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Exhibit 3.3
CERTIFICATE OF DESIGNATION OF VOTING POWER,
DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS
OF
SERIES A SENIOR CUMULATIVE PARTICIPATING
CONVERTIBLE PREFERRED STOCK
OF
CYRK, INC.
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PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
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Cyrk, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article IV of its
Certificate of Incorporation (the "Certificate of Incorporation"), and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation at a meeting
duly called and held on August 31, 1999 duly approved and adopted the following
resolution which resolution remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board
of Directors by the Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issue of a series
preferred stock having a par value of $.01 per share, with a liquidation
preference of $1,000 per
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share (the "Base Liquidation Preference") which shall be designated as Series A
Senior Cumulative Participating Convertible Preferred Stock (the "Preferred
Stock") consisting of 40,000 shares, of which 25,000 shares shall be designated
Series A1 Senior Cumulative Participating Convertible Preferred Stock (the
"Series A1 Stock") and 15,000 shares shall be designated Series A2 Senior
Cumulative Participating Convertible Preferred Stock (the "Series A2 Stock"),
plus, in each case, such additional shares of Preferred Stock as may be issued
pursuant to paragraph 2 hereof, having the following voting powers, preferences
and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
1. Ranking. The Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank (i) senior to all classes of Common Stock of the
Corporation and to each other class of capital stock or series of preferred
stock established after November 10, 1999 by the Board of Directors the terms of
which do not expressly provide that it ranks senior to or on a parity with the
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Corporation (collectively
referred to with the Common Stock of the Corporation as "Junior Securities");
(ii) on a parity with any additional shares of Preferred Stock issued by the
Corporation in the future and any other class of capital stock or series of
preferred stock issued by the Corporation established after November 10, 1999 by
the Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Corporation (collectively referred to as "Parity Securities"); and (iii)
junior to each class of capital stock or series of preferred stock issued by the
Corporation established after November 10, 1999 by the Board of Directors the
terms of which expressly provide that such class or series will rank senior to
the Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as "Senior Securities").
2. Dividends.
(i) The holders of shares of the Preferred Stock shall be entitled to
receive, when, as and if dividends are declared by the Board of Directors out of
funds of the Corporation legally available therefor, cumulative dividends from
the
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date of issuance of the Preferred Stock accruing at the rate per annum of 4% of
the Base Liquidation Preference per share, payable quarterly in arrears on each
February 10, May 10, August 10 and November 10, commencing on February 10, 2000
(each a "Dividend Payment Date"), to the holders of record as of the next
preceding January 31, April 30, July 31 and October 31, (each, a "Record Date")
whether or not such Record Date is a Business Day. If any Dividend Payment Date
is not a Business Day, such payment shall be made on the next succeeding
Business Day. Dividends will be payable, at the option of the Corporation, (A)
in cash, (B) by delivery of shares of Preferred Stock of the same designation as
the shares on which the dividend is paid or (C) through any combination of the
foregoing. In addition, if the Corporation declares or pays any cash dividends
on the Common Stock, the Corporation shall also declare and pay to the holders
of the Preferred Stock at the same time that it declares and pays such
dividends, the dividends which would have been declared and paid with respect to
the Common Stock issuable upon conversion of the Preferred Stock had all of the
outstanding Preferred Stock been converted immediately prior to the record date
for such dividend.
(ii) Dividends on the Preferred Stock shall accrue whether or not the
Corporation has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate, compounded quarterly.
(iii) No dividend whatsoever shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding share of the
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Preferred Stock. Unless full cumulative dividends on all outstanding
shares of Preferred Stock for all past dividend periods shall have been declared
and paid, or declared and a sufficient sum for the payment thereof set apart,
then: (a) no dividend (other than a divided payable solely in shares of any
Junior Securities) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Securities or Parity Securities;
(b) no other distribution shall be declared or made upon, or any sum set apart
for the payment of any distribution upon, any shares of Junior Securities or
Parity Securities, other than a distribution consisting solely of Junior
Securities; (c) no
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shares of Junior Securities or Parity Securities shall be purchased, redeemed or
otherwise acquired or retired for value (excluding an exchange for shares of
other Junior Securities or Parity Securities) by the Corporation or any of its
subsidiaries; and (d) no monies shall be paid into or set apart or made
available for a sinking or other like fund for the purchase, redemption or other
acquisition or retirement for value of any shares of Junior Securities or Parity
Securities by the Corporation or any of its subsidiaries. Holders of the
Preferred Stock will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends as herein
described.
3. Conversion Rights.
(i) A holder of shares of Preferred Stock may convert such shares at
any time, unless previously redeemed, at the option of the holder thereof into
shares Common Stock of the Corporation. For the purposes of conversion, each
share of Preferred Stock shall be valued at the Base Liquidation Preference plus
accrued and unpaid dividends, which shall be divided by the Conversion Price in
effect on the Conversion Date to determine the number of shares of Common Stock
issuable upon conversion, except that the right to convert shares of Preferred
Stock called for redemption shall terminate at the close of business on the
Business Day preceding the Redemption Date and shall be lost if not exercised
prior to that time, unless the Corporation shall default in payment of the
redemption price contemplated by Section 5(i) or 5(ii). Immediately following
such conversion, the rights of the holders of converted Preferred Stock shall
cease and the persons entitled to receive the Common Stock upon the conversion
of Preferred Stock shall be treated for all purposes as having become the owners
of such Common Stock.
(ii) To convert Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form satisfactory to the Corporation, at the
office of the Corporation or transfer agent for the Preferred Stock, (B) notify
the Corporation at such office that he elects to convert Preferred Stock and the
number of shares he wishes to convert, (C) state in writing the name or names in
which he wishes the certificate or certificates for shares of Common Stock to be
issued, and (D) pay any transfer or similar tax if required pursuant to
paragraph 3(iv). In the event that a holder fails to notify the Corporation of
the number of shares of Preferred Stock which he wishes to convert, he shall be
deemed to have elected
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to convert all shares represented by the certificate or certificates surrendered
for conversion. The date on which the holder satisfies all those requirements is
the "Conversion Date." As soon as practical following the Conversion Date, the
Corporation shall deliver to the holder a certificate for the number of full
shares of Common Stock issuable upon the conversion, and a new certificate
representing the unconverted portion, if any, of the shares of Preferred Stock
represented by the certificate or certificates surrendered for conversion. The
person in whose name the Common Stock certificate is registered shall be treated
as the stockholder of record on and after the Conversion Date. The holder of
record of a share of Preferred Stock at the close of business on a Record Date
with respect to the payment of dividends on the Preferred Stock will be entitled
to receive such dividends with respect to such share of Preferred Stock on the
corresponding Dividend Payment Date, notwithstanding the conversion of such
share after such Record Date and prior to such Dividend Payment Date. The
dividend payment with respect to a share of Preferred Stock called for
redemption on a date during the period from the close of business on any Record
Date for the payment of dividends to the close of business on the Business Day
immediately following the corresponding Dividend Payment Date will be payable on
such Dividend Payment Date to the record holder of such share on such Record
Date, notwithstanding the conversion of such share after such Record Date and
prior to such Dividend Payment Date, and the holder converting such share of
Preferred Stock need not include a payment of such dividend amount upon
surrender of such share of Preferred Stock for conversion. If a holder of
Preferred Stock converts more than one share at a time, the number of full
shares of Common Stock issuable upon conversion shall be based on the total Base
Liquidation Preferences plus accrued and unpaid dividends thereon of all shares
of Preferred Stock converted. If the last day on which Preferred Stock may be
converted is not a Business Day, Preferred Stock may be surrendered for
conversion on the next succeeding Business Day.
(iii) The Corporation shall not issue any fractional shares of Common
Stock upon conversion of Preferred Stock. Instead the Corporation shall pay a
cash adjustment based upon the Closing Price of the Common Stock on the Business
Day prior to the Conversion Date.
(iv) If a holder converts shares of Preferred Stock, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion. However, the holder shall
pay any such tax that is due because the shares are issued in a name other than
the
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holder's name.
(v) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Preferred Stock in
full. All shares of Common Stock that may be issued upon conversion of Preferred
Stock shall be fully paid and nonassessable.
(vi) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation (other than the
Preferred Stock) in Common Stock, the Conversion Price in effect at the opening
of business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator of which
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination of the holders entitled to such dividends and
distributions. For the purposes of this paragraph 3(vi), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Corporation. The Corporation will not pay any dividend or make
any distribution on shares of Common Stock held in the treasury of the
Corporation.
(vii) In case the Corporation shall issue rights, options or warrants
to all holders of its Common Stock entitling them to subscribe for, purchase or
acquire shares of Common Stock at a price per share less than the current market
price per share (determined as provided in paragraph 3(xi) below) of the Common
Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants, the Conversion Price in effect at the
opening of business on the day following the date fixed for such determination
shall be reduced by multiplying such Conversion Price by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the number
of shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription, purchase or
acquisition would purchase at such current market price and the denominator of
which shall
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be the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common Stock
so offered for subscription, purchase or acquisition, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination of the holders entitled to such rights,
options or warrants. However, upon the expiration of any right, option or
warrant to purchase Common Stock, the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this paragraph 3(vii), if any
such right, option or warrant shall expire and shall not have been exercised,
the Conversion Price shall be recomputed immediately upon such expiration and
effective immediately upon such expiration shall be increased to the price it
would have been (but reflecting any other adjustments to the Conversion Price
made pursuant to the provisions of this paragraph 3 after the issuance of such
rights, options or warrants) had the adjustment of the Conversion Price made
upon the issuance of such rights, options or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights, options or warrants. No
further adjustment shall be made upon exercise of any right, option or warrant
if any adjustment shall be made upon the issuance of such security. For the
purposes of this paragraph 3(vii), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation. The Corporation will not issue any rights, options or warrants in
respect of shares of Common Stock held in the treasury of the Corporation.
(viii) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be reduced, and, conversely, in case
the outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be increased, in each case to equal the product of the
Conversion Price in effect on such date and a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, as the case may be, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such subdivision or combination, as the case may be. Such reduction or
increase, as the case may be, shall become effective immediately after the
opening of business on the day following the day upon which such subdivision or
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combination becomes effective.
(ix) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock (A) evidences of its indebtedness
or (B) shares of any class of capital stock, cash or other assets (including
securities, but excluding (x) any rights, options or warrants referred to in
paragraph 3(vii) above, (y) any dividends or distributions referred to in
paragraph 3(vi) or 3(viii) above, and (z) cash dividends), then in each case,
the Conversion Price in effect at the opening of business on the day following
the date fixed for the determination of holders of Common Stock entitled to
receive such distribution shall be adjusted by multiplying such Conversion Price
by a fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph 3(xi) below) of the Common Stock on such
date of determination (or, if earlier, on the date on which the Common Stock
goes "ex-dividend" in respect of such distribution) less the then fair market
value as determined by the Board of Directors (whose determination shall be
conclusive and shall be described in a statement filed with the Transfer Agent)
of the portion of the capital stock, cash or other assets or evidences of
indebtedness so distributed (and for which an adjustment to the Conversion Price
has not previously been made pursuant to the terms of this paragraph 3)
applicable to one share of Common Stock, and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately after the opening of business on the day following such
date of determination of the holders entitled to such distribution.
(ixA) In case a tender or exchange offer made by the Corporation or any
subsidiary of the Corporation for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Corporation or such subsidiary of consideration per share of Common Stock having
a fair market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof, whose
determination shall be conclusive and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case may be) at the
last time (the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended) that exceeds the
current market price per share (determined as provided in paragraph 3(xi) below)
of the Common Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the
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Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
on the Expiration Time multiplied by the current market price per share of the
Common Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the current market price per share of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time. For the purposes of this paragraph 3(ixA), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Corporation.
(x) The reclassification or change of Common Stock into securities,
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which paragraph 3(xviii) below shall apply)
shall be deemed to involve (A) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the determination of
holders of Common Stock entitled to receive such distribution" within the
meaning of paragraph 3(ix) above), and (B) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of Common Shares outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph 3(viii) above).
(xi) For the purpose of any computation under paragraph 3(vii), or
3(ix) or 3(ixA) above, the current market price per share of Common Stock on any
day shall be deemed to be the average of the Closing Prices of the Common Stock
for the 20 consecutive Trading Days ending on the day before the day in
question; provided, that, in the case of paragraph 3(ix), if the period between
the
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date of the public announcement of the dividend or distribution and the date for
the determination of holders of Common Stock entitled to receive such dividend
or distribution (or, if earlier, the date on which the Common Stock goes
"ex-dividend" in respect of such dividend or distribution) shall be less than 20
Trading Days, the period shall be such lesser number of Trading Days but, in any
event, not less than five Trading Days.
(xii) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this paragraph
3 shall be made to the nearest 1/10,000th of a cent or to the nearest 1/10,000th
of a share, as the case may be.
(xiii) For purposes of this Certificate of Designation, "Common Stock"
includes any stock of any class of the Corporation which has no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation and which
is not subject to redemption by the Corporation. However, subject to the
provisions of paragraph 3(xviii) below, shares issuable on conversion of shares
of Preferred Stock shall include only shares of the class designated as Common
Stock of the Corporation on the Preferred Stock Issue Date or shares of any
class or classes resulting from any reclassification thereof and which have no
preferences in respect of dividends or amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation and which are not subject to redemption by the Corporation; provided
that, if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
(xiv) No adjustment in the Conversion Price shall reduce the Conversion
Price below the then par value of the Common Stock. No adjustment in the
Conversion Price need be made under paragraphs 3(vi), 3(vii) and 3(ix) above if
the Corporation issues or distributes to each holder of Preferred Stock the
shares of Common Stock, evidences of indebtedness, assets, rights, options or
warrants referred to in those paragraphs which each holder would have been
entitled to receive had Preferred Stock been converted into Common Stock prior
to the happening of such event or the record date with respect thereto.
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(xv) Whenever the Conversion Price is adjusted, the Corporation shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment. The Corporation shall file with the transfer agent for
the Preferred Stock, if any, a certificate from the Corporation's independent
public accountants briefly stating the facts requiring the adjustment and the
manner of computing it. Unless holders of a majority of the outstanding shares
of Preferred Stock shall notify (a "Dispute Notice") the Corporation, within 30
days of the date the Corporation mails such notice of adjustment, that such
holders (the "Disputing Holders") dispute such adjustment, such adjustment shall
be final and binding. The Dispute Notice shall set forth in reasonable detail
the basis for such dispute and shall name a representative (the
"Representative") for the Disputing Holders. The Corporation and the
Representative shall jointly engage an accounting firm of national reputation
which shall be instructed to resolve such dispute as promptly as practicable.
The decision of such accounting firm shall be final and binding. The Corporation
and the Representative, on behalf of the Disputing Holders, shall each bear
one-half of the fees and expenses (including the responsibility for any
indemnity or similar obligations) of such accounting firm.
(xvi) The Corporation from time to time may reduce the Conversion Price
if it considers such reductions to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the holders of Common Stock by any amount, but in no event may the
Conversion Price be less than the par value of a share of Common Stock. Whenever
the Conversion Price is reduced, the Corporation shall mail to holders of
Preferred Stock a notice of the reduction. The Corporation shall mail, first
class, postage prepaid, the notice at least 15 days before the date the reduced
Conversion Price takes effect. The notice shall state the reduced Conversion
Price and the period it will be in effect. A reduction of the Conversion Price
pursuant to this paragraph 3(xvi) does not change or adjust the Conversion Price
otherwise in effect for purposes of paragraphs 3(vi), 3(vii), 3(viii), 3(ix),
3(ixA) and 3(x) above.
(xvii) If:
(a) the Corporation takes any action which would require an
adjustment in the Conversion Price pursuant to paragraph 3(vii), 3(ix) or 3(x)
above;
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(b) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another entity, and stockholders of
the Corporation must approve the transaction; or
(c) there is a dissolution or liquidation of the Corporation;
the Corporation shall mail to holders of the Preferred Stock, first class,
postage prepaid, a notice stating the proposed record or effective date, as the
case may be. The Corporation shall mail the notice at least 10 days before such
date. However, failure to mail the notice or any defect in it shall not affect
the validity of any transaction referred to in clause (a), (b) or (c) of this
paragraph 3(xvii).
(xviii) In the case of any consolidation of the Corporation or the
merger of the Corporation with or into any other entity or the sale or transfer
of all or substantially all the assets of the Corporation pursuant to which the
Corporation's Common Stock is converted into other securities, cash or assets,
upon consummation of such transaction, each share of Preferred Stock shall
automatically become convertible into the kind and amount of securities, cash or
other assets receivable upon the consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such share of
Preferred Stock is convertible immediately prior to such consolidation, merger,
transfer or sale (assuming such holder of Common Stock failed to exercise any
rights of election and received per share the kind and amount of consideration
receivable per share by a plurality of non-electing shares). Appropriate
adjustment (as determined by the Board of Directors of the Corporation) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the conversion of
Preferred Stock. If this paragraph 3(xviii) applies, paragraphs 3(vi), 3(viii)
and 3(x) do not apply.
(xix) In any case in which this paragraph 3 shall require that an
adjustment as a result of any event becomes effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event the issuance to the holder of any shares of Preferred Stock converted
after such record date and before the occurrence of such event of the additional
shares of
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Common Stock issuable upon such conversion over and above the shares issuable on
the basis of the Conversion Price in effect immediately prior to adjustment;
provided, however, that if such event shall not have occurred and authorization
of such event shall be rescinded by the Corporation, the Conversion Price shall
be recomputed immediately upon such rescission to the price that would have been
in effect had such event not been authorized, provided that such rescission is
permitted by and effective under applicable laws.
4. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation or reduction or
decrease in its capital stock resulting in a distribution of assets to the
holders of any class or series of the Corporation's capital stock, each holder
of shares of the Preferred Stock will be entitled to payment out of the assets
of the Corporation available for distribution of an amount equal to the greater
of (a) the Adjusted Liquidation Preference as of the date fixed for liquidation,
dissolution, winding-up or reduction or decrease in capital stock per share of
Preferred Stock held by such holder times the number of shares of Preferred
Stock held by such holder or (b) the amount that would have been paid to such
holder of the Preferred Stock with respect to Common Stock issuable upon
conversion of such holder's Preferred Stock had each share of such holder's
outstanding Preferred Stock been converted to Common Stock immediately prior to
the date of the liquidation, dissolution, winding-up or reduction or decrease in
capital stock (such sum, the "Total Liquidation Payment"), before any
distribution is made on any Junior Securities, including, without limitation,
Common Stock of the Corporation. After payment in full of the Total Liquidation
Payment to which holders of Preferred Stock are entitled, such holders will not
be entitled to any further participation in any distribution of assets of the
Corporation. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the amounts payable with respect to the Preferred
Stock and all other Parity Securities are not paid in full, the holders of the
Preferred Stock and the Parity Securities will share equally and ratably in any
distribution of assets of the Corporation in proportion to the full liquidation
preference and accumulated and unpaid dividends, if any, to which each is
entitled. However, neither the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one or more Persons will
be deemed to be a voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation or reduction or decrease in capital stock, unless
such sale, conveyance, exchange or transfer shall be in connection with a
liquidation,
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dissolution or winding-up of the business of the Corporation or reduction or
decrease in capital stock.
5. Redemption.
(i) Mandatory Offer of Redemption. Within 15 days following a
Change of Control Event, the Corporation shall give notice to the holder of the
Preferred Stock, describing in reasonable detail the material terms of the
transaction and offering to purchase all of such holder's shares of Preferred
Stock at a price per share in cash equal to 101% of the Adjusted Liquidation
Preference as of the repurchase date, which shall be no earlier than 30 days,
nor later than 60 days from the date such notice is mailed; provided, however,
that if the Change of Control Event occurs prior to November 10, 2002, the
Adjusted Liquidation Preference shall be deemed to equal the Adjusted
Liquidation Preference plus the dividends that would have accrued on the shares
of Preferred Stock (and assuming such dividends were paid by delivery of shares
of Preferred Stock of the same designation) had such Preferred Stock remained
outstanding until November 10, 2002. The failure of the holder to accept such
offer prior to the repurchase date shall be deemed a rejection of such offer. A
"Change of Control Event" shall mean (A) the acquisition by any person or group
(within the meaning of Section 12(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934), of beneficial ownership, direct or indirect, of securities of the
Corporation representing 50% or more of the combined voting power of the
Corporation's then outstanding equity securities, (B) (x) the acquisition by any
person or group of beneficial ownership, direct or indirect, of securities of
the Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding equity securities and (y) either (1) a
representative or nominee of such person or group shall be elected or appointed
to the Board of Directors of the Corporation without the support of at least 5/7
of the members of the Board of Directors of the Corporation, provided that, if
there is a vote of the stockholders, the holders of the Preferred Stock shall
have voted against such election or (2) a person designated by the Investor (as
defined in the Securities Purchase Agreement dated as of September 1, 1999
between the Investor and the Corporation) pursuant to Section 4.5(e) of such
Securities Purchase Agreement shall not be elected to the Board of Directors of
the Corporation as provided in such Section or (C) the consolidation of the
Company with, or the merger of the Company with or into, another Person or the
sale, assignment or transfer of all or substantially all of the Company's assets
to any Person, or the consolidation of any Person with, or the merger of any
Person with or into, the Company, in any
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such event in a transaction in which the outstanding voting capital stock of the
Company is converted into or exchanged for cash, securities or other property,
provided that following such transaction the holders of voting stock of the
Company immediately prior to such transaction do not own more than 50% of the
voting stock of the company surviving such transaction or to which such assets
are transferred. Paragraph 5(i)(B) shall not be applicable if the Investor is
not entitled to make a designation pursuant to Section 4.5(e) of the Securities
Purchase Agreement. This paragraph 5(i) shall not apply to any Change of Control
resulting from actions by the Investor or any affiliate, transferee or person
acting in concert therewith.
(ii) Optional Redemption. The Preferred Stock shall be subject to
redemption, at the option of the Corporation (an "Optional Redemption"), at any
time following November 10, 2002 and prior to November 10, 2004 at the "Optional
Redemption Price" (as defined below) if the average of the Closing Prices of the
Common Stock has exceeded $12.00 for sixty consecutive Trading Days following
Preferred Stock Issue Date. The Preferred Stock shall be redeemable at any time
following the fifth anniversary of the issuance of Preferred Stock at the
Optional Redemption Price. The "Optional Redemption Price" per share shall be
the Adjusted Liquidation Preference as of the Optional Redemption Date (as
defined below).
(iii) Notice of Redemption. The Corporation shall give the holder of
Preferred Stock written notice of any Optional Redemption not less than 30 days
nor more than 45 days prior to the proposed redemption date, specifying such
redemption date (each, an "Optional Redemption Date"), the per share Optional
Redemption Price and the number of such holder's shares to be redeemed on such
date. Upon making an election to redeem shares pursuant to paragraph 5(ii)
hereof, the Corporation shall be obligated to consummate such redemption. Notice
of redemption having been given as aforesaid, the number of shares to be
redeemed as specified in such notice shall be so redeemed on the redemption date
specified. In case of redemption of less than all of the shares of Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected pro
rata or by lot as determined by the Corporation in its sole discretion.
(iv) Effect of Redemption. On the date established for redemption
pursuant to this paragraph 5 hereof, all rights in respect of the shares of
Preferred Stock to be redeemed, except the right to receive the applicable
redemption price, plus accrued and unpaid dividends, if any (but only to the
extent such accrued
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and unpaid dividends have not been included in the redemption price), to the
date of redemption, shall cease and terminate (unless default shall be made by
the Corporation in the payment of the applicable redemption price, plus accrued
and unpaid dividends, if any, in which event such rights shall be exercisable
until such default is cured), and such shares shall no longer be deemed to be
outstanding, notwithstanding that any certificates representing such shares
shall not have been surrendered to the Corporation. All shares of Preferred
Stock redeemed pursuant to this paragraph 5 shall be retired and shall be
restored to the status of authorized and unissued shares of preferred stock,
without designation as to series or class, and may thereafter be reissued,
subject to compliance with the terms hereof, as shares of any series of
preferred stock other than shares of Preferred Stock. No Preferred Stock may be
redeemed except with funds legally available for such purpose.
6. Voting Rights.
(i) The holder of the Preferred Stock shall vote along with the holders
of the shares of Common Stock as a single class, except as provided in paragraph
6(iii), below, with each share of Common Stock entitled to one vote and each
share of Preferred Stock entitled to one vote for each share of Common Stock
issuable upon conversion of such Preferred Stock as of the relevant record date.
(ii) The Corporation shall not, without the affirmative vote or consent
of the holders of at least 50% of the shares of Preferred Stock then outstanding
(with shares held by the Corporation not being considered to be outstanding for
this purpose) voting or consenting as the case may be, as one class:
(a) issue any Senior Securities or Parity Securities;
(b) issue any preferred stock which is not a Senior Security
or Parity Security and which has voting rights (except as required by
law) unless such preferred stock votes as a single class with the
Common Stock and the Preferred Stock;
(c) amend this Certificate of Designation in any manner that
adversely affects the specified rights, preferences, privileges or
voting rights of holders of Preferred Stock; or
(d) authorize the issuance of any additional shares of
Preferred Stock, other than as contemplated by the Securities Purchase
Agreement,
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dated as of September 1, 1999 between Overseas Toys, L.P. and the
Corporation, the Warrants contemplated thereby and this Certificate of
Designation;
(iii) The Corporation in its sole discretion may without the vote or
consent of any holders of the Preferred Stock amend or supplement this
Certificate of Designation:
(a) to cure any ambiguity, defect or inconsistency, provided
such amendment or supplement is not adverse to the rights of the
holders of the Preferred Stock;
(b) to provide for uncertificated Preferred Stock in addition
to or in place of certificated Preferred Stock; or
(c) to make any change that would provide any additional
rights or benefits to the holders of the Preferred Stock or that does
not adversely affect the legal rights under this Certificate of
Designation of any such holder.
Except as set forth above, (x) the creation or authorization of any shares of
Junior Securities, Parity Securities or Senior Securities or the issuance of any
shares of Junior Securities or (y) the increase or decrease in the amount of
authorized capital stock of any class, including any preferred stock, shall not
require the consent of the holders of the Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges, special rights
or voting rights of holders of shares of Preferred Stock.
7. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Preferred Stock shall not have any voting powers, preferences
and relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Certificate of Incorporation. The shares of
Preferred Stock shall have no preemptive or subscription rights.
8. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
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9. Severability of Provisions. If any voting powers, preferences and
relative, participating, optional and other special rights of the Preferred
Stock and qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable voting powers, preferences and relative, participating, optional
or other special rights of Preferred Stock and qualifications, limitations and
restrictions thereof herein set forth.
10. Re-issuance of Preferred Stock. Shares of Preferred Stock that have
been issued and reacquired in any manner, including shares purchased or redeemed
or exchanged or converted, shall (upon compliance with any applicable provisions
of the laws of Delaware) have the status of authorized but unissued shares of
preferred stock of the Corporation undesignated as to series and may be
designated or re-designated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Corporation, provided that any issuance
of such shares as Preferred Stock must be in compliance with the terms hereof.
11. Mutilated or Missing Preferred Stock Certificates. If any of the
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the
Corporation shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Preferred Stock certificate, or in lieu of and
substitution for the Preferred Stock certificate lost, stolen or destroyed, a
new Preferred Stock certificate of like tenor and representing an equivalent
amount of shares of Preferred Stock, but only upon receipt of evidence of such
loss, theft or destruction of such Preferred Stock certificate and indemnity, if
requested, satisfactory to the Corporation and the transfer agent (if other than
the Corporation).
12. Certain Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Adjusted Liquidation Preference" means, with respect to each share of
Preferred Stock, the sum of (a) the Base Liquidation Preference per share of
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Preferred Stock plus accrued and unpaid dividends thereon and (b) the result of
(i) the amount by which (x) 7.5 percent of the Excess Retained Earnings exceeds
(y) the aggregate amount of cash dividends paid pursuant to the final sentence
of paragraph 2(i) that are not in excess of the dividends paid pursuant to the
first sentence of paragraph 2(i), divided by (ii) the total number of shares of
Preferred Stock outstanding on the date (the "Calculation Date") of the event
giving rise to the calculation of the Adjusted Liquidation Preference
(including, without limitation, the redemption of the Preferred Stock or the
liquidation of the Corporation).
"Business Day" means any day except a Saturday, a Sunday, or any day on
which banking institutions in New York, New York are required or authorized by
law or other governmental action to be closed.
"Closing Price" means, for each Trading Day, the last reported sale
price regular way on the Nasdaq National Market or, if the Common Stock is not
quoted on the Nasdaq National Market, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the corporation for that
purpose.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Corporation.
"Conversion Price" shall initially mean $8.25 per share of Series A1
Stock and $9.00 per share of Series A2 Stock and thereafter shall be subject to
adjustment from time to time pursuant to the terms of paragraph 3 hereof.
"Excess Retained Earnings" means the excess, if any, of (i) retained
earnings as shown on the most recent quarterly or annual consolidated balance
sheet of the Corporation prior to the Calculation Date, over (ii) $75 million.
For purposes of this definition, retained earnings shall be computed ignoring
the effects of any acquisitions after the Preferred Stock Issue Date and
ignoring the Corporation's investment in ThingWorld.com LLC (including any
income therefrom or sale thereof).
"Exchange Act" means the Securities Exchange Act of 1934.
"Person" means any individual or corporation, partnership, joint
venture,
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association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock Issue Date" means the date on which the first shares
of Preferred Stock are originally issued by the Corporation under this
Certificate of Designation.
"Trading Day" means any day on which the Nasdaq National Market or
other applicable stock exchange or market is open for business.
"Transfer Agent" shall be Boston Equiserve unless and until a successor
is selected by the Corporation.
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IN WITNESS WHEREOF, this Certificate of Designation has been signed by
the President of the Corporation and attested to by its Secretary this 10th day
of November, 1999.
By: /s/ Patrick D. Brady
-------------------------
Patrick D. Brady,
President
Attest:
/s/ Patricia J. Landgren
- --------------------------
Patricia J. Landgren,
Secretary