuant to a registration
statement declared effective under the Securities Act of 1933, as amended,
underwritten by a
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securities firm of nationally recognized standing with an aggregate offering
price to the public of not less than $30 million and a price per share not less
than one-tenth of the Liquidation Preference (defined below) per share of the
Series A Preferred Stock determined as of the date of the closing of such public
offering.
(c) Mechanics of Conversion.
(i) To convert shares of Series A Preferred Stock into shareCommon
Stock, the holder of such shares of Series A Preferred Stock shall (A)
surrender the certificate or certificates therefor, duly endorsed, at the
office of the corporation or of any transfer agent for such stock, (B) give
written notice to the corporation at such office that it elects to convert
the same, (C) state therein the name or names in which it wishes the
certificate or certificates for shares of Common Stock to be issued and (D)
deliver to the corporation an executed joinder agreement pursuant to which
such holder agrees to become a party to and be bound by the Shareholders'
Agreement dated as of April 16, 1993 among the corporation and the holders
of Common Stock, as amended (the "Shareholders' Agreement"). The
corporation shall, as soon as practicable thereafter and at its expense,
issue and deliver to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock
on such date.
(ii) If the conversion is mandatory pursuant to Section 5(b) of this
Statement of Rights and Preferences, the conversion shall be conditioned
upon the closing with the underwriters of the sale of securities pursuant
to such Qualified Public Offering, the closing of such Qualified
Transaction or the vote or written consent of holders of not less than 75%
of the outstanding shares of Series A Preferred Stock, as the case may be,
and the Series A Preferred Stock shall be deemed to have been converted
immediately prior to the occurrence of such event.
(d) Reservation of Stock Issuable Upon Conversion. The corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, free of preemptive rights, solely for the purpose of effecting
the conversion of the shares of Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred Stock, the corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall
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be sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to these Articles of Incorporation.
(e) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the same
fraction of the fair market value per share as of the date of conversion.
(f) No Dilution or Impairment. The corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
corporation, including without limitation the adjustments required under this
Section 5, and will at all times in good faith assist in the carrying out of all
the provisions of this Section 5 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of Series A Preferred Stock against dilution or other impairment.
(g) Changes in Common Stock. In case at any time the corporation shall
initiate any transaction or be a party to any transaction (including, without
limitation, a merger, consolidation, share exchange, sale, lease or other
disposition of all or substantially all of the corporation's assets, charter
amendment, recapitalization or reclassification of the Common Stock or a "Stock
Sale," as defined below) in connection with which the previously outstanding
Common Stock shall be changed into or exchanged for different securities of the
corporation or capital stock or other securities of another corporation or
interests in a non-corporate entity or other property (including cash) or any
combination of the foregoing (each such transaction being herein called a
"Transaction"), then, as a condition of the consummation of the Transaction,
lawful, enforceable and adequate provision shall be made so that the holders of
Series A Preferred Stock shall be entitled to receive upon conversion of their
shares of Series A
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Preferred Stock at any time on or after the consummation of the Transaction, in
lieu of the shares of Common Stock issuable upon such conversion prior to such
consummation, the securities or other property (including cash) to which such
holders of Series A Preferred Stock would have been entitled upon consummation
of the Transaction if such holders had converted their shares of Series A
Preferred Stock immediately prior thereto (subject to adjustments from and after
the consummation date as nearly equivalent as possible to the adjustments
provided for in this Section 5). If a purchase, tender or exchange offer is made
to and accepted by the holders of more than 50% of the outstanding Common Stock
(a "Stock Sale"), and if the holders of Series A Preferred Stock so designate in
a written notice given to the corporation, such holders of Series A Preferred
Stock shall be entitled to receive upon the conversion of their shares of Series
A Preferred Stock at any time on or after the consummation of the Stock Sale in
lieu of the shares of Common Stock issuable upon conversion prior to the
consummation of the Stock Sale, the securities or other property to which such
holders of Series A Preferred Stock would have been entitled if such holders had
converted their shares of Series A Preferred Stock prior to the expiration of
such purchase, tender or exchange offer and had accepted such offer (subject to
adjustments from and after the consummation of such purchase, tender or exchange
offer as nearly equivalent as possible to the adjustments provided for in this
Section 5). The corporation will not effect any Transaction unless prior to the
consummation thereof each corporation or entity (other than the corporation)
which may be required to deliver any securities or other property upon the
conversion of Series A Preferred Stock as provided herein shall assume, by
written instrument delivered to the holders of Series A Preferred Stock, the
obligation to deliver to such holders such securities or other property as in
accordance with the foregoing provisions such holders may be entitled to
receive. The foregoing provisions of this Section 5(g) shall similarly apply to
successive Transactions.
(h) Other Action Affecting Common Stock. In case at any time or from time
to time the corporation shall take any action affecting the Common Stock, other
than an action described in Section 5(g) hereof, then, unless in the opinion of
the Board of Directors of the corporation such action will not have a material
adverse effect upon the rights of the holders of Series A Preferred Stock
(taking into consideration, if necessary, any prior actions which the Board of
Directors deemed not to materially adversely affect the rights of the holders),
the conversion formula set forth in Section 5(a) shall be adjusted in such
manner and at such time as the Board of Directors of the corporation may in good
faith determine to be equitable in the circumstances.
(i) Issue Taxes. The corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred Stock pursuant
hereto; provided, that the corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
Section 6. Liquidation Preference.
(a) Series A Preferred Stock. In the event of any liquidation, dissolution
or winding up of the corporation, either voluntary or involuntary, the holders
of the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
corporation to the holders of any stock ranking junior to the Series A Preferred
Stock, an amount equal to $100.00 per share plus the amount of accrued and
unpaid dividends thereon (the "Liquidation Preference")(such Liquidation
Preference to be adjusted for any combinations, consolidations, stock
distributions or stock dividends with respect to shares of the Series A
Preferred Stock). If upon the occurrence of any such liquidation, dissolution or
winding up of the corporation the assets and funds to be distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full Liquidation Preference, then the entire
assets and funds of the corporation legally available for
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distribution after payment of any amounts due and owing to holders of any stock
ranking senior to the Series A Preferred Stock shall be distributed ratably
among the holders of Series A Preferred Stock based upon the number of shares of
Series A Preferred Stock then held by them.
(b) Consolidation, Merger, etc. Not a Liquidation. The consolidation or
merger of the corporation with or into any other entity, the acquisition of the
capital stock of the corporation in a share exchange or the sale, lease or other
disposition of all or substantially all of the assets, property or business of
the corporation shall not be deemed to be a liquidation, dissolution or winding
up of the corporation within the meaning of this Section 6.
(c) Valuation of Securities. Any securities to be distributed pursuant to
this Section 6 in a liquidation, dissolution or winding up of the corporation
shall be the fair market value thereof, as determined in good faith by the Board
of Directors of the corporation or, if so required by a holder of Series A
Preferred Stock, as determined by a national or regional investment bank or a
national accounting firm mutually selected by such holder and the corporation,
the fees and expenses of which shall be paid by the corporation.
(d) Notice. Written notice (the "Notice") of any such liquidation,
dissolution or winding up of the corporation within the meaning of this Section
6, which states the payment date, the place where said payments shall be made
and the date on which Conversion Rights (as defined in Section 5) terminate as
to such shares (which shall be not less than 20 days after the date such notice
is given), shall be given by first class mail, postage prepaid, or by telecopy,
facsimile or recognized overnight courier, not less than 30 nor more than 60
days prior to the payment date stated therein, to the then holders of record of
Series A Preferred Stock and Common Stock, such Notice to be addressed to each
such holder at its address as shown on the records of the corporation.
Section 7. Redemption Rights.
(a) The corporation shall have the right at any time after November 1, 2005
to redeem, out of funds legally available therefor, any outstanding shares of
Series A Preferred Stock, in whole or in part, for a redemption price equal to
the Liquidation Price per share of the Series A Preferred Stock (calculated as
if the corporation liquidated on the date of redemption). On November 1, 2008,
the corporation shall redeem, out of funds legally available therefor, any
outstanding shares of Series A Preferred Stock, in whole or in part, for a
redemption price equal to the Liquidation Price per share of the Series A
Preferred Stock (calculated as if the corporation liquidated on the date of
redemption).
(b) In the event that fewer than all the outstanding Series A Preferred
Stock are to be redeemed, except as otherwise provided by law, the number of
shares to be redeemed shall be determined by the Board and the shares to be
redeemed shall be determined by lot or pro rata as may be determined by the
Board or by any other method as may be determined by the Board in its sole
discretion to be equitable.
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(c) In the event the corporation shall redeem shares of Series A Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the redemption
date, to each holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock register of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of Series
A Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; and (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price.
(d) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the corporation in providing money for the
payment of the redemption price), the redeemed shares of Series A Preferred
Stock shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the corporation (except the right to receive from the
corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board shall so require and the notice shall so
state), such shares shall be redeemed by the corporation at the redemption price
aforesaid. In case fewer than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
(e) Any shares of Series A Preferred Stock which shall at any time have
been redeemed shall, after such redemption, have the status of authorized but
unissued shares of preferred stock, without designation as to series until such
shares are once more designated as part of a particular series by the Board.
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