EXHIBIT 3.(i)3
CRITICAL PATH, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES D CUMULATIVE REDEEMABLE CONVERTIBLE
PARTICIPATING PREFERRED STOCK,
PAR VALUE $0.001 PER SHARE
Pursuant to Section 400 of the California General Corporation Law
The undersigned, Michael Zuckerman, Vice President and Secretary
of Critical Path, Inc., a California corporation (the "Corporation"), DOES
HEREBY CERTIFY that the following resolution, creating a series of 4,000,000
shares of Preferred Stock was duly adopted by the Board of Directors, on
November 6, 2001.
WHEREAS, the Board of Directors is authorized, within the
limitations and restrictions stated in the Articles of Incorporation of the
Corporation, to provide by resolution or resolutions for the issuance of shares
of Preferred Stock, par value $0.001 per share, of the Corporation, in one or
more classes or series with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions as
shall be stated and expressed in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated and
expressed in the Articles of Incorporation, or any amendment thereto, including
(but without limiting the generality of the foregoing) such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of the State of California; and
WHEREAS, it is the desire of the Board of Directors, pursuant to
its authority as aforesaid, to authorize and fix the terms of a series of
Preferred Stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There shall be hereby
created and established a series of Preferred Stock designated as "Series D
Cumulative Redeemable Convertible Participating Preferred Stock" (the "Series D
Preferred Stock"). The authorized number of shares of Series D Preferred Stock
shall be 4,000,000. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Section 10 below.
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2. Rank.
(a) The Series D Preferred Stock shall with respect to
the payment of the Liquidation Payment in the event of Liquidation or Change of
Control rank senior to (i) all classes of common stock of the Corporation
(including, without limitation, the Common Stock, par value $0.001 per share, of
the Corporation (the "Common Stock")), (ii) all classes of preferred stock of
the Corporation (including, without limitation, the Series C Participating
Preferred Stock, par value $0.001 per share) and (iii) each other class or
series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series D Preferred Stock
(clauses (i), (ii) and (iii), together, the "Junior Stock").
(b) Notwithstanding anything to the contrary contained
in the Articles of Incorporation of the Corporation, the vote of the holders of
a majority of the Series D Preferred Stock shall be a prerequisite to the
designation or issuance of any shares of Capital Stock of the Corporation
ranking pari passu with or senior to the Series D Preferred Stock in the event
of a Liquidation or with respect to the payment of the Liquidation Payment.
3. Dividends.
(a) Dividend Rate. The holders of shares of Series D
Preferred Stock shall receive, out of funds legally available therefor,
dividends at an annual rate equal to eight percent (8%) of the Accreted Value,
calculated on the basis of a 360-day year, consisting of twelve 30-day months,
and shall accrue on a daily basis from the date of issuance thereof, whether or
not declared by the Board of Directors. Accrued and unpaid dividends shall
compound to the Accreted Value on a semi-annual basis on December 31st and June
30th of each year (each such date, the "Compounding Date") whether or not
declared by the Board of Directors.
(b) Change of Control; Optional Redemption. In the event
of the occurrence of a Change of Control or an optional redemption of the shares
of Series D Preferred Stock pursuant to Section 5(a) below, the sum of (i) any
dividends accrued at the rate and in the manner specified in Section 3(a) since
the previous Compounding Date and prior to the date of the occurrence of a
Change of Control or the Optional Redemption Date plus (ii) any and all
dividends that would have accrued and compounded at the rate and in the manner
specified in Section 3(a) from the closing date of such Change of Control or the
Optional Redemption Date through and until the Automatic Redemption Date shall
be added to the Accreted Value on the closing date of such Change of Control or
the Optional Redemption Date, as the case may be.
(c) Other Dividends. The Corporation shall not declare
or pay any dividends on, or make any other distributions with respect to or
redeem, purchase or otherwise acquire for consideration, any other shares of
Capital Stock unless and until all accrued and unpaid dividends on the Series D
Preferred Stock have been paid in full.
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4. Liquidation and Change of Control.
(a) Priority Payment. Upon the occurrence of a
Liquidation, the holders of shares of Series D Preferred Stock shall be paid in
cash for each share of Series D Preferred Stock held thereby, out of, but only
to the extent of, the assets of the Corporation legally available for
distribution to its stockholders, an amount equal to the sum of (i) the Accreted
Value of such share of Series D Preferred Stock (the "Liquidation Payment") on
the date of such Liquidation plus (ii) all dividends accrued since the previous
Compounding Date. If the assets of the Corporation available for distribution to
the holders of shares of Series D Preferred Stock shall be insufficient to
permit payment in full to such holders of the sums which such holders are
entitled to receive in such case, then all of the assets available for
distribution to holders of shares of Series D Preferred Stock shall be
distributed among and paid to such holders ratably in proportion to the amounts
that would be payable to such holders if such assets were sufficient to permit
payment in full.
(b) Change of Control. In the event of a Change of
Control, the holders of shares of Series D Preferred Stock shall be paid for
each share of Series D Preferred Stock held thereby, an amount equal to the sum
of (x) the Liquidation Payment plus (y) all dividends that accrue and compound
pursuant to Section 3(b). Such amount shall be paid in the form of consideration
paid in such Change of Control on the closing date of such Change of Control.
(c) Participating Payment.
(i) Upon the completion of the distribution
required by Section 4(a) or Section 4(b) above, and any other distribution to
any other class or series of Capital Stock of the Corporation ranking senior to
the Common Stock, if assets remain in the Corporation, the remaining assets of
the Corporation available for distribution to stockholders shall be distributed
among the holders of shares of Series D Preferred Stock, the holders of shares
of any series of preferred stock entitled to a participating payment and the
holders of Common Stock pro rata based on the number of shares of the Common
Stock held by each (assuming conversion of all such Series D Preferred Stock in
accordance with Section 7(a) below).
(ii) Notwithstanding anything to the contrary
set forth in subsection (b) above, no Liquidation Payment shall be paid pursuant
to clause (x) of subsection (b) above and no accrued dividends shall be paid
pursuant to clause (y) of subsection (b) above if either (A) the price per share
paid for each share of Series D Preferred Stock in such Change of Control (had
each share of Series D Preferred Stock converted into Common Stock immediately
prior to the consummation of such Change of Control) equals not less than the
product of (i) four multiplied by (ii) the Accreted Value or (B) the average
closing price per share of the Common Stock as reported on NASDAQ or other
nationally recognized securities exchange on which the shares of Common Stock
principally trade is, for at least sixty (60) consecutive trading days, not less
than the product of (i) four multiplied by (ii) the Accreted Value.
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(d) Notice. Written notice of a Liquidation or Change of
Control stating a payment or payments and the place where such payment or
payments shall be payable, shall be delivered in person, mailed by certified
mail, return receipt requested, mailed by overnight mail or sent by telecopier,
not less than ten (10) days prior to the earliest payment date stated therein,
to the holders of record of shares of Series D Preferred Stock, such notice to
be addressed to each such holder at its address as shown by the records of the
Corporation.
5. Redemption.
(a) Optional Redemption.
(i) Optional Redemption Period. The Corporation shall
not have any right to redeem any shares of the Series D Preferred Stock on or
prior to the fourth anniversary of the Closing Date. If on any date after the
fourth anniversary of the Closing Date but prior to the Automatic Redemption
Date, the average closing price per share of the Common Stock, as reported on
NASDAQ or other nationally recognized securities exchange on which the shares of
Common Stock trade, for any sixty (60) consecutive trading days after such
fourth anniversary date, equals or exceeds four hundred percent (400%) of the
Accreted Value (the "Optional Redemption Measurement Window"), the Corporation
shall have the right, at its sole option and election, to redeem (unless
otherwise prevented by law) within thirty (30) days following such Optional
Redemption Measurement Window (the "Optional Redemption Period"), all, but not
less than all, of the outstanding shares of Series D Preferred Stock in cash, at
a price per share (the "Optional Redemption Price") equal to the sum of the
Accreted Value plus all dividends that accrue, compound and are payable pursuant
to Section 3(b).
(ii) Optional Redemption Payment. Written notice of any
election by the Corporation to redeem the shares of Series D Preferred Stock
pursuant to Section 5(a) and the closing date prior to the expiration of the
Optional Redemption Period selected for such redemption (the "Optional
Redemption Date") shall be delivered in person, mailed by certified mail, return
receipt requested, mailed by overnight mail or sent by telecopier not less than
ten (10), nor more than thirty (30), days prior to such Optional Redemption Date
to the holders of record of the shares of Series D Preferred Stock, such notice
to be addressed to each such holder at its address as shown in the records of
the Corporation. The Optional Redemption Price shall be made with respect to
each share of Series D Preferred Stock by wire transfer of immediately available
funds as promptly as practicable and, in any event, within seven (7) days after
receipt by the Corporation of the Series D Preferred Stock certificates to
accounts designated in writing by the holders of such shares of Series D
Preferred Stock after surrender of the Series D Preferred Stock certificates
pursuant to the following sentence. Upon notice from the Corporation, each
holder of shares of Series D Preferred Stock so redeemed shall promptly
surrender to the Corporation, at any place where the Corporation shall maintain
a transfer agent for its shares of Series D Preferred Stock, certificates
representing the shares so redeemed, duly endorsed in blank or accompanied by
proper instruments of transfer. Notwithstanding anything to the contrary set
forth in this Certificate of Designation, any holder of Series D Preferred Stock
may convert its
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shares of Series D Preferred Stock pursuant to Section 7(a) until the Optional
Redemption Price has been paid in full by the Corporation to such holder.
(iii) Termination of Rights. If shares of Series
D Preferred Stock are redeemed in full on the Optional Redemption Date, then
after the Optional Redemption Date, all rights of any holder of shares of Series
D Preferred Stock shall cease and terminate, and such shares of Series D
Preferred Stock shall no longer be deemed to be outstanding; provided, however,
that, if the Corporation defaults in the payment in full of the Optional
Redemption Price, then, subject to Section 5(b), the Corporation may not redeem
the shares of Series D Preferred Stock until the next Optional Redemption
Measurement Window.
(b) Automatic Redemption.
(i) Automatic Redemption Date and Payment. On
the fifth anniversary of the Closing Date (the "Automatic Redemption Date"), all
of the shares of Series D Preferred Stock shall automatically, with no further
action required to be taken by the Corporation or the holder thereof, be
redeemed (unless otherwise prevented by law) in cash, at a redemption price per
share (the "Redemption Price") equal to the sum of the Accreted Value plus, all
dividends accrued since the previous Compounding Date. Written notice of the
Automatic Redemption Date shall be delivered in person, mailed by certified
mail, return receipt requested, mailed by overnight mail or sent by telecopier
not less than thirty (30), nor more than sixty (60), days prior to the Automatic
Redemption Date to the holders of record of the shares of Series D Preferred
Stock, such notice to be addressed to each such holder at its address as shown
in the records of the Corporation. The Redemption Price shall be made with
respect to each share of Series D Preferred Stock by wire transfer of
immediately available funds as promptly as practicable and, in any event, within
seven (7) days after receipt by the Corporation of the Series D Preferred Stock
certificates to accounts designated in writing by the holders of such shares of
Series D Preferred Stock after surrender of the Series D Preferred Stock
certificates pursuant to the following sentence. Upon notice from the
Corporation, each holder of such shares of Series D Preferred Stock so redeemed
shall promptly surrender to the Corporation, at any place where the Corporation
shall maintain a transfer agent for its shares of Series D Preferred Stock,
certificates representing the shares so redeemed, duly endorsed in blank or
accompanied by proper instruments of transfer. Notwithstanding anything to the
contrary set forth in this Certificate of Designation, any holder of Series D
Preferred Stock may convert its shares of Series D Preferred Stock pursuant to
Section 7(a) hereof until the Redemption Price has been paid in full by the
Corporation to any such holder.
(ii) Termination of Rights. If the shares of
Series D Preferred Stock are redeemed in full on the Automatic Redemption Date,
then after the Automatic Redemption Date, all rights of any holder of such
shares of Series D Preferred Stock shall cease and terminate, and such shares of
Series D Preferred Stock shall no longer be deemed to be outstanding, whether or
not the certificates representing such shares have been received by the
Corporation; provided, however, that, if the Corporation
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defaults in the payment in full of the Redemption Price, the rights of the
holders of shares of Series D Preferred Stock shall continue until the
Corporation cures such default.
(iii) Insufficient Funds for Redemption. If the
funds of the Corporation available for redemption of the shares of Series D
Preferred Stock on the Automatic Redemption Date are insufficient to redeem in
full the shares of Series D Preferred Stock, the holders of shares of Series D
Preferred Stock shall share ratably in any funds available by law for redemption
of such shares according to the respective amounts which would be payable with
respect to the number of shares owned by them if the shares to be so redeemed on
such Automatic Redemption Date were redeemed in full. Any shares of Series D
Preferred Stock that the Corporation does not redeem on the Automatic Redemption
Date due to insufficient funds shall continue to be outstanding until redeemed
and dividends on such shares shall continue to accrue and cumulate until
redeemed. The Corporation shall in good faith use all commercially reasonable
efforts as expeditiously as possible to eliminate, or obtain an exception,
waiver or exemption from, any and all restrictions that prevented the
Corporation from paying the Redemption Price and redeeming all of the shares of
Series D Preferred Stock. At any time thereafter when additional funds of the
Corporation are available by law for the redemption of the shares of Series D
Preferred Stock, such funds shall be used as promptly as practicable to redeem
the balance of such shares, or such portion thereof for which funds are
available, on the basis set forth above.
6. Voting Rights; Election of Directors.
(a) General. In addition to the voting rights to which
the holders of Series D Preferred Stock are entitled under or granted by
California law, the holders of Series D Preferred Stock shall be entitled to
vote, in person or by proxy, at a special or annual meeting of stockholders on
all matters entitled to be voted on by holders of shares of Common Stock voting
together as a single class with the Common Stock (and with other shares entitled
to vote thereon, if any). With respect to any such vote, each share of Series D
Preferred Stock shall entitle the holder thereof to cast that number of votes as
is equal to the number of votes that such holder would be entitled to cast had
such holder converted its shares of Series D Preferred Stock into shares of
Common Stock pursuant to Section 7(a) below on the record date for determining
the stockholders of the Corporation eligible to vote on any such matters.
(b) Directors. As long as at least 500,000 shares of
Series D Preferred Stock are outstanding, if General Atlantic Partners 74, L.P.,
GAP Coinvestment Partners II, L.P., GapStar, LLC, GAPCO GmbH & Co. KG and/or any
Affiliate thereof in the aggregate own at least a majority of the outstanding
shares of Series D Preferred Stock, then the holders of shares of Series D
Preferred Stock, voting as a separate class, shall be entitled to elect one (1)
director of the Corporation.
(c) Elections. As long as at least 500,000 shares of
Series D Preferred Stock are outstanding, the Series D Preferred Stock shall
vote together as a single class with the Common Stock (and all other classes and
series of stock of the Corporation entitled to vote thereon, if any) with
respect to the election of all of the other
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directors of the Corporation. If the conditions set forth in Section 6(b)
necessary for the holders of shares of Series D Preferred Stock to vote as a
separate class for the election of one director are not satisfied, then the
Series D Preferred Stock shall vote together as a single class with the Common
Stock (and all other classes and series of stock of the Corporation entitled to
vote thereon, if any) with respect to the election of all of the directors of
the Corporation. At any meeting held for the purpose of electing directors
pursuant to Section 6(b) at a time when the holders of shares of Series D
Preferred Stock are entitled to vote as a separate class for the election of one
director, the presence in person or by proxy of the holders of a majority of the
shares of Series D Preferred Stock then outstanding shall constitute a quorum of
the Series D Preferred Stock for the election of the director to be elected
solely by the holders of shares of Series D Preferred Stock; the holders of
shares of Series D Preferred Stock shall be entitled to cast one vote per share
of Series D Preferred Stock in any such election; and the director to be elected
exclusively by the holders of shares of Series D Preferred Stock shall be
elected by the affirmative vote of the holders of a majority of the outstanding
shares of Series D Preferred Stock. A vacancy in a directorship filled by the
holders of the Series D Preferred Stock voting as a separate class pursuant to
this Section 6(c) shall be filled only by vote or written consent of the holders
of shares of Series D Preferred Stock. The director elected pursuant to Section
6(b) may not be removed without the consent of a majority of the holders of
shares of Series D Preferred Stock.
(d) Major Actions. Notwithstanding anything to the
contrary set forth in the Articles of Incorporation or the By-laws of the
Corporation, the affirmative vote of the holders of a majority of the
outstanding shares of Series D Preferred Stock voting as a separate class shall
be a prerequisite to:
(i) any amendment, modification or restatement
of the Articles of Incorporation or the By-laws of the Corporation;
(ii) the issuance, reservation for issuance or
authorization of any Capital Stock of the Corporation or any right or option to
acquire shares of Capital Stock ranking senior to the shares of Series D
Preferred Stock or any increase or decrease in the authorized number of shares
of Series D Preferred Stock, provided that the Corporation may issue options or
shares pursuant to the Stock Option Plans;
(iii) the redemption of any Junior Stock other
than the repurchase of unvested stock options or restricted stock from
employees, officers, directors, or consultants of the Corporation upon
termination of service;
(iv) any declaration, distribution or payment of
any dividend or other distribution to any Junior Stock;
(v) the issuance, incurrence, assumption or
guarantee by the Corporation or any Subsidiary of the Corporation of any funded
Indebtedness in excess of $25 million (excluding capital leases incurred in the
ordinary course of business); and
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(vi) any amendment to this Section 6(d).
7. Conversion.
(a) Optional Conversion. Any holder of shares of Series
D Preferred Stock shall have the right, at its option, at any time and from time
to time, to convert, subject to the terms and provisions of this Section 7, any
or all of such holder's shares of Series D Preferred Stock into such number of
fully paid and non-assessable shares of Common Stock as is equal to the product
of (i) the number of shares of Series D Preferred Stock being so converted
multiplied by (ii) the quotient of (x) the sum of the Accreted Value plus all
dividends accrued since the previous Compounding Date divided by (y) the
Conversion Price, subject to adjustment as provided in Section 7(c) below. Such
conversion right shall be exercised by the surrender of certificate(s)
representing the shares of Series D Preferred Stock to be converted to the
Corporation at any time during usual business hours at its principal place of
business maintained by it (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of shares of
Series D Preferred Stock), accompanied by written notice that the holder elects
to convert such shares of Series D Preferred Stock and specifying the name or
names (with address) in which a certificate or certificates for shares of Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 7(i) below. All certificates representing shares of Series D
Preferred Stock surrendered for conversion shall be delivered to the Corporation
for cancellation and canceled by it. As promptly as practicable after the
surrender of any shares of Series D Preferred Stock, in any event within 7 days
of the receipt of such certificates, the Corporation shall (subject to
compliance with the applicable provisions of federal and state securities laws)
deliver to the holder of such shares so surrendered certificate(s) representing
the number of fully paid and nonassessable shares of Common Stock into which
such shares are entitled to be converted. At the time of the surrender of such
certificate(s), the Person in whose name any certificate(s) for shares of Common
Stock shall be issuable upon such conversion shall be deemed to be the holder of
record of such shares of Common Stock on such date, notwithstanding that the
share register of the Corporation shall then be closed or that the certificates
representing such Common Stock shall not then be actually delivered to such
Person.
(b) Termination of Rights. On the date of such optional
conversion pursuant to Section 7(a) above all rights with respect to the shares
of Series D Preferred Stock so converted, including the rights, if any, to
receive notices and vote, shall terminate, except only the rights of holders
thereof to (i) receive certificates for the number of shares of Common Stock
into which such shares of Series D Preferred Stock have been converted and (ii)
exercise the rights to which they are entitled as holders of Common Stock.
(c) (i) Dividend, Subdivision, Combination or
Reclassification of Common Stock. In the event that the Corporation shall at any
time or from time to time, prior to conversion of shares of Series D Preferred
Stock (w) pay a
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dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock of the Corporation, (x) subdivide the outstanding
shares of Common Stock into a larger number of shares, (y) combine the
outstanding shares of Common Stock into a smaller number of shares or (z) issue
any shares of its Capital Stock in a reclassification of the Common Stock (other
than any such event for which an adjustment is made pursuant to another clause
of this Section 7(c)), then, and in each such case, the Conversion Price in
effect immediately prior to such event shall be adjusted (and any other
appropriate actions shall be taken by the Corporation) so that the holder of any
share of Series D Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other securities of
the Corporation that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series D Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 7(c)(i) shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
(ii) Certain Distributions. In case the
Corporation shall at any time or from time to time, prior to conversion of
shares of Series D Preferred Stock, distribute to all holders of shares of the
Common Stock (including any such distribution made in connection with a merger
or consolidation in which the Corporation is the resulting or surviving Person
and the Common Stock is not changed or exchanged) cash, evidences of
indebtedness of the Corporation or another issuer, securities of the Corporation
or another issuer or other assets (excluding cash dividends in which holders of
shares of Series D Preferred Stock participate, in the manner provided in
Section 3(c), dividends payable in shares of Common Stock for which adjustment
is made under another paragraph of this Section 7(c) and any distribution in
connection with an Excluded Transaction) or rights or warrants to subscribe for
or purchase of any of the foregoing, then, and in each such case, the Conversion
Price then in effect shall be adjusted (and any other appropriate actions shall
be taken by the Corporation) by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution less the then fair market value
(as determined by the Board of Directors in the exercise of their fiduciary
duties) of the portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such rights or warrants applicable to one
share of Common Stock and (y) the denominator of which shall be the Current
Market Price of the Common Stock immediately prior to the date of distribution
(but such fraction shall not be greater than one); provided, however, that no
adjustment shall be made with respect to any distribution of rights or warrants
to subscribe for or purchase securities of the Corporation if the holder of
shares of Series D Preferred Stock would otherwise be entitled to receive such
rights or warrants upon conversion at any time of shares of Series D Preferred
Stock into Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
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immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) Other Changes. In case the Corporation at
any time or from time to time, prior to the conversion of shares of Series D
Preferred Stock, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in Sections 7(c)(i) or
(ii) above or Section 7(f) below (but not including any action described in any
such Section) and the Board of Directors in good faith determines that it would
be equitable in the circumstances to adjust the Conversion Price as a result of
such action, then, and in each such case, the Conversion Price shall be adjusted
in such manner and at such time as the Board of Directors in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of shares of Series D Preferred Stock).
(iv) No Adjustment. Notwithstanding anything
herein to the contrary, no adjustment under this Section 7(c) need be made to
the Conversion Price if the Corporation receives written notice from holders of
a majority of the outstanding shares of Series D Preferred Stock that no such
adjustment is required.
(d) Abandonment. If the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then no adjustment in the Conversion Price shall
be required by reason of the taking of such record.
(e) Certificate as to Adjustments. Upon any adjustment
in the Conversion Price, the Corporation shall within a reasonable period (not
to exceed ten (10) Business Days) following any of the foregoing transactions
deliver to each registered holder of shares of Series D Preferred Stock a
certificate, signed by (i) the Chief Executive Officer of the Corporation and
(ii) the Chief Financial Officer of the Corporation, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased Conversion
Price then in effect following such adjustment.
(f) Reorganization, Reclassification. In case of any
merger or consolidation of the Corporation (other than a Change of Control) or
any capital reorganization, reclassification or other change of outstanding
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value) (each, a "Transaction"), the
Corporation shall execute and deliver to each holder of shares of Series D
Preferred Stock at least ten (10) Business Days prior to effecting such
Transaction a certificate, signed by (i) the Chief Executive Officer of the
Corporation and (ii) the Chief Financial Officer of the Corporation, stating
that the holder of each share of Series D Preferred Stock shall have the right
to receive in such Transaction, in exchange for each share of Series D Preferred
Stock, a security identical to (and not less favorable than) the Series D
Preferred Stock, and provision shall be made
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therefor in the agreement, if any, relating to such Transaction. Any certificate
delivered pursuant to this Section 7(f) shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 7. The provisions of this Section 7(f) and any equivalent
thereof in any such certificate similarly shall apply to successive
transactions.
(g) Notices. In case at any time or from time to time:
(w) the Corporation shall declare a dividend (or
any other distribution) on its shares of Common Stock;
(x) the Corporation shall authorize the granting
to the holders of its Common Stock rights or warrants to subscribe for or
purchase any shares of Capital Stock of any class or of any other rights or
warrants; or
(y) there shall be any Transaction; or
then the Corporation shall mail to each holder of shares of Series D Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least ten (10) days
prior to the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or granting of rights or warrants are to be
determined, or (B) the date on which such Transaction is expected to become
effective and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for shares of stock
or other securities or property or cash deliverable upon such Transaction.
Notwithstanding the foregoing, in the case of any event to which Section 7(f)
above is applicable, the Corporation shall also deliver the certificate
described in Section 7(f) above to each holder of shares of Series D Preferred
Stock at least ten (10) Business Days' prior to effecting such reorganization or
reclassification as aforesaid.
(h) Reservation of Common Stock. The Corporation shall
at all times reserve and keep available for issuance upon the conversion of
shares of Series D Preferred Stock, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient to permit the
conversion of all outstanding shares of Series D Preferred Stock, and shall take
all action to increase the authorized number of shares of Common Stock if at any
time there shall be insufficient authorized but unissued shares of Common Stock
to permit such reservation or to permit the conversion of all outstanding shares
of Series D Preferred Stock; provided that (x) the holders of shares of Series D
Preferred Stock shall vote such shares in favor of any such action that requires
a vote of stockholders and (y) such holders shall cause any directors elected by
them pursuant to Section 6(b) above to vote in favor of any such action that
requires a vote of the Board of Directors.
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(i) No Conversion Tax or Charge. The issuance or
delivery of certificates for Common Stock upon the conversion of shares of
Series D Preferred Stock shall be made without charge to the converting holder
of shares of Series D Preferred Stock for such certificates or for any tax in
respect of the issuance or delivery of such certificates or the securities
represented thereby, and such certificates shall be issued or delivered in the
respective names of, or (subject to compliance with the applicable provisions of
federal and state securities laws) in such names as may be directed by, the
holders of the shares of Series D Preferred Stock converted; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the holder of the shares of Series D
Preferred Stock converted, and the Corporation shall not be required to issue or
deliver such certificate unless or until the Person or Persons requesting the
issuance or delivery thereof shall have paid to the Corporation the amount of
such tax or shall have established to the reasonable satisfaction of the
Corporation that such tax has been paid.
(j) Limitations on Conversions. Each holder of the
Series D Preferred Stock's right to convert its shares of Series D Preferred
Stock into shares of Common Stock shall not be limited by any notice delivered
by the Corporation of any proposed redemption, Change of Control or any other
event that notwithstanding this subsection (j) shall purport to limit such
conversion right.
8. Certain Remedies. Any registered holder of shares of Series D
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Certificate of Designation and to enforce
specifically the terms and provisions of this Certificate of Designation in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such holder may be entitled at law or
in equity.
9. Business Day. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
10. 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:
"Accreted Value" shall mean as of any date, with respect to each
share of Series D Preferred Stock, the Price Per Share plus the amount of
dividends that have accrued and compounded to such date pursuant to Section 3(a)
of this Certificate of Designation.
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
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"Automatic Redemption Date" shall have the meaning ascribed to
it in Section 5(b) hereof.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except a Saturday, a Sunday, or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
(including, without limitation, common stock and preferred stock) and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.
"Change of Control" means (i) any merger, consolidation or other
business combination transaction (or series of related transactions) in which
the stockholders owning a majority of the voting securities of the Corporation
prior to such transaction do not own a majority of the voting securities of the
surviving entity, (ii) any tender offer, exchange offer or other transaction
whereby any person or "group" other than the Investors obtains a majority of the
outstanding shares of Common Stock, (iii) any proxy contest in which a majority
of the Board of Directors of the Corporation (or persons appointed by such Board
of Directors) prior to such contest do not constitute a majority of the
Corporation's Board of Directors after such contest or (iv) any other
transaction described in any stockholder rights agreement or "poison pill", if
any, to which the Corporation is party, which may permit the holders of any
rights or similar certificates to exercise the rights evidenced thereby.
"Closing Date" means November 8, 2001.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning ascribed to it in Section
2(a) hereof.
"Common Stock Equivalent" shall mean any security or obligation
which is by its terms convertible, exchangeable or exercisable into or for
shares of Common Stock, including, without limitation, the Series D Preferred
Stock, and any option, warrant or other subscription or purchase right with
respect to Common Stock or any Common Stock Equivalent.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation, contractual or
otherwise the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property
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constituting direct or indirect security therefor, (b) to advance or provide
funds (i) for the payment or discharge or any such primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss or failure or inability to perform
in respect thereof. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof.
"Conversion Price" shall mean $1.05, as adjusted pursuant to
Section 7(c).
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Certificate of Designation.
"Current Market Price" per share of Capital Stock of any Person
shall mean, as of the date of determination, (a) the average of the daily Market
Price under clause (a), (b) or (c) of the definition thereof of such Capital
Stock during the immediately preceding thirty (30) trading days ending on such
date, and (b) if such Capital Stock is not then listed or admitted to trading on
any national securities exchange or quoted in the over-the-counter market, then
the Market Price under clause (d) of the definition thereof on such date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Excluded Transaction" means (a) any issuance of shares of stock
or options to purchase shares of Common Stock pursuant to the Stock Option Plans
and (b) any issuance of Common Stock (i) upon the conversion of shares of Series
D Preferred Stock, (ii) as a dividend on shares of Series D Preferred Stock or
(iii) upon conversion or exercise of any Common Stock Equivalents, or (c) any
issuance of Common Stock in connection with any Liquidation Payment, (d) Capital
Stock issued in consideration of an acquisition, approved by the Board of
Directors, by the Company of another Person and (e) shares of Common Stock and
Common Stock Equivalents issued in strategic transactions (which may not be
private equity or venture capital financing transactions) approved by the Board
of Directors to Persons that are not principally engaged in financial investing.
"GAAP" means United States generally accepted accounting
principles in effect from time to time.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof.
15
"Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (c) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Liens in favor of lessors under
leases other than leases included in clause (e)) on any property or asset owned
or held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of that
Person, and (g) any Contingent Obligation of such Person.
"Junior Stock" shall have the meaning ascribed to it in Section
2(a) hereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).
"Liquidation" shall mean the voluntary or involuntary
liquidation under applicable bankruptcy or reorganization legislation, or the
dissolution or winding up of the Corporation.
"Liquidation Payment" shall have the meaning ascribed to it in
Section 4(a) hereof.
"Market Price" shall mean, with respect to the Capital Stock of
any Person, as of the date of determination, (a) if such Capital Stock is listed
on a national securities exchange, the closing price per share of such Capital
Stock on such date published in The Wall Street Journal (National Edition) or,
if no such closing price on such date is published in The Wall Street Journal
(National Edition), the average of the closing bid and asked prices on such
date, as officially reported on the principal national securities exchange on
which such Capital Stock is then listed or admitted to trading; or (b) if such
Capital Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the National Association of Securities Dealers, Inc., the last trading price of
such Capital Stock on such date; or (c) if there shall have been no trading on
such date or if such Capital Stock is not designated as a national market system
security by the National Association of Securities Dealers, Inc., the average of
the reported closing bid and asked prices of such Capital Stock on such date as
shown by the National Market System of the National
16
Association of Securities Dealers, Inc. Automated Quotations System and reported
by any member firm of the New York Stock Exchange selected by the Corporation;
or (d) if none of (a), (b) or (c) is applicable, a market price per share
determined mutually by the Board of Directors and the holders of a majority of
the shares of Series D Preferred Stock or, if the Board of Directors and the
holders of a majority of the shares of Series D Preferred Stock shall fail to
agree, at the Corporation's expense by an appraiser chosen by the Board of
Directors and reasonably acceptable to the holders of a majority of the shares
of Series D Preferred Stock. Any determination of the Market Price by an
appraiser shall be based on a valuation of the Corporation as an entirety
without regard to any discount for minority interests or disparate voting rights
among classes of Capital Stock.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"Optional Redemption Date" shall have the meaning ascribed to it
in Section 5(a)(ii) hereof.
"Optional Redemption Measurement Window" shall have the meaning
ascribed to it in Section 5(a)(i) hereof.
"Optional Redemption Period" shall have the meaning ascribed to
it in Section 5(a)(i) hereof.
"Optional Redemption Price" shall have the meaning ascribed to
it in Section 5(a)(i) hereof.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Price Per Share" means $13.75.
"Redemption Price" shall have the meaning ascribed to it in
Section 5(b) hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Series D Preferred Stock" shall have the meaning ascribed to it
in Section 1 hereof.
"Stock Option Plans" means the Company's stock option plans and
employee purchase plans approved by the Board of Directors, pursuant to which
shares of restricted stock and options to purchase shares of Common Stock are
reserved and available for grant to officers, directors, employees and
consultants of the Corporation.
17
"Transaction" shall have the meaning ascribed to it in Section
7(f) hereof.
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IN WITNESS WHEREOF, the undersigned has executed and subscribed
this certificate this 6th day of November, 2001.
/s/ Michael Zuckerman
---------------------------------
Senior Vice President and Secretary