PAGE 1
DELAWARE
--------
The First State
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TRIBEWORKS, INC.", FILED IN THIS OFFICE ON THE EIGHTH DAY OF
SEPTEMBER, A.D. 2005, AT 9:48 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
Harriet Smith Windsor
----------------------------
Harriet Smith Windsor, Secretary of State
3143589 8100 [CERTIFICATE] AUTHENTICATION: 4145592
050738814 DATE: 09-09-05
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
TRIBEWORKS, INC.
Tribeworks, Inc. (the "Company"), a corporation organized and existing
under the laws of the State of Delaware,
DOES HEREBY CERTIFY:
that, pursuant to authority conferred upon the board of directors of the
Company (the "Board") by the Certificate of Incorporation of the Company, and
pursuant to the provisions of Section 151 of the Delaware General Corporation
Law, as amended (the "DGCL"), such Board, by unanimous written consent of its
members dated effective August 31, 2005, filed with the minutes of the Board,
adopted a resolution providing for the issuance of a series of One Million One
Hundred Eighty Thousand (1,180,000) shares of Series B Convertible Redeemable
Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board in
accordance with the provisions of the Company's Certificate of Incorporation, a
series of Preferred Stock of the Company be and hereby is created, such series
of Preferred Stock to be designated Series B Convertible Redeemable Preferred
Stock, to consist of One Million One Hundred Eighty Thousand (1,180,000) shares,
to be issued at a price of $0.50 per share (the "Stated Value"), with the voting
powers, preferences and relative, participating, optional and other special
rights, and the qualifications, limitations or restrictions of such series to be
as set forth in the Certificate of Designation.
The voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations or restrictions
thereof shall be as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall have a Stated
Value of $0.50 per share and shall be designated as Series B Convertible
Redeemable Preferred Stock (the "Series B Preferred Stock") and the number of
shares constituting the Series B Preferred Stock shall be One Million One
Hundred Eighty Thousand (1,180,000).
2. RANK. The Series B Preferred Stock shall rank prior to all of the
Company's common stock, par value $0.0004 per share ("Common Stock") and parri
passu to the Company's Series A Convertible Redeemable Preferred Stock (the
"Series A Preferred Stock"), in each case, with respect to dividends and
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
3. DIVIDENDS.
(a) Dividends on Series B Preferred Stock. Beginning on the date of
issuance, holders of shares of Series B Preferred Stock shall be
entitled to receive annual cumulative dividends equal to ten
percent (10%) of the aggregate Liquidation Preference (which
shall be the Stated Value of the Series B Preferred Stock, plus
accrued but unpaid dividends, if any) per share of Series B
Preferred Stock. Accrued dividends with respect to each share of
Series B Preferred Stock shall be paid in cash or in shares of
the Company's common stock, par value $0.0004 per share ("Common
Stock"), at the Company's sole option.
(b) Restrictions on Dividends on Common Stock. During such time as
any Series B Preferred Stock is outstanding, the Company shall
not declare or pay any dividend on shares of Common Stock unless
the holders of the then outstanding shares of Series B Preferred
Stock shall have received all accrued dividends as described in
Section 3(a) above prior to the declaration and payment of a
dividend on the Common Stock.
(c) Payments to Holders of Series B Preferred Stock. Each such
dividend shall be payable to the holders of the Series B
Preferred Stock of record as they appear on the stock ledger of
the Company on the record date of such dividend. No dividend
shall be declared or paid if such declaration or payment would
cause the Company to violate any provision of the DGCL.
4. LIQUIDATION PREFERENCE.
(a) Preferential Distributions. The initial liquidation preference
(the "Liquidation Preference") of the Series B Preferred Stock
shall be an amount equal to $0.50 per share (subject to
adjustment upward to the extent required to satisfy the dividend
preference requirements of Section 3). In the event of any
voluntary or involuntary liquidation (including a partial
liquidation, dissolution or winding up of the affairs of the
Company), the holders of shares of Series B Preferred Stock then
outstanding shall be entitled to be paid out of the Company's
funds legally available for distribution to its stockholders an
amount in cash equal to the Liquidation Preference for each
share of Series B Preferred Stock outstanding in parity with any
distribution to the holders of Series A Preferred Stock but
before any payment shall be made or any assets distributed to
the holders of any Common Stock. If the assets of the Company
are insufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of the Series B Preferred
Stock, then the entire assets of the Company legally available
for distribution shall be distributed ratably among the holders
of the Series A Preferred Stock and Series B Preferred Stock in
proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Certain Transactions. For purposes of this Section 4, the sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities, or other consideration)
-2-
of all or substantially all of the assets or property of the
Company or the statutory exchange or consolidation or merger of
the Company with or into one or more entities, shall be deemed
to be a liquidation, dissolution, or winding up of the Company
(collectively, a "Liquidity Event"), unless the holders of all
of the then outstanding shares of Series B Preferred Stock shall
elect not to treat any such transaction as a liquidation,
dissolution or winding up of the Company, in which case Section
6(c) shall apply.
(c) Actions upon Merger, Consolidation, Etc. Prior to the closing of
a transaction described in Section 4(b) which would constitute a
Liquidity Event, the Company shall either (i) make all
distributions it is required to make to the holders of Series B
Preferred Stock pursuant to the first sentence of Section 4(a),
or (ii) set aside sufficient funds from which all such cash
distributions required to be made to the holders of Series B
Preferred Stock can be made, or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which
the proceeds payable to the Company from a sale of all or
substantially all the assets of the Company will be used to make
the liquidating payments to the holders of Series B Preferred
Stock immediately after the consummation of such sale. In the
event that the Company has not fully complied with any of the
foregoing alternatives, the Company shall either: (i) cause such
closing to be postponed until such distributions have been made,
or (ii) cancel such transaction, in which event the rights of
the holders of shares of Series B Preferred Stock shall be the
same as existing immediately prior to such proposed transaction.
5. REDEMPTION.
(a) Redemption at the Company's Option. At any time on or after the
date of issuance (an "Optional Redemption Date"), the Company
may, at its election, redeem all, but not less than all, of the
shares of Series B Preferred Stock then outstanding on such
Optional Redemption Date.
(b) Redemption Payment. The aggregate Redemption Price (as defined
in Section 5(c) below) payable to each holder of shares of
Series B Preferred Stock pursuant to this Section 5 shall be
paid to such holder in a single lump-sum payment.
(c) Redemption Price. The redemption price (the "Redemption Price")
for each share of Series A Preferred Stock redeemed pursuant to
this Section 5 shall be $0.50 per share of Series B Preferred
Stock plus any accrued but unpaid dividends thereon. If on or
before the Optional Redemption Date all funds necessary for such
redemption shall have been set aside by the Company, separate
and apart from its other funds in trust for the prorata benefit
of the holders of the Series B Preferred Stock, so as to be and
continue to be available therefor, then from and after the
Optional Redemption date, notwithstanding that any certificate
for shares of the Series B Preferred Stock shall not have been
surrendered for cancellation, the shares represented thereby
shall no longer be deemed outstanding, and all rights with
respect to shares of the Series B Preferred Stock shall
forthwith on the
-3-
Optional Redemption Date cease and terminate except only as to
the right of the holders thereof to receive the Redemption Price
of such Shares so to be redeemed. Any monies set aside by the
Company and unclaimed at the end of five (5) years from the
Optional Redemption Date shall revert to the general funds of
the Company (provided that the holders of the Series B Preferred
Stock have received notice of the redemption within thirty (30)
days after the Optional Redemption Date.
(d) Equitable Adjustment. The Redemption Price set forth in this
Section 5 shall be subject to equitable adjustment whenever
there shall occur a stock split, stock dividend, combination,
reorganization, recapitalization, reclassification or other
similar event involving a change in the Series B Preferred
Stock.
(e) Redemption Notice. At least thirty (30) days prior to the
Optional Redemption Date described specified in Section 5(a)
above, written notice (hereinafter referred to as the
"Redemption Notice") shall be delivered by the Company to each
holder of record of Series B Preferred Stock, at such holder's
address as shown on the stock ledger of the Company or its
transfer agent, if applicable. The Redemption Notice shall
contain the following information:
(i) a statement that the Company intends to redeem all the
shares of Series B Preferred Stock held by the holder
and subject to redemption on such date, and the total
number of shares of Series B Preferred Stock held by all
holders which the Company has determined will be
redeemed on such date;
(ii) the Redemption Date and the applicable Redemption Price
(subject to the provisions of Section 5(c) above); and
(iii) a statement that the holder is to surrender to the
Company, at the place designated in the Redemption
Notice or to the Company's designated transfer agent
(the "Transfer Agent"), its certificate or certificates
representing all of the shares of Series B Preferred
Stock so to be redeemed.
(f) Notice of Acknowledgement. Within thirty (30) days after receipt
of a Redemption Notice, any holder of Series B Preferred Stock
shall provide the Company with written notice of such holder's
acknowledgement of the Company's intention to redeem his shares,
which notice shall specify the number of shares to be redeemed.
All notices hereunder shall be deemed to have been given if
personally delivered, sent by facsimile transmission, prepaid
overnight courier, or certified or registered mail.
(g) Surrender of Certificates. Each holder of shares of Series B
Preferred Stock shall surrender the certificate(s) representing
such shares to be redeemed to the Company at the address
specified in the Redemption Notice or to the Transfer
-4-
Agent, and thereupon the Redemption Price for such shares as set
forth in this Section 5 shall be paid to the order of the person
whose name appears on such certificate(s) and each surrendered
certificate shall be cancelled and retired.
(h) Option to Convert. After receipt of the Redemption Notice and
prior to the close of business on the business day prior to the
Redemption Date, the holders of the Series B Preferred Stock so
called for redemption may convert such stock, or any number of
shares thereof, into Common Stock in accordance with the
conversion privileges set forth in Section 6 hereof. Unless: (i)
the holder of shares of Series A Preferred Stock to whom such
Redemption Notice has been duly given shall have exercised its
rights to convert in accordance with Section 6 hereof; or (ii)
the Company shall default in the payment of the Redemption Price
as set forth in the Redemption Notice (or as determined in
accordance with the provisions Section 5(c)), upon such
Redemption Date such holder shall no longer have any voting or
other rights with respect to such shares, except the right to
receive the monies payable upon such redemption from the
Company, without interest thereon, upon surrender (and
endorsement, if required by the Company or the Transfer Agent)
of the certificate(s), and the shares represented thereby shall
no longer be deemed to be outstanding as of the Redemption Date.
In the event a holder of Series B Preferred Stock provides the
Company with notice of conversion of all or a portion of such
Series B Preferred Stock into shares of Common Stock on or after
any Redemption Notice is provided, the holder shall have be
deemed to have converted such shares as of the Redemption Date;
provided, however, that in the event the Company shall default
in the payment of the Redemption Price as set forth in such
Redemption Notice (or as determined in accordance with the
provisions Section 5(c)), the conversion shall not be effective
unless the holder of the Series B Preferred Stock electing to
convert provides written notice to the Company within twenty
(20) days of the purported Redemption Date of his desire to
effect such conversion.
(i) Status. All shares of Series B Preferred Stock so redeemed shall
have the status of authorized but unissued preferred stock, but
such shares so redeemed shall not be reissued as shares of
Series B Preferred Stock created hereby.
(j) Common Stock Reservation. If the Company calls for redemption of
the Series B Preferred Stock, it shall reserve sufficient shares
of Common Stock for the purpose of issuing such shares of Common
Stock to holders of Series B Preferred Stock that determine to
convert such shares of Series B Preferred Stock into Common
Stock pursuant to the provisions of this Section 5.
6. CONVERSION. The Series B Preferred Stock shall be convertible as follows
(the "Conversion Rights"):
(a) Each share of Series B Preferred Stock shall be convertible, at
the sole option of the Company, at any time after the date of
issuance of such share, at the office of the Company or any
transfer agent for the Series B Preferred Stock, into such
-5-
number of fully paid and nonassessable shares of Common Stock
(the "Conversion Rate") as is determined by dividing $0.50 per
share by the Conversion Price for the Series B Preferred Stock
in effect on the date of such conversion. The conversion price
shall be $0.50 (such price being referred to as the "Conversion
Price").
(b) Mechanics of Conversion. Before any holder of Series B Preferred
Stock shall be entitled to convert any of such shares into
shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the
office of the Company or of any transfer agent for the Series B
Preferred Stock, and shall give written notice by mail, postage
prepaid, to the Company at its principal corporate offices, of
the election to convert the same and shall state therein the
name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Company shall, as
soon as practicable thereafter, issue and deliver at such office
to such holder of Series B Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates
representing the number of shares of Common Stock to which such
holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series B
Preferred Stock to be converted (the "Conversion Date"), 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
as of the Conversion Date.
(c) Reorganizations and Recapitalizations. If at any time or from
time to time there shall be a reorganization or recapitalization
of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for in Section 4
hereof), then, as a condition of such reorganization or
recapitalization, provision shall be made so that the holders of
the Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series B Preferred Stock the
number of shares of stock or other securities or property of the
Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such
reorganization or recapitalization. In any such case,
appropriate adjustment shall be made, in the good faith
determination of the Board of Directors of the Company, in the
application of the provisions of this Section 6 with respect to
the rights of the holders of the Series B Preferred Stock after
the recapitalization to the end that the provisions of this
Section 6 (including adjustment of the Conversion Price then in
effect and the number of shares receivable upon conversion of
the Series B Preferred Stock) shall be applicable after that
event in as nearly an equivalent manner as may be practicable.
(d) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of
-6-
the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out
of all the provisions of this Section 6 and in the taking of all
such action (including the reduction of par value of the Common
Stock or the Series B Preferred Stock) as may be necessary or
appropriate in order to protect the conversion rights of the
holders of the Series B Preferred Stock.
(e) No Fractional Shares. No fractional shares shall be issued upon
conversion of the Series B Preferred Stock and the number of
shares of Common Stock to be issued shall be rounded down to the
nearest whole share, and there shall be no payment to a holder
of Series B Preferred Stock for any such rounded fractional
shares. Whether or not fractional shares result from such
conversions shall be determined on the basis of the total number
of shares of Series B Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of Series B
Preferred Stock pursuant to this Section 6, the Company, at its
expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to
each holder of Series B Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any
holder of Series B Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i)
such adjustment and readjustment, (ii) the Conversion Price at
the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series
B Preferred Stock.
(g) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series B Preferred
Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock, and if at
any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series B Preferred Stock, then in
addition to such other remedies as shall be available to the
holder of such Series B Preferred Stock, the Company will take
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for
such purposes.
-7-
(h) Notices. In the event that the Company shall propose at any
time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and
whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of
stock of any class or series or any other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in the
Common Stock; or
(iv) to merge or consolidate with or into any other Company,
or sell, lease or convey all or substantially all of its
property or business, or to liquidate, dissolve or wind
up;
then, in connection with each such event, the Company
shall send to the holders of the Series B Preferred
Stock:
(A) at least twenty (20) days' prior written notice
of the date on which a record shall be taken for
such dividend, distribution or subscription
rights (and specifying the date on which the
holders of Common Stock shall be entitled
thereto) or for determining rights to vote in
respect of the matters referred to in
subsections (h)(iii) and (h)(iv) above; and
(B) in the case of the matters referred to in
subsections (h)(iii) and (h)(iv) above, at least
twenty (20) days' prior written notice of the
date when the same shall take place (and
specifying the date on which the holders of
Common Stock shall be entitled to exchange their
Common Stock for securities or other property
deliverable upon the occurrence of such events
or the record date for the determination of such
holders if such record date is earlier).
Any notice required by the provisions of this Section 6 to be given to
the holders of shares of Series A Preferred Stock shall be deemed given if sent
by facsimile, by telex, or if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his, her or its address
appearing on the books of the Company.
7. VOTING RIGHTS. Except as otherwise required by the DGCL, this
Certificate of Designation, or the Company's Certificate of Incorporation, the
holders of the Series B Preferred Stock shall have no voting rights, and no
consent of any holder shall be required for the taking of any corporate action.
-8-
8. WARRANT. In the event of conversion of the outstanding shares of Series
B Preferred Stock, the Company shall issue to each holder of Series B Preferred
Stock a one year warrant to purchase one (1) share of Common Stock at a strike
price of US 1.00 for each share of Common Stock (the "Warrants") for each two
(2) shares of Series B Preferred Stock so converted.
9. RESTRICTIONS AND LIMITATIONS. So long as any shares of Series B
Preferred Stock shall be outstanding, the Company shall not, without first
having obtained the affirmative vote or written consent of the holders of at
lease sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares
of Series B Preferred Stock, voting as a separate class:
(a) effect any amendment of the Company's Certificate of
Incorporation or By-Laws which would materially adversely affect
the rights of the Series B Preferred Stock; or
(b) amend, alter or repeal the preferences, special rights or other
powers of the Series B Preferred Stock so as to adversely affect
the holders of shares of Series B Preferred Stock.
10. TRANSFERABILITY. The Series B Preferred Stock shall not be transferable
by the holders.
11. PAYMENT OF TAXES. The issuance and delivery of shares of Common Stock
upon conversion of shares of Series B Preferred Stock shall be made without
charge to the holder of Series B Preferred Stock for any issuance tax in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer and delivery of shares in a name other
than that of the holder of the Series B Preferred Stock that has been converted.
12. NOTICE TO THE COMPANY. Except as specifically set forth herein, all
notices or communications provided for or permitted hereunder shall be made in
writing by hand delivery, express overnight courier, registered first class
mail, or telecopier addressed (i) if to the Company, to its office at 243 Front
Street, San Francisco, CA 94111, Attention: Peter B. Jacobson, CEO, and (2) if
to a holder of the Series B Preferred Stock, to such holder at the address of
such holder as listed in the stock ledger of the Company or to such other
address as the Company or such holder, as the case may be, shall have designated
by notice similarly given. All such notices and communications shall be deemed
to have been duly given: when delivered by hand, if personally delivered; five
(5) business days after being deposited in the mail, registered or certified
mail, return receipt requested, postage prepaid, if mailed; when received after
being deposited in the regular mail; the next business day after being deposited
with an overnight courier, if deposited with a nationally recognized, overnight
courier service; when receipt is acknowledged, if by telecopier, so long as
followed upon the same day by overnight courier.
13. STATUS OF REDEEMED, CONVERTED OR UNISSUED SHARES OF SERIES B PREFERRED
STOCK. Any Series B Preferred Stock redeemed, purchased, converted or otherwise
acquired by the Company in any manner whatsoever shall not be reissued as part
of such Series B Preferred Stock and shall be retired promptly after the
acquisition thereof. Further, no shares of Series B
-9-
Preferred Stock shall be issued by the Company after September 30, 2005. Any
shares of Series B Preferred Stock that are not issued by September 30, 2005,
shall return to the status of undesignated shares of preferred stock of the
Company.
14. PREFERENCE RIGHTS. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one (1) or more
additional series of preferred stock of the Company that is/are senior in rights
and preferences to the Series B Preferred Stock.
(EXECUTION PAGE FOLLOWS)
-10-
IN WITNESS WHEREOF, Tribeworks, Inc. has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by Peter B. Jacobson, its
Chief Executive Officer and Robert Gardner, its Secretary, as of this 6th day of
September, 2005.
/s/ PETER B. JACOBSON
---------------------------------
PETER B. JACOBSON,
Chief Executive Officer
/s/ ROBERT C. GARDNER
---------------------------------
ROBERT C. GARDNER,
Secretary
-11-