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EXHIBIT 4.1
RESOLUTION OF THE BOARD OF DIRECTORS
APPROVING
THE DESIGNATION STATEMENT
RELATING TO
7% SERIES B CONVERTIBLE PREFERRED STOCK
WHEREAS, the Certificate of Incorporation of eLoyalty Corporation, a
Delaware corporation (the "Corporation"), authorizes the Corporation to issue a
total of [______________] shares of preferred stock, par value $.01 per share
("Preferred Stock"), which may be divided into one or more series as the Board
of Directors may determine;
WHEREAS, the Certificate of Incorporation of the Corporation expressly
vests in the Board of Directors the authority to fix and determine the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions, of the Preferred Stock; and
WHEREAS, the Board of Directors deems it advisable to designate a
series of the Preferred Stock consisting of [______________] shares designated
as 7% Series B Convertible Preferred Stock;
WHEREAS, immediately prior to the filing of this Certificate of
Designation with the Secretary of State of the State of Delaware, the
Corporation filed an amendment to its Certificate of Incorporation which, among
other things, gave effect to a one-for-ten reverse stock split of the
Corporation's common stock, $.01 par value per share.
NOW, THEREFORE, IT IS HEREBY RESOLVED, that pursuant to Article IV of
the Certificate of Incorporation of the Corporation, there be and hereby is
authorized and created a series of Preferred Stock hereby designated as 7%
Series B Convertible Preferred Stock, to consist of [______________] shares,
having a par value of $.01 per share, which series shall have the voting rights,
designations, powers, preferences, relative and other special rights, and the
qualifications, limitations and restrictions set forth below:
Series B Convertible Preferred Stock. [______________] of the
authorized shares of Preferred Stock are hereby designated "7% Series B
Convertible Preferred Stock" (the "Series B Preferred Stock"). The rights,
preferences, privileges, restrictions and other matters relating to the Series B
Preferred Stock are as follows:
(a) Dividend Rights.
(i) Subject to the right of any other series of Preferred
Stock that may from time to time come into existence and which is
expressly senior to the rights of the Series B Preferred Stock, the
holders of Series B Preferred Stock, in preference to the holders of
common stock, par value $.01 per share, of the Corporation (the "Common
Stock"), the Series A Junior Participating Preferred Stock, par value
$.01 per share, of the Corporation
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and any other stock of the Corporation hereafter created which shall be
junior to the Series B Preferred Stock (together, "Series B Junior
Stock"), shall be entitled to receive dividends, when, as and if
declared by the Board of Directors, but only out of funds that are
legally available therefor, at the rate of 7% of the Series B Original
Issue Price (as defined below) per annum (the "Series B Dividend Rate")
on each outstanding share of Series B Preferred Stock (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the
like with respect to such shares). For any share of Series B Preferred
Stock, such dividends shall begin to accrue commencing upon the first
date such share is issued and becomes outstanding and shall be payable
semi-annually in cash on January 1 and July 1 of each year, beginning
on July 1, 2002 (each, a "Dividend Payment Date"), provided, that, (i)
if any such Dividend Payment Date is not a Business Day, then any such
dividend shall be payable on the next Business Day, and (ii) any such
dividend shall be payable only as the Board of Directors may from time
to time determine, and only when, as and if declared by the Board of
Directors. Subject to the foregoing, any such dividend shall be paid to
the holders of record at the close of business on the date specified by
the Board of Directors at the time such dividend is declared, provided,
however, that such date may not be more than 60 days nor less than 10
days prior to the applicable dividend payment date. Such dividends
shall accrue day by day and shall be cumulative, whether or not
declared by the Board of Directors and whether or not there shall be
funds legally available for the payment of dividends. The original
issue price of the Series B Preferred Stock shall be $[_____] (the
"Series B Original Issue Price"). Dividends payable for any period
shorter or longer than a semi-annual dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months. Dividends in
arrears may be declared by the Board of Directors and paid on any date
fixed by the Board of Directors, without reference to any regular
Dividend Payment Date. Any dividend paid upon the Series B Preferred
Stock at a time when any accrued dividends for any prior periods are
delinquent shall be expressly declared as a dividend in whole or
partial payment of the accrued dividend for the earliest period or
periods for which dividends are then delinquent, and shall be so
designated to each holder to whom payment is made thereof. The term
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of Chicago, Illinois are
authorized or required by law to be closed.
(ii) So long as any shares of Series B Preferred Stock shall
be outstanding, without the prior written consent of the holders of a
majority of the then issued and outstanding shares of Series B
Preferred Stock, no dividend (other than a Common Stock dividend paid
pro rata to the Corporation's stockholders), whether in cash,
securities or other property, shall be paid or declared, nor shall any
other distribution (other than a Common Stock dividend paid pro rata to
the Corporation's stockholders) be made, on any Series B Junior Stock,
nor shall any shares of any Series B Junior Stock of the Corporation be
purchased, redeemed or otherwise acquired for value by the Corporation
or any of its subsidiaries (except (A) for acquisitions of Common Stock
by the Corporation or its subsidiaries pursuant to stock-based
compensation arrangements or agreements that permit the Corporation to
repurchase such shares upon termination of services to the Corporation
or its subsidiaries for a price not greater than the cost thereof to
the applicable service
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provider, (B) for acquisitions by the Company or its subsidiaries in
whole or partial satisfaction of the exercise price or applicable tax
withholding requirements in respect of any option, restricted stock or
similar award made pursuant to any compensation or benefit plan,
agreement or arrangement maintained or assumed by the Company or its
subsidiaries and (C) by conversion into or exchange for Series B Junior
Stock or any security convertible into or exchangeable for Series B
Junior Stock) until all dividends (set forth in Section (a)(i) above)
then accrued on the Series B Preferred Stock shall have been paid or
declared and set apart. In the event that the Corporation shall declare
a dividend or distribution payable in securities of the Corporation or
of other persons (other than a dividend paid solely in shares of Common
Stock), evidences of indebtedness issued by the Corporation or other
persons, or options or rights to purchase any such securities or
evidences of indebtedness or other assets (including cash) to the
holders of the Common Stock, then the holders of the Series B Preferred
Stock shall be entitled to a proportionate share of any such dividend
or distribution as though the holders of the Series B Preferred Stock
were the holders of the number of shares of Common Stock into which
their respective shares of Series B Preferred Stock are convertible as
of the record date fixed for the determination of the holders of the
Common Stock entitled to receive such dividend or distribution
(calculated as if the Series B Preferred Stock were convertible upon
the Series B Original Issue Date and without consideration of the
restriction on conversion contained in Section (d)(i) hereof).
(b) Voting Rights.
(i) General Rights. Except as otherwise provided herein or as
required by law, the Series B Preferred Stock shall be voted equally
with the shares of the Common Stock of the Corporation and not as a
separate class, at any annual or special meeting of stockholders of the
Corporation, upon the following basis: each holder of shares of Series
B Preferred Stock shall be entitled to such number of votes as shall be
equal to the whole number of shares of Common Stock into which such
holder's aggregate number of shares of Series B Preferred Stock are
convertible pursuant to Section (d) hereof immediately after the close
of business on the record date fixed for such meeting or the effective
date of such written consent (calculated as if the Series B Preferred
Stock were convertible upon the Series B Original Issue Date and
without consideration of the restriction on conversion contained in
Section (d)(i) hereof).
(ii) Separate Vote of Series B Preferred Stock. In addition to
any other vote or consent required herein or by law, the vote of the
holders of at least a majority of the outstanding Series B Preferred
Stock shall be necessary for effecting or validating the following
actions:
(A) any action that authorizes, creates or results in
the issuance of any class or series of stock or any other
securities convertible into or exercisable for equity
securities of the Corporation having rights, preferences or
privileges senior to or on a parity with the Series B
Preferred Stock;
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(B) any increase or decrease in the authorized number
of shares of Series B Preferred Stock; or
(C) any amendment, waiver, alteration or repeal of
any provisions of the Certificate of Incorporation or Bylaws
of the Corporation in a way that, directly or indirectly,
adversely affects the rights, preferences or privileges of the
Series B Preferred Stock.
(iii) Special Voting Rights. During the period beginning on
the Series B Original Issue Date (as defined below), and ending on the
date which is six months after the Series B Original Issue Date, the
Corporation shall not consummate any Sale Transaction to which it is a
party unless such Sale Transaction has been approved by the affirmative
vote of the holders of at least 85% of the Series B Preferred Stock
present in person or by proxy and entitled to vote at a stockholder
meeting called for the purpose of approving such Sale Transaction.
(c) Liquidation Rights.
(i) Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution
or payment shall be made to the holders of any Series B Junior Stock,
subject to the rights of any series of Preferred Stock that may from
time to time come into existence and which is expressly senior to the
rights of the Series B Preferred Stock, the holders of Series B
Preferred Stock shall be entitled to be paid in cash out of the assets
of the Corporation an amount per share of Series B Preferred Stock
equal to 100% of the Series B Original Issue Price (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares), plus accrued but unpaid dividends (the
"Liquidation Preference"), for each share of Series B Preferred Stock
held by each such holder. If, upon any such liquidation, dissolution,
or winding up, the assets of the Corporation shall be insufficient to
make payment in full of the Liquidation Preference to all holders of
Series B Preferred Stock, then such assets shall be distributed among
the holders of Series B Preferred Stock at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise
be respectively entitled. After the payment of the foregoing full
Liquidation Preference of the Series B Preferred Stock and any other
distribution that may be required with respect to any series of
Preferred Stock that may from time to time come into existence and
which is expressly senior to the rights of the Series B Preferred
Stock, the assets of the Corporation legally available for
distribution, if any, shall be distributed ratably to the holders of
the Series B Junior Stock and the Series B Preferred Stock, on an as
converted basis; provided, however, that if, in connection with a Sale
Transaction (as defined below), the holders of a share of the Common
Stock (before giving effect to the payment of the Liquidation
Preference but after giving effect to the payment of the liquidation
preference of any other class of Preferred Stock and assuming
conversion in full of the outstanding shares of Series B Preferred
Stock into Common Stock) would receive consideration with a value of at
least four times the Series B Original Issue Price (as adjusted for
stock splits, stock dividends, combinations, recapitalizations and the
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like), then in lieu of the Liquidation Preference plus participation
with the Series B Junior Stock provided for above, the holders of the
Series B Preferred Stock shall receive the amount that they would be
entitled to receive if all shares of Series B Preferred Stock were
converted to Common Stock immediately prior to the Sale Transaction.
The Corporation shall not enter into any Sale Transaction that does not
provide for the treatment of the holders of Series B Preferred Stock in
a manner consistent (assuming in the case of a merger or consolidation
that the assets of the Corporation legally available for distribution
equals the aggregate consideration to be received by the Corporation's
stockholders in such merger or consolidation) with the provisions of
this Section (c). In the event the requirements of the immediately
preceding sentence are not complied with in connection with a Sale
Transaction, the Corporation shall forthwith either (A) cause the
closing of such Sale Transaction to be postponed until such time as
such requreiments have been complied with or (B) cancel such Sale
Transaction, in which event the rights, preferences and privileges of
the holders of the Series B Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section (c)(iv)
hereof. Upon receipt by any holder of the full amount of the
distributions to such holder as contemplated by this Section (c)(i) in
respect of any share of Series B Preferred Stock, such share of Series
B Preferred Stock shall be deemed to be retired and shall no longer be
outstanding.
(ii) The following events (each a "Sale Transaction") shall be
considered a liquidation under this Section:
(A) any consolidation or merger of the Corporation
with or into any other corporation or other entity or person,
or any other corporate reorganization, in which the
stockholders of the Corporation immediately prior to such
consolidation, merger or reorganization, own less than 50% of
the Corporation's voting power immediately after such
consolidation, merger or reorganization, or any transaction or
series of related transactions to which the Corporation is a
direct contracting party in which in excess of 50% of the
Corporation's voting power is transferred, excluding any
consolidation or merger effected exclusively to change the
domicile of the Corporation (an "Acquisition");
(B) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "Asset
Transfer").
(iii) In any of the events set forth in subparagraph (ii), if
the consideration received by the Corporation or its stockholders is
other than cash, its value will be deemed its fair market value as
determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(A) Securities not subject to restrictions on free
marketability covered by subparagraph (B) below:
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(1) If traded on a securities exchange or
through the Nasdaq National Market (or a similar
national quotation system), the value shall be deemed
to be the average of the closing prices of the
securities on such quotation system over the 30 day
period ending three days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable)
over the 30 day period ending three days prior to the
closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as
determined in good faith by the Board of Directors.
(B) The method of valuation of securities subject to
restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in
subparagraphs (iii)(A)(1), (2) or (3) to reflect the
approximate fair market value thereof, as determined in good
faith by the Board of Directors.
(iv) Written notice of any such liquidation, dissolution or
winding up (or deemed liquidation, dissolution or winding up) of the
Corporation within the meaning of this Section, which states the
payment date, the place where said payments shall be made and the date
on which conversion rights as set forth herein terminate as to such
shares (which shall be not less than 10 days after the date of such
notice), shall be given by first class mail, postage prepaid, or by
telecopy or facsimile, not less than 20 days prior to the payment date
stated therein, to the then holders of record of Series B Preferred
Stock, such notice to be addressed to each such holder at its address
as shown on the records of the Corporation.
(d) Conversion Rights. The holders of the Series B Preferred Stock
shall have the following rights with respect to the conversion of the Series B
Preferred Stock into shares of Common Stock:
(i) Optional Conversion. Subject to and in compliance with the
provisions of this Section (d), any shares of Series B Preferred Stock
may, at the option of the holder, be converted at any time on and after
the date which is six months after the Series B Original Issue Date
into fully-paid and nonassessable shares of Common Stock. The number of
shares of Common Stock to which a holder of Series B Preferred Stock
shall be entitled upon conversion shall be the product obtained by
multiplying the "Series B Preferred Conversion Rate" then in effect
(determined as provided in subsection (ii)) by the number of shares of
Series B Preferred Stock being converted.
(ii) Series B Preferred Conversion Rate. The conversion rate
in effect at any time for conversion of the Series B Preferred Stock
(the "Series B Preferred Conversion Rate")
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shall be the quotient obtained by dividing the Series B Original Issue
Price by the "Series B Preferred Conversion Price," calculated as
provided in subsection (iii) below.
(iii) Series B Preferred Conversion Price. The conversion
price for the Series B Preferred Stock shall initially be the Series B
Original Issue Price (the "Series B Preferred Conversion Price"). Such
initial Series B Preferred Conversion Price shall be adjusted from time
to time in accordance with this Section (d). All references to the
Series B Preferred Conversion Price herein shall mean the Series B
Preferred Conversion Price as so adjusted.
(iv) Mechanics of Conversion. Each holder of Series B
Preferred Stock who desires to convert the same into shares of Common
Stock pursuant to this Section (d) shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation
or any transfer agent for the Series B Preferred Stock, and shall give
written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of
shares of Series B Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled and shall promptly pay in cash
(at the Common Stock's fair market value determined by the Board of
Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series B
Preferred Stock. Such conversion shall be deemed to have been made at
the close of business on the date of such surrender of the certificates
representing the shares of Series B Preferred Stock to be converted,
and the person entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(v) Adjustment Upon Common Stock Event. Upon the happening of
a Common Stock Event (as hereinafter defined) at any time or from time
to time after the date that the first share of Series B Preferred Stock
is issued (the "Series B Original Issue Date"), the Series B Preferred
Conversion Price shall, simultaneously with the happening of such
Common Stock Event, be adjusted by multiplying the Series B Preferred
Conversion Price in effect immediately prior to such Common Stock Event
by a fraction, (i) the numerator of which shall be the number of shares
of Common Stock issued and outstanding immediately prior to such Common
Stock Event, and (ii) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately after such
Common Stock Event, and the product so obtained shall thereafter be the
Series B Preferred Conversion Price. The Series B Preferred Conversion
Price shall be readjusted in the same manner upon the happening of each
subsequent Common Stock Event. As used in this Section (d), the term
"Common Stock Event" shall mean (i) the issue by the Corporation of
additional shares of Common Stock as a dividend or other distribution
on outstanding Common Stock, (ii) a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock
(by stock split, reclassification or otherwise), or (iii) a combination
or consolidation, by reclassification or otherwise, of the outstanding
shares of Common Stock
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into a smaller number of shares of Common Stock (unless the Series B
Preferred Stock is combined, consolidated or reclassified on an equal
basis).
(vi) Adjustment for Other Dividends and Distributions. If at
any time or from time to time after the Series B Original Issue Date
the Corporation pays a dividend or makes another distribution to the
holders of the Common Stock (or fixes a record date for the
determination of holders of Common Stock entitled to receive such
dividend or other distribution) payable in securities of the
Corporation or any of its subsidiaries other than shares of Common
Stock, then in each such event provision shall be made so that the
holders of Series B Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
upon conversion thereof, the amount of securities of the Corporation or
such subsidiary which they would have received had their Series B
Preferred Stock been converted into Common Stock (determined as if the
Series B Preferred Stock were convertible upon the Series B Original
Issue Date and without consideration of the restriction on conversion
contained in Section (d)(i) hereof) on the date of such event (or such
record date, as applicable) and had they thereafter, during the period
from the date of such event (or such record date, as applicable) to and
including the conversion date, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments
called for during such period under this Section (d) with respect to
the rights of the holders of the Series B Preferred Stock or with
respect to such other securities by their terms. Notwithstanding the
foregoing, the adjustment provided by this Section (d)(vi) shall not be
made if the holders of the Series B Preferred Stock shall have received
a proportionate dividend as provided in Section (a)(ii).
(vii) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Series B
Original Issue Date, the Common Stock issuable upon the conversion of
the Series B Preferred Stock is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section (c) or a
subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section (d)), in any such event each holder of Series
B Preferred Stock shall have the right thereafter (to the extent such
Series B Preferred Stock is convertible as otherwise provided herein)
to convert such Series B Preferred Stock into the kind and amount of
stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of
Series B Preferred Stock could have been converted immediately prior to
such recapitalization, reclassification or change (determined as if the
Series B Preferred Stock were convertible upon the Series B Original
Issue Date and without consideration of the restriction on conversion
contained in Section (d)(i) hereof), all subject to further adjustment
as provided herein or with respect to such other securities or property
by the terms thereof. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section (d) with
respect to the rights of the holders of Series B Preferred Stock after
such recapitalization, reclassification or other change (including
adjustment of the Series B
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Preferred Conversion Price then in effect and the number of shares
issuable upon conversion of the Series B Preferred Stock), to the end
that the provisions of this Section (d) shall be applicable after that
event and be as nearly equivalent as practicable.
(viii) Adjustment for Reorganizations, Mergers or
Consolidations. If at any time or from time to time after the Series B
Original Issue Date, there is a capital reorganization of the Common
Stock or the merger or consolidation of the Corporation with or into
another corporation or another entity or person (other than an
Acquisition or Asset Transfer as defined in Section (c) or a
recapitalization, subdivision, combination, reclassification, exchange
or substitution of shares provided for elsewhere in this Section (d)),
as a part of such capital reorganization, merger or consolidation,
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 which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger or consolidation, subject to adjustment
in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of
the provisions of this Section (d) with respect to the rights of the
holders of Series B Preferred Stock after the capital reorganization,
merger or consolidation (including adjustment of the Series B Preferred
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series B Preferred Stock), to the end that the
provisions of this Section (d) shall be applicable after that event and
be as nearly equivalent as practicable.
(ix) Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, or (ii) any Acquisition (as
defined in Section (c)) or other capital reorganization of the
Corporation, any reclassification or recapitalization of the capital
stock of the Corporation, any merger or consolidation of the
Corporation with or into any other entity, or any Asset Transfer (as
defined in Section (c)), or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series B Preferred Stock at least 10 days prior
to the record date specified therein (or such shorter period approved
by a majority of the outstanding Series B Preferred Stock) a notice
specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such
dividend or distribution, (B) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to
become effective, and (C) the date, if any, that is to be fixed as to
when the holders of record of Common Stock (or other securities) shall
be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up.
(x) Automatic Conversion.
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(A) Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock, based
on the then-effective Series B Preferred Conversion Price, (i)
with respect to holders of the Series B Preferred Stock other
than the Investors (as defined below), if at any time after
six months from the Series B Original Issue Date the Common
Stock has a Closing Price (as defined below) of at least five
times the Series B Original Issue Price (as adjusted for any
stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for thirty consecutive
trading days, and (ii) with respect to the Investors, if at
any time after six months from the Series B Original Issue
Date (y) the Common Stock has a Closing Price (as defined
below) of at least five times the Series B Original Issue
Price (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such
shares) for thirty consecutive trading days, and (z) the Shelf
Registration as defined in and provided for in the Amended and
Restated Investor Rights Agreement, dated as of [_______]
[__], 200[__] (the "Investor Agreement"), between the
Corporation and the investors named on Exhibit A thereto
(collectively with the Holders, as such term is defined in the
Investor Agreement, the "Investors") has become effective
under the Securities Act of 1933, as amended, and is available
for sales of Common Stock by the Investors thereunder (to the
extent the requirement to maintain such Shelf Registration
effective has not at such time lapsed pursuant to Section 5 of
such Investor Agreement). For purposes of this Section (d)(x),
the term "Closing Price" shall mean (1) if the Common Stock is
traded on a securities exchange or through the Nasdaq National
Market (or a similar national quotation system), the closing
price of the Common Stock on such exchange or the last sale
price of the Common Stock on such quotation system, and (2) if
clause (1) is inapplicable, the closing bid or sale price
(whichever is applicable) in the over-the-counter market.
(B) Upon the occurrence of the events specified in
subparagraph (A), the outstanding shares of Series B Preferred
Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the
Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing such shares of
Series B Preferred Stock are either delivered to the
Corporation or its transfer agent as provided below, or the
holder notifies the Corporation or its transfer agent that
such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such
automatic conversion of the Series B Preferred Stock, (y) the
Corporation shall notify (the "Automatic Conversion Notice")
each holder of Series B Preferred Stock who is shown to be
such a holder on the books of the Corporation as of the time
immediately prior to such conversion, and (z) the holders of
Series B Preferred Stock shall surrender the certificates
representing such shares at the office of the Corporation or
any transfer agent for the
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Series B Preferred Stock, which shall be designated in the
Automatic Conversion Notice. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in
its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of
shares of Common Stock into which the shares of Series B
Preferred Stock surrendered were convertible on the date on
which such automatic conversion occurred.
(xi) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon conversion
of more than one share of Series B 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 any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by
the Board of Directors) on the date of conversion.
(xii) 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, 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. 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, the Corporation will take such corporate action as may
be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(xiii) Notices. Any notice required by the provisions of this
Section (d) shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified, (ii) when sent
by confirmed electronic mail or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day,
(iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next
day delivery, with verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
(xiv) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges
that may be imposed with respect to the issue or delivery of shares of
Common Stock upon conversion of shares of Series B Preferred Stock,
excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock
in a name other than that in which the shares of Series B Preferred
Stock so converted were registered.
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(xv) No Impairment. The Corporation shall not avoid or seek to
avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but shall at all times in
good faith assist in carrying out all such actions as may be reasonably
necessary or appropriate in order to protect the conversion rights of
the holders of the Series B Preferred Stock against impairment.
(xvi) Satisfaction of Accrued Dividends. Except as otherwise
expressly provided, upon the conversion of any shares of Series B
Preferred Stock into Common Stock as provided herein, the holders
thereof shall be entitled to receive a payment in satisfaction of all
accrued but unpaid dividends.
(e) Waiver. Any rights of the holders of Series B Preferred Stock set
forth herein, other than the voting rights set forth in Section (b)(iii), may be
waived by the affirmative vote or consent of the holders of a majority of the
shares of Series B Preferred Stock then outstanding.
(f) Limitation on Reissuance of Shares. No share of shares of Series B
Preferred Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares of Series B Preferred Stock that the Corporation is
authorized to issue.
(g) Limitation on Transfer. The Series B Preferred Stock shall not be
eligible to be transferred on the books of the Corporation prior to the one year
anniversary of the Series B Original Issue Date except for transfers: (i) in
connection with a Sale Transaction, (ii) in any transaction in which a holder
that is a partnership or limited liability company distributes Series B
Preferred Stock solely to its affiliates (including affiliated fund
partnerships), current or former partners or members thereof, or (ii) by will or
by the laws of intestate succession. Certificates issued in respect of the
Series B Preferred Stock within one year after the Series B Original Issue Date
shall bear a legend referencing the restrictions set forth in this Section (g).
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