Exhibit 3.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
SMARTDISK CORPORATION
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
The undersigned, being the President of SmartDisk Corporation (the
"Corporation"), organized and existing under and by virtue of the General
Corporation Law of the state of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That, by the Restated Certificate of Incorporation of the Corporation
duly filed in the office of the Secretary of State of Delaware on August 11,
1999 (the "Certificate of Incorporation"), the Corporation is authorized to
issue a total number of shares of capital stock equal to 65,000,000 shares, of
which 5,000,000 shares shall be Preferred Stock; and, by said Certificate of
Incorporation, the shares of the Preferred Stock are authorized to be issued in
one or more series as may be determined from time to time by the Board of
Directors of the Corporation, each of such series to be distinctly designated.
That, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the said Corporation, the said Board of
Directors on December 16, 2002, duly adopted the following resolutions creating
the Series A Redeemable Convertible Preferred Stock of the Corporation to
consist initially of 2,552,364.8 shares and fixing the designations,
preferences, and rights, and the qualifications, limitations, and restrictions
thereof, of the shares of such series by all necessary action on the part of the
Corporation:
WHEREAS, Article Fourth of the Certificate of Incorporation of the
Corporation authorizes the issuance of Five Million (5,000,000) shares of
preferred stock, par value $0.001 per share, issuable from time to time in one
or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized by
Article Fourth of the Certificate of Incorporation to divide the preferred stock
into series and to fix and determine the designations, powers, preferences, and
rights of the shares of each serial preferred stock so established, and the
qualifications, limitations, or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors, pursuant to the
authority granted to it, to provide for the issuance of a series of preferred
stock and to fix the rights, preferences, privileges, restrictions, and other
matters relating to that series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
authorize and provide for the issuance of the series of preferred stock of the
Corporation as herein described and does hereby fix and determine the rights,
preferences, privileges, restrictions, and other matters relating to such series
of preferred stock as follows:
1. Designation. A total of 2,552,364.8 shares of the
Corporation's Preferred Stock shall be designated as "Series A Redeemable
Convertible Preferred Stock." As used herein, the term "Preferred Stock" used
without references to the Series A Redeemable Convertible Preferred Stock means
the shares of Series A Redeemable Convertible Preferred Stock and the shares of
any series of authorized Preferred Stock of the Corporation issued and
designated from time to time by a resolution or
resolutions of the Board of Directors, share for share alike and without
distinction as to class or series, except as otherwise expressly provided for in
this Certificate of Incorporation or as the context otherwise requires.
2. Dividends. Subject to provisions of law, the holders of
record of shares of the Series A Redeemable Convertible Preferred Stock shall be
entitled to receive cumulative cash dividends, which shall accrue from the date
of issuance and which shall be payable, except as otherwise provided herein,
when, as, and if declared by the Board of Directors, out of assets which are
legally available for the payment of such dividends, including any special
dividends declared by the Board of Directors as well as ordinary dividends, at
an annual rate equal to $0.06 per share of Series A Redeemable Convertible
Preferred Stock; provided, however, if the Company receives written notice from
the holders of a majority in interest of the Series A Redeemable Convertible
Preferred Stock requesting that a special meeting of the Company's stockholders
be called to approve the authorization of the Company's issuance of Common Stock
upon conversion of the Series A Redeemable Convertible Preferred Stock in
accordance with Marketplace Rule 4350(i) of the NASDAQ Stock Market ("NASDAQ"),
and if such approval has not been obtained by that date that is 120 days after
the date on which such written request was received by the Company, such annual
rate shall automatically increase to $0.10 per share of Series A Redeemable
Convertible Preferred Stock, (each which per share dividend amount shall be
subject to equitable adjustment whenever there shall occur a stock dividend,
stock split, combination, reorganization, recapitalization, reclassification, or
other similar event involving the Series A Redeemable Convertible Preferred
Stock), provided that such dividends shall not be currently payable and shall
only be payable when and if specifically declared by the Company's Board of
Directors. Dividends shall be cumulative. Dividends payable on the Series A
Redeemable Convertible Preferred Stock for any period less than a full year
shall be computed on the basis of the actual number of days elapsed and a
365-day year. No dividends shall be paid or declared, and no other distribution
shall be made, on or with respect to the Common Stock of the Corporation as long
as there are shares of Series A Redeemable Convertible Preferred Stock issued
and outstanding; provided, however, that nothing in this Section 2 shall
prohibit the Corporation from distributing to its holders of Common Stock rights
to purchase shares of Common Stock pursuant to a rights offering. Upon the
redemption of the shares of Series A Redeemable Convertible Preferred Stock or
the conversion of shares of the Series A Redeemable Convertible Preferred Stock
into Common Stock of the Corporation, all accrued dividends with respect to such
converted shares shall be promptly paid in cash.
3. Liquidation, Dissolution, or Winding Up.
(a) Treatment at Sale, Liquidation, Dissolution, or
Winding Up. In the event of any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment is made to any holders of any shares of Common Stock or any other class
or series of capital stock of the Corporation designated to be junior to the
Series A Redeemable Convertible Preferred Stock, and subject to the liquidation
rights and preferences of any class or series of Preferred Stock designated to
be senior to, or on a parity with, the Series A Redeemable Convertible Preferred
Stock, the holders of shares of Series A Redeemable Convertible Preferred Stock
shall be entitled to be paid first out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock,
whether such assets are capital, surplus, or earnings, an amount equal to $1.00
per share of Series A Redeemable Convertible Preferred Stock (which amount shall
be subject to equitable adjustment whenever there shall occur a stock dividend,
stock split, combination, reorganization, recapitalization, reclassification, or
other similar event involving the Series A Redeemable Convertible Preferred
Stock) plus any accrued but unpaid dividends on such shares (such amount, as so
determined, is referred to herein as the "Series A Liquidation Value" with
respect to such shares). After payment has been made to the holders of the
Series A Redeemable Convertible Preferred Stock and any series of Preferred
Stock designated to be senior to, or on a parity with, the Series A Redeemable
Convertible Preferred Stock, and any other series of Preferred Stock, of the
full liquidation preference to which such holders shall be entitled as
aforesaid, the remaining assets shall be distributed among the holders of Common
Stock.
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(b) Insufficient Funds. If upon such liquidation,
dissolution, or winding up the assets or surplus funds of the Corporation to be
distributed to the holders of shares of Series A Redeemable Convertible
Preferred Stock and any other then-outstanding shares of the Corporation's
capital stock ranking on a parity with respect to payment on liquidation with
the Series A Redeemable Convertible Preferred Stock (such shares being referred
to herein as the "Series A Parity Stock") shall be insufficient to permit
payment to such respective holders of the full Series A Liquidation Value and
all other preferential amounts payable with respect to the Series A Redeemable
Convertible Preferred Stock and such Series A Parity Stock, then the assets
available for payment or distribution to such holders shall be allocated among
the holders of the Series A Redeemable Convertible Preferred Stock and such
Series A Parity Stock, pro rata, in proportion to the full respective
preferential amounts to which the Series A Redeemable Convertible Preferred
Stock and such Series A Parity Stock are each entitled.
(c) Certain Transactions Treated as Liquidation. For
purposes of this Section 3, (A) any acquisition of the Corporation by means of
merger or other form of corporate reorganization or consolidation with or into
another corporation in which outstanding shares of this Corporation, including
shares of Series A Redeemable Convertible Preferred Stock, are exchanged for
securities or other consideration issued, or caused to be issued, by the other
corporation or its subsidiary and, as a result of which transaction, the
stockholders of this Corporation own 50% or less of the voting power of the
surviving entity (other than a mere re-incorporation transaction), or (B) a
sale, transfer, or lease (other than a pledge or grant of a security interest to
a bona fide lender) of all or substantially all of the assets of the Corporation
shall be treated as a liquidation, dissolution, or winding up of the Corporation
and shall entitle the holders of Series A Redeemable Convertible Preferred Stock
to receive the amount that would be received in a liquidation, dissolution, or
winding up pursuant to Section 3(a) hereof, if the holders of at least 50% of
the then outstanding shares of Series A Redeemable Convertible Preferred Stock
so elect by giving written notice thereof to the Corporation at least three days
before the effective date of such event. The Corporation shall provide the
holders of Preferred Stock with notice of all transactions which may be treated
as a liquidation, dissolution, or winding up pursuant to this Section 3(c)
twenty (20) days prior to the earlier of the vote relating to such transaction
or the closing of such transaction.
(d) Distributions of Property. Whenever the distribution
provided for in this Section 3 shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors, unless the holders of 50% or
more of the then outstanding shares of Series A Redeemable Convertible Preferred
Stock request, in writing, that an independent appraiser perform such valuation,
then by an independent appraiser selected by the Board of Directors and
reasonably acceptable to 50% or more of the holders of such series of Preferred
Stock.
4. Voting Power.
(a) General. Except as otherwise expressly provided in
Section 9 hereof or as otherwise required by law, each holder of Series A
Redeemable Convertible Preferred Stock shall be entitled to vote on all matters
and shall be entitled to that number of votes equal to the number of whole
shares of Common Stock into which such holder's shares of Series A Redeemable
Convertible Preferred Stock could then be converted, pursuant to the provisions
of Section 5 hereof, including the limitation set forth in Section 5(e) hereof
at the record date for the determination of stockholders entitled to vote on
such matter or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is solicited. Except as otherwise
expressly provided in Section 9 hereof or as otherwise required by law, the
holders of shares of Preferred Stock and Common Stock shall vote together as a
single class on all matters.
(b) Voting Rights Upon Default. In the event that the
Corporation fails to make the mandatory redemption required by Section 6, in
whole or in part, the holders of the then outstanding Series A Redeemable
Convertible Preferred Stock, voting as a separate class, with each share of the
Series A Redeemable Convertible Preferred Stock having one vote, shall be
entitled to elect a majority of the Board of Directors of the Corporation at the
next annual meeting of stockholders or at a
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special meeting of the holders of the Series A Redeemable Convertible Preferred
Stock called for such purposes, which directors shall continue as directors
until the mandatory redemption shall have been paid in full by the Corporation,
at which time all voting rights provided for by this Section 4(b) shall be
divested from the Series A Redeemable Convertible Preferred Stock and the
directors elected pursuant to this Section 4(b) shall be removed and cease to be
directors.
5. Conversion Rights. The holders of the Series A Redeemable
Convertible Preferred Stock shall have the following rights with respect to the
conversion of such shares into shares of Common Stock:
(a) General. Subject to and in compliance with the
provisions of this Section 5, including the limitations of Section 5(e) hereof,
any or all shares of the Series A Redeemable Convertible Preferred Stock may, at
the option of the holder thereof, be converted at any time into fully-paid and
non-assessable shares of Common Stock. The number of shares of Common Stock
which a holder of Series A Redeemable Convertible Preferred Stock shall be
entitled to receive upon conversion shall be the product obtained by multiplying
the Series A Applicable Conversion Rate (determined as provided in Section 5(b))
by the number of shares of Series A Redeemable Convertible Preferred Stock being
converted at any time.
(b) Applicable Conversion Rate. The conversion rate in
effect at any time for the Series A Redeemable Convertible Preferred Stock (the
"Series A Applicable Conversion Rate") shall be the quotient obtained by
dividing $1.00 by the Series A Applicable Conversion Value, as defined in
Section 5(c). Initially, the Series A Applicable Conversion Rate shall be 3.125,
and each share of Series A Redeemable Convertible Preferred Stock shall
initially be convertible into 3.125 shares of Common Stock.
(c) Applicable Conversion Value. The Series A Applicable
Conversion Value in effect from time to time, except as adjusted in accordance
with Section 5(d) hereof, shall be $0.32 with respect to the Series A Redeemable
Convertible Preferred Stock (the "Series A Applicable Conversion Value").
(d) Adjustment to Series A Applicable Conversion Value.
Upon the happening of an Extraordinary Common Stock Event (as hereinafter
defined), the Series A Applicable Conversion Value (and all other conversion
values set forth in this Section 5) shall, simultaneously with the happening of
such Extraordinary Common Stock Event, be adjusted by multiplying the Series A
Applicable Conversion Value by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Series A Applicable Conversion Value. The Series A Applicable Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Common Stock Event or Events. An "Extraordinary
Common Stock Event" shall mean (i) the issue of additional shares of Common
Stock as a dividend or other distribution on outstanding shares of Common Stock,
(ii) a subdivision of outstanding shares of Common Stock into a greater number
of shares of Common Stock, or (iii) a combination or reverse stock split of
outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
(e) Limitation on Shares Issuable Upon Conversion.
Notwithstanding any other provision herein, in no event shall the aggregate
number of shares of Common Stock issuable upon conversion of the Series A
Redeemable Convertible Preferred Stock exceed 19.99% of the number of shares of
Common Stock outstanding on the original issuance date of the Series A
Redeemable Convertible Preferred Stock (the "Maximum Share Amount"), subject to
adjustment in accordance with Section 5(d), unless (i) if required, the
Corporation has obtained approval of the issuance of all shares of Common Stock
issuable upon conversion of the shares of Series A Redeemable Convertible
Preferred Stock by a majority of the total votes eligible to be cast on such
proposal, in person or by proxy, by the holders of the then outstanding Common
Stock in accordance with NASDAQ Marketplace Rule 4350(i);
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(ii) if the vote referenced in subparagraph (i) above is otherwise required, the
Corporation has obtained permission from NASDAQ to allow the conversion of the
shares of Series A Redeemable Convertible Preferred Stock without obtaining
stockholder approval; or (iii) the Corporation is no longer governed by a rule
promulgated by a stock exchange, NASDAQ, or other applicable body prohibiting
the issuance of Common Stock upon conversion of shares of Series A Redeemable
Convertible Preferred Stock in excess of the Maximum Share Amount without
stockholder approval. The Company shall maintain records setting forth the
number of shares of Common Stock issued by the Company upon conversion of shares
of Series A Redeemable Convertible Preferred Stock from time to time, which
records shall be controlling in the absence of manifest error.
(f) Automatic Conversion Upon Stockholder Approval.
(i) Mandatory Conversion of Preferred Stock.
Immediately upon (a) the approval of the issuance of all shares of Common Stock
issuable upon conversion of the shares of Series A Redeemable Convertible
Preferred Stock by a majority of the total votes eligible to be cast on such
proposal, in person or by proxy, by the holders of the then outstanding Common
Stock, or (b) the receipt of permission from NASDAQ to allow such issuances
without any limitation on the number of shares of Common Stock issuable upon
conversion of the shares of Series A Redeemable Convertible Preferred Stock, or
(c) any event whereby the Corporation is no longer governed by a rule
promulgated by a stock exchange, NASDAQ or other applicable body prohibiting the
issuance of Common Stock upon conversion of the shares of Series A Redeemable
Convertible Preferred Stock in excess of the Maximum Share Amount (each, a
"Mandatory Conversion Event"), all outstanding shares of Series A Redeemable
Convertible Preferred Stock shall be converted automatically into the number of
shares of Common Stock into which such shares of Series A Redeemable Convertible
Preferred Stock are then convertible pursuant to Section 5 hereof as of the date
of the Mandatory Conversion Event, 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.
(ii) Surrender of Certificates Upon Mandatory
Conversion. Upon the occurrence of a Mandatory Conversion Event, the holders of
the Series A Redeemable Convertible Preferred Stock shall, upon notice from the
Corporation, surrender the certificates representing such shares at the office
of the Corporation or of its transfer agent for the Common Stock. Thereupon,
there shall be issued and delivered to such holder a certificate or certificates
for the number of shares of Common Stock into which the shares of Series A
Redeemable Convertible Preferred Stock so surrendered were convertible on the
date on which such conversion occurred. The Corporation shall not be obligated
to issue such certificates unless certificates evidencing the shares of Series A
Redeemable Convertible Preferred Stock being converted are either delivered to
the Corporation or any such transfer agent, or the holder notifies the
Corporation 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 therewith.
(g) Merger, Consolidation, or Sale of Assets. If at any time or from
time to time there shall be a merger or consolidation of the Corporation with or
into another corporation (other than a merger or reorganization involving only a
change in the state of incorporation of the Corporation), or the sale of all or
substantially all of the Corporation's capital stock or assets to any other
person, then, as a part of such reorganization, merger, or consolidation or
sale, provision shall be made so that the holders of the Series A Redeemable
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Redeemable Convertible Preferred Stock the number of
shares of stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger or consolidation, to which such
holder would have been entitled, notwithstanding the provisions of Section 5(e),
if such holder had converted its shares of Series A Redeemable Convertible
Preferred Stock immediately prior to such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 5 to the end that the
provisions of this Section 5 (including adjustment of the Series A Applicable
Conversion Value then in effect and the number of shares of Common Stock or
other securities issuable upon conversion of such
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shares of Series A Redeemable Convertible Preferred Stock) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
(h) Certificate as to Adjustments; Notice by
Corporation. In each case of an adjustment or readjustment of the Series A
Applicable Conversion Rate, the Corporation at its expense will furnish each
holder of Series A Redeemable Convertible Preferred Stock with a certificate
prepared by the Treasurer or Chief Financial Officer of the Corporation, showing
such adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(i) Exercise of Conversion Privilege. To exercise its
conversion privilege, a holder of Series A Redeemable Convertible Preferred
Stock shall surrender the certificate or certificates representing the shares
being converted to the Corporation at its principal office, and shall give
written notice to the Corporation at that office that such holder elects to
convert such shares. Such notice shall also state the name or names (with
address or addresses) in which the certificate or certificates for shares of
Common Stock issuable upon such conversion shall be issued. The certificate or
certificates for shares of Series A Redeemable Convertible Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation, together with the certificate or certificates representing the
shares of Series A Redeemable Convertible Preferred Stock being converted, shall
be the "Conversion Date." As promptly as practicable after the Conversion Date,
the Corporation shall issue and shall deliver to the holder of the shares of
Series A Redeemable Convertible Preferred Stock being converted, or on its
written order, such certificate or certificates as it may request for the number
of whole shares of Common Stock issuable upon the conversion of such shares of
Series A Redeemable Convertible Preferred Stock in accordance with the
provisions of this Section 5, rounded up to the nearest whole share as provided
in Section 5(l), in respect of any fraction of a share of Common Stock issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holder as holder of the converted shares of Series A
Redeemable Convertible Preferred Stock shall cease and the person(s) in whose
name(s) any certificate(s) for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
(j) No Issuance of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon the conversion of shares of Series A Redeemable Convertible Preferred
Stock. Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of Series A Redeemable Convertible Preferred Stock, the
Corporation shall round up to the next whole share of Common Stock issuable upon
the conversion of shares of Series A Redeemable Convertible Preferred Stock. The
determination as to whether any fractional shares of Common Stock shall be
rounded up shall be made with respect to the aggregate number of shares of
Series A Redeemable Convertible Preferred Stock being converted at any one time
by any holder thereof, not with respect to each share of Series A Redeemable
Convertible Preferred Stock being converted.
(k) Partial Conversion. In the event some but not all of
the shares of Series A Redeemable Convertible Preferred Stock represented by a
certificate(s) surrendered by a holder are converted, the Corporation shall
execute and deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series A
Redeemable Convertible Preferred Stock which were not converted.
(l) Reservation of Common Stock. 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 A Redeemable Convertible 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 A Redeemable Convertible
Preferred Stock (including any shares of Series A Redeemable Convertible
Preferred Stock represented by any warrants, options, subscription or purchase
rights for Series A Redeemable Convertible Preferred Stock), and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the
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conversion of all then outstanding shares of the Series A Redeemable Convertible
Preferred Stock (including any shares of Series A Redeemable Convertible
Preferred Stock represented by any warrants, options, subscriptions or purchase
rights for such Preferred Stock), the Corporation shall take such 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.
(m) No Reissuance of Preferred Stock. No share or shares
of Series A Redeemable Convertible Preferred Stock acquired by the Corporation
by reason of redemption, purchase, conversion, or otherwise shall be reissued,
and all such shares shall be cancelled, retired, and eliminated from the shares
which the Corporation shall be authorized to issue. The Corporation shall from
time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of the Series A Redeemable Convertible
Preferred Stock.
6. Redemption.
(a) Upon the request of holders of at least a majority
of the outstanding shares of Series A Redeemable Convertible Preferred Stock,
which request may be made by such holders at any time after June 18, 2004, the
Corporation shall redeem, from any source of funds legally available therefor,
the Series A Redeemable Convertible Preferred Stock on such date that is 30 days
after the receipt by the Corporation of such request, (the "Redemption Date").
The redemption price for the Series A Redeemable Convertible Preferred Stock
shall be an amount equal to $1.00 per share (as adjusted for any stock
dividends, combinations, or splits with respect to such shares) plus all accrued
but unpaid dividends on such shares (the "Series A Redemption Price").
(b) As soon as practicable following receipt of the
notice set forth in Section 6(a), written notice shall be mailed, first class
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Series A
Redeemable Convertible Preferred Stock to be redeemed, at the address last shown
on the records of the Corporation for such holder, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section 9(c), on or after the Redemption Date, each holder
of Series A Redeemable Convertible Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In the event that
less than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series A Redeemable Convertible Preferred Stock designated
for redemption in the Redemption Notice as holders of Series A Redeemable
Convertible Preferred Stock (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Series A Redeemable Convertible Preferred Stock on the
Redemption Date are insufficient to redeem the total number of shares of Series
A Redeemable Convertible Preferred Stock to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares ratably among the holders of such shares to be redeemed
based upon their holdings of Series A Redeemable Convertible Preferred Stock.
The shares of Series A Redeemable Convertible Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time and from time to time thereafter when additional funds of
the Corporation are legally available for the redemption of shares of Series A
Redeemable Convertible
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Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obligated to redeem on the
Redemption Date, but which it has not redeemed.
(d) Any shares of Series A Redeemable Convertible
Preferred Stock redeemed pursuant to this Section 6 or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled and shall not under any
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Series A Redeemable Convertible Preferred Stock.
7. Registration of Transfer. The Corporation will keep at its principal
office a register for the registration of shares of Preferred Stock. Upon the
surrender of any certificate representing shares of Preferred Stock at such
place, the Corporation will, at the request of the record holders of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefore representing the aggregate
number of shares of Preferred Stock represented by the surrendered certificate.
Each such new certificate will be registered in such name and will represent
such number of shares of Preferred Stock as is required by the holder of the
surrendered certificate and will be substantially identical in form to the
surrendered certificate.
8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction, or mutilation of any certificate
evidencing shares of Preferred Stock, and in the case of any such loss, theft,
or destruction, upon receipt of an unsecured indemnity from the holder
reasonably satisfactory to the Corporation or, in the case of such mutilation
upon surrender of such certificate, the Corporation will (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Preferred Stock represented by such lost,
stolen, destroyed, or mutilated certificate and dated the date of such lost,
stolen, destroyed, or mutilated certificate.
9. Restrictions and Limitations on Corporate Action and Amendments to
Charter.
(a) For so long as at least a majority of the shares of
Series A Redeemable Convertible Preferred Stock originally issued remain
outstanding (subject to adjustment for any stock split, reverse stock split, or
other Extraordinary Common Stock Event), the Corporation shall not take any
corporate action or otherwise amend its Certificate of Incorporation without the
approval by vote or written consent of the holders of at least a majority of the
then outstanding shares of Series A Redeemable Convertible Preferred Stock,
voting as a separate class, if such corporate action or amendment would:
(i) amend any of the rights, preferences,
privileges of, or limitations provided for herein for the benefit of any shares
of Series A Redeemable Convertible Preferred Stock;
(ii) authorize or issue, or obligate the
Corporation to authorize or issue, (1) additional shares of Series A Redeemable
Convertible Preferred Stock, (2) any shares of Series A Parity Stock, or (3)
shares of Preferred Stock senior to the Series A Redeemable Convertible
Preferred Stock with respect to liquidation preferences, dividend rights, voting
rights, or redemption rights;
(iii) amend any provisions of this Section 9(a);
or
(iv) cause the Corporation to sell shares of
Common Stock, other than Excluded Securities, at a price per share less than
$0.32, subject in all cases to the adjustments contemplated in Section 5(d); or
(v) cause the Corporation to incur indebtedness
for borrowed money in excess of $1.0 million in the aggregate.
For purposes of this Section 9(a), "Excluded Securities" shall mean the
issuance of shares of Common Stock (or options to purchase such shares of Common
Stock), issuable to employees, officers, directors, or independent contractors
of the Corporation at prices or exercise prices determined by the
8
Board of Directors to be not less than fair market value pursuant to any
employee stock option or other incentive stock or benefit plan of the
Corporation approved by the Corporation's Board of Directors.
10. No Dilution or Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
capital stock or assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Preferred Stock set forth herein, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of the Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not increase the par value of any shares of stock
receivable on the conversion of the Preferred Stock above the amount payable
therefor on such conversion, and (b) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of stock on the conversion of all
Preferred Stock from time to time outstanding.
11. Notices of Record Date. In the event of:
(a) 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 any
right to subscribe for, purchase or otherwise acquire any shares of capital
stock of any class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other corporation, or
any other entity or person, or
(c) any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, then and in each such event the
Corporation shall mail or cause to be mailed to each holder of Preferred Stock a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution, or right and a description of such
dividend, distribution, or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation, or winding up is expected to become effective,
and (iii) the time, 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 reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation, or winding up. Such
notice shall be mailed by first class mail, postage prepaid, at least ten (10)
days prior to the earlier of (1) the date specified in such notice on which such
record is to be taken and (2) the date on which such action is to be taken.
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder).
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be duly executed by its President this 24th day of December,
2002.
SMARTDISK CORPORATION
By:
/s/ Michael S. Battaglia
--------------------------------------
Michael S. Battaglia, President