Exhibit 3.1
CERTIFICATE OF DESIGNATION
OF
CERTIFICATE OF INCORPORATION
OF
ADSTAR, INC.
AdStar, Inc., a Delaware corporation (the ""Corporation""), acting
pursuant to Section 141 of the Delaware General Corporation Law, does hereby
submit the following Certificate of Designation of Series and Determination of
Rights and Preferences of its Series A Preferred Stock.
FIRST: The name of the Corporation is AdStar, Inc.
SECOND: By a vote of the Board of Directors of the Corporation at a
meeting on March 14, 2002, the following resolutions were duly adopted:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes
Preferred Stock consisting of 5,000,000 shares, par value $.0001 per share,
issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized, subject
to limitations prescribed by law and by the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation to establish and fix the number of
shares to be included in any series of Preferred Stock and the designation,
rights, preferences and limitations of the shares of such series; and
WHEREAS, it is the desire of the Board of Directors to establish and fix
the number of shares to be included in a new series of Preferred Stock and the
designation, rights, preferences and limitations of the shares of such new
series.
NOW, THEREFORE, BE IT RESOLVED that pursuant to Article FOURTH of the
Corporation's Certificate of Incorporation, there is hereby established a new
series of 1,443,457 shares of Series A Preferred stock of the Corporation, par
value $.0001 per share, to have the designation, rights, preferences, powers,
restrictions and limitations set forth in a supplement of Article FOURTH as
follows:
A. Series A Preferred Stock
1. Dividends.
a. General. Upon the occurrence of a Liquidation Event and to the
extent permitted under the Delaware General Corporation Law, the
Corporation shall pay preferential cumulative dividends in cash to
the holders of the Series A Preferred as provided in this Section
1.a. Dividends on each issued and outstanding share of the Series A
Preferred shall accrue on a daily basis at a rate of 7% per annum of
the Series A Liquidation Value thereof from and including the Series
A Original Issuance Date to and including the first to occur of (i)
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the date on which the Series A Liquidation Value of such share (plus
all accrued and unpaid dividends thereon) is paid to the holder
thereof in connection with a Liquidation Event or (ii) the date on
which such share of Series A Preferred is converted into shares of
Common hereunder. Such dividends shall accrue whether or not they
have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends, and such dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with
funds irrevocably set apart for payment before any dividends,
distributions, redemptions or other payments may be made with
respect to any Series A Junior Securities.
b. Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series A
Preferred, such payment shall be distributed pro rata among the
holders thereof based upon the aggregate accrued but unpaid
dividends on the Series A Preferred held by each such holder.
c. Participation in Common Dividends. In the event that the Corporation
declares or pays a dividend or makes any distribution on the Common,
then the holders of the outstanding shares of Series A Preferred (on
a Common Equivalent Basis as of the record date for such dividend or
distribution) and the holders of the Common shall share pro rata in
such dividend or distribution.
d. Treatment of Accrued and Unpaid Dividends Upon Conversion. Upon any
conversion of shares of Series A Preferred into Common in accordance
with Section 4, all accrued and unpaid dividends on the Series A
Preferred shall be waived.
2. Voting Rights.
a. General. The holders of the Series A Preferred shall be entitled to
notice of all stockholders meetings in accordance with the By-laws
and, except as otherwise provided herein or required by applicable
law, the holders of the Series A Preferred shall be entitled to vote
on all matters submitted to the stockholders for a vote, voting as a
single class with the Common and other securities that vote with the
Common, with the holders of Series A Preferred entitled to one vote
for each share of Common issuable upon conversion of the Series A
Preferred held as of the record date for such vote or, if no record
date is specified, as of the date of such vote.
b. Actions Requiring the Consent of the Holders of Series A Preferred .
So long as any shares of Series A Preferred remains outstanding, the
Corporation shall not, unless it has received the prior approval
from the holders of at least a majority of the shares of Series A
Preferred then outstanding:
(i) make any amendment to the Certificate of Incorporation, this
Certificate of Designation or the By-laws, or file any
resolution of the Board with the Delaware Secretary of State
containing any provisions or take any other action, that would
amend the terms of the Series
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A Preferred, increase or decrease the number of authorized
Series A Preferred, approve a reverse stock split with respect
to the Series A Preferred or adversely affect or otherwise
impair the rights or the relative preferences or priorities of
the holders of the Series A Preferred under the Certificate of
Incorporation, this Certificate of Designation or the By-laws;
(ii) make any amendment to the Certificate of Incorporation, this
Certificate of Designation or the By-laws, or file any
resolution of the Board with the Delaware Secretary of State
containing any provisions, or cause the approval and
authorization of or amend, replace or modify the Governance
Agreement, or take any other action, that would affect the
rights of the Investor to nominate a member to the Board;
(iii) except for the issuance and sale of the Series A Preferred,
authorize, issue or enter into any agreement providing for the
issuance (contingent or otherwise) of any capital stock or
other equity securities of the Corporation (or any securities
convertible into or exchangeable for any capital stock or
other equity securities of the Corporation) having rights,
preferences, privileges or priorities pari passu with or
senior to the Series A Preferred;
(iv) directly or indirectly (x) declare or pay any cash or property
dividends or make any cash or property distributions upon any
of its capital stock or other equity securities or (y) redeem,
purchase or otherwise acquire any of the Corporation's capital
stock or other equity securities (including warrants, options
and other rights to acquire such capital stock or other equity
securities), in each case, except out of the Corporation's
earned surplus; or
(v) liquidate, dissolve or wind-up the Corporation, whether
pursuant to a Federal bankruptcy proceeding, state law or
otherwise.
3. Liquidation, Dissolution, etc.
a. Liquidation Event. Upon any (i) liquidation (whether in connection
with a sale of all or substantially all of the assets of the
Corporation or otherwise), dissolution or winding up of the
Corporation (whether voluntary or involuntary) or (ii) any merger or
consolidation to which the Corporation is a party pursuant to which
the holders of Common are entitled to receive securities or cash in
exchange for such Common (except where, after giving effect to such
merger, the holders of the Corporation's outstanding capital stock
immediately prior to such merger or consolidation shall continue to
own the Corporation's outstanding capital stock possessing more than
50% of the voting power of the surviving entity) (each, a
"Liquidation Event"):
(i) Each holder of Series A Preferred shall be entitled to
receive, prior and in preference to any distribution or
payment made upon, or in exchange for, any Series A Junior
Securities, an amount equal to (payable in the same form as
the merger consideration paid to the holders of Common, if
applicable (and in the same ratio if more than one form of
consideration is used)) (i) the aggregate Series A Liquidation
Value of all shares of Series A Preferred held by such holder
plus (ii) all accrued and unpaid dividends on such shares of
Series A Preferred. If upon any Liquidation Event the
Corporation's assets or merger consideration to be distributed
among the holders
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of the Series A Preferred are insufficient to permit payment
to such holders of the aggregate amount that they are entitled
to be paid under this Section 3.a(i), then the entire assets
or merger consideration available to be distributed to the
Corporation's stockholders shall be distributed pro rata among
such holders of the Series A Preferred based upon the
aggregate Series A Liquidation Value (plus all accrued and
unpaid dividends) of the shares of Series A Preferred held by
each such holder.
(ii) After payment to the holders of the Series A Preferred of the
amounts set forth in Section 3.a(i), the entire remaining
assets and funds of the Corporation or merger consideration
legally available for distribution, if any, shall be
distributed pro rata among the holders of the Common and the
holders of the Series A Preferred (on a Common Equivalent
Basis).
b. Form of Consideration. Whenever the distribution provided for in
this Section 3 shall be payable in securities or property other than
cash, the value of such securities or property shall be the fair
market value thereof as determined by the Board in its reasonable
and good faith determination.
4. Conversion.
a. Conversion Procedure.
(i) At any time and from time to time, a holder of Series A
Preferred shall have the right to convert all or any portion
of its shares of Series A Preferred into the number of shares
of Common computed by dividing (x) the aggregate Series A
Liquidation Value of the shares of Series A Preferred to be
converted by (y) the Series A Conversion Price then in effect.
(ii) All shares of Series A Preferred shall automatically convert
into Common (pursuant to the computation set forth in Section
4.a(i)) on the first day after the 24-month anniversary of the
Series A Original Issuance Date for which the Market Price of
a share of Common exceeds 200% of the average trading price
per share of Common during the 30 consecutive days immediately
preceding the Series A Original Issuance Date.
(iii) Each conversion of Series A Preferred shall be deemed to have
been effected as of the close of business on the date on which
the certificate or certificates representing the Series A
Preferred to be converted have been surrendered for conversion
at the principal office of the Corporation (any such date
being referred to as a "Conversion Date"). At the time any
such conversion has been effected, the rights of the holder of
the shares of Series A Preferred converted as a holder of
Series A Preferred shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares
of Common are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the
shares of Common represented thereby.
(iv) As soon as possible after a conversion has been effected the
Corporation shall, or (if applicable) use its best efforts to
cause its transfer agent to, deliver to the
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converting holder:
(1) certificates representing the number of shares of Common
issuable by reason of such conversion in such name or
names and such denomination or denominations as the
converting holder has specified; and
(2) a certificate representing any shares of Series A
Preferred which were represented by the certificate or
certificates delivered to the Corporation in connection
with such conversion but which were not converted.
(v) The issuance of certificates for shares of Common upon
conversion of Series A Preferred shall be made without charge
to the holders of such Series A Preferred or Common for any
issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related
issuance of shares of Common. Upon conversion of each share of
Series A Preferred, the Corporation shall take all such
actions as are necessary in order to insure that the Common
issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all
taxes, liens, charges and encumbrances with respect to the
issuance thereof.
(vi) The Corporation shall not close its books against the transfer
of Series A Preferred or of Common issued or issuable upon
conversion of Series A Preferred in any manner that interferes
with the timely conversion of Series A Preferred. The
Corporation shall assist and cooperate with any holder of
shares of Series A Preferred required to make any governmental
filings or obtain any governmental approval prior to or in
connection with any conversion of shares hereunder (including,
without limitation, making any filings required to be made by
the Corporation).
(vii) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common, solely
for the purpose of issuance upon the conversion of shares of
the Series A Preferred, such number of shares of Common as are
issuable upon the conversion of all outstanding Series A
Preferred. All shares of Common that are so issuable shall,
when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens, charges and
encumbrances. The Corporation shall take all such actions as
may be necessary to insure that all such shares of Common may
be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common may be listed
(except for official notice of issuance which shall be
delivered immediately by the Corporation upon each such
issuance). The Corporation shall not take any action that
would cause the number of authorized but unissued shares of
Common to be less than the number of such shares required to
be reserved hereunder for issuance upon conversion of the
Series A Preferred.
(viii) If any fractional interest in a share of Common would, except
for the provisions of this subparagraph, be delivered upon any
conversion of the Series A Preferred, the Corporation, in lieu
of delivering the fractional share therefor, may pay an amount
to
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the holder thereof equal to the Market Price of such
fractional interest as of the date of conversion. The
determination as to whether or not to make any cash payment in
lieu of the issuance of fractional shares shall be based upon
the total number of shares of Series A Preferred being
converted at any one time by the holder thereof, not upon each
share of Series A Preferred being converted.
b. Conversion Price.
(i) The initial Series A Conversion Price shall be $1.244 per
share of Common. In order to prevent dilution of the
conversion rights granted under this Section 4, the Series A
Conversion Price shall be subject to adjustment from time to
time pursuant to this Section 4.b.
(ii) If and whenever on or after the Original Series A Issuance
Date, but prior to June 30, 2003, the Corporation issues or
sells or, in accordance with this Section 4, is deemed to have
issued or sold, any shares of its Common for a consideration
per share less than the Series A Conversion Price in effect
immediately prior to the time of such issuance, then
immediately upon such issuance or sale or deemed issuance or
sale the Series A Conversion Price shall be reduced to the
conversion price determined by dividing (A) the sum of (1) the
product derived by multiplying the Series A Conversion Price
in effect immediately prior to such issuance or sale by the
number of shares of Common Deemed Outstanding immediately
prior to such issuance or sale, plus (2) the consideration, if
any, received by the Corporation upon such issuance or sale,
by (B) the number of shares of Common Deemed Outstanding
immediately after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no adjustment in
the Series A Conversion Price as a result of any issuance or
sale (or deemed issuance or sale) of shares of Common (a)
issued upon conversion of the Series A Preferred, (b) issued
as a dividend or distribution on the Series A Preferred for
which adjustment is made pursuant to Section 4.c(ix), (c)
issued or issuable pursuant to any equity incentive plan
approved by the Board or (d) issued or issuable pursuant to
any merger, acquisition or consolidation (including shares of
Common issued or issuable for cash if such cash is to be used
for any such merger, acquisition or consolidation) pursuant to
which the Corporation is a party (collectively, the "Excepted
Shares").
c. Effect on Conversion Price of Certain Events. For purposes of
determining the Series A Conversion Price under Section 4, the
following shall be applicable:
(i) Issuance of Options. If the Corporation in any manner grants,
issues or sells any Options (other than Options that are
convertible into Excepted Shares) and the price per share for
which Common is issuable upon the exercise of such Options, or
upon conversion or exchange of any Convertible Securities
issuable upon exercise of such Options, is less than the
Series A Conversion Price in effect immediately prior to the
time of the granting, issuance or sale of such Options, then
the total maximum number of shares of Common issuable upon the
exercise of such Options or upon
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conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such
Options shall be deemed to be outstanding and to have been
issued and sold by the Corporation at the time of the
granting, issuance or sale of such Options for such price per
share. For purposes of this paragraph, the "price per share
for which Common is issuable" shall be determined by dividing
(A) the sum of (1) the total amount, if any, received or
receivable by the Corporation as consideration for the
granting, issuance or sale of such Options, plus (2) the
minimum aggregate amount of additional consideration payable
to the Corporation upon exercise of all such Options, plus (3)
in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum
number of shares of Common issuable upon the exercise of such
Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Conversion Price shall
be made when Convertible Securities are actually issued upon
the exercise of such Options or when Common is actually issued
upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities (other than
Convertible Securities that are convertible into Excepted
Shares) and the price per share for which Common is issuable
upon conversion or exchange thereof is less than the Series A
Conversion Price in effect immediately prior to the time of
such issuance or sale, then the maximum number of shares of
Common issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of
the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this paragraph, the
"price per share for which Common is issuable" shall be
determined by dividing (A) the sum of (1) the total amount
received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus (2) the
minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common
issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Series A
Conversion Price shall be made when Common is actually issued
upon the conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such
Convertible Securities is made upon exercise of any Options
for which adjustments of the Series A Conversion Price had
been or are to be made pursuant to other provisions of this
Section 4, no further adjustment of the conversion price shall
be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase
price provided for in any Options (other than Options that are
convertible into Excepted Shares), the additional
consideration, if any, payable upon the conversion or exchange
of any Convertible Securities (other than Convertible
Securities that are convertible into Excepted Shares) or the
rate at which any Convertible Securities (other than
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Convertible Securities that are convertible into Excepted
Shares) are convertible into or exchangeable for Common
changes at any time, the Series A Conversion Price in effect
at the time of such change shall be immediately adjusted to
the Series A Conversion Price that would have been in effect
at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may
be, at the time initially granted, issued or sold; provided,
that, if such adjustment of the Series A Conversion Price
would result in an increase in the Series A Conversion Price
then in effect, the Corporation will promptly give all holders
of Series A Preferred written notice of such increase. For
purposes of this Section 4.c(iii), if the terms of any Option
or Convertible Security (other than Options or Convertible
Securities that are convertible into Excepted Shares) that was
outstanding as of the Original Series A Issuance Date are
changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the
Common deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of
such change; provided, that, no such change shall at any time
cause the Series A Conversion Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Security without the exercise of any such Option
or right, the Series A Conversion Price then in effect
hereunder shall be adjusted immediately to the Series A
Conversion Price that would have been in effect at the time of
such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided, that,
if such expiration or termination would result in an increase
in the Series A Conversion Price then in effect, the
Corporation will promptly give all holders of Series A
Preferred written notice of such increase. For purposes of
this Section 4.c(iv), the expiration or termination of any
Option or Convertible Security that was outstanding as of the
Original Series A Issuance Date shall not cause the Series A
Conversion Price hereunder to be adjusted unless, and only to
the extent that, a change in the terms of such Option or
Convertible Security caused it to be deemed to have been
issued after the Original Series A Issuance Date.
(v) Calculation of Consideration Received. If any Common, Option
or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the
Corporation therefor (net of discounts, commissions and
related expenses). If any Common, Option or Convertible
Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received
by the Corporation shall be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received
by the Corporation shall be the Market Price thereof as of the
date of receipt. If any Common, Option or Convertible Security
is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the
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fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common,
Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities
shall be determined by the Board in its reasonable and good
faith determination.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of
the Corporation, together comprising one integrated
transaction in which no specific exercise price is allocated
to such Option by the parties thereto, the Option shall be
deemed to have been issued at an exercise price of $0.01.
(vii) Treasury Shares. The number of shares of Common outstanding at
any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any
shares so owned or held shall be considered an issuance or
sale of such shares.
(viii) Record Date. If the Corporation takes a record of the holders
of Common for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common, Options or
in Convertible Securities or (B) to subscribe for or purchase
Common, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of
the shares of Common deemed to have been issued or sold upon
the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(ix) Subdivisions or Combinations of Common. If the Corporation at
any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common into a greater number of shares,
the Series A Conversion Price in effect immediately prior to
such subdivision shall be reduced proportionately, and if the
Corporation at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of
Common into a smaller number of shares, the Series A
Conversion Price in effect immediately prior to such
combination shall be increased proportionately.
(x) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Corporation's assets or
other transaction, in each case which is effected in such a
manner that the holders of Common are entitled to receive
(either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for
Common, and which does not otherwise qualify as a Liquidation
Event, is referred to herein as an "Organic Change." Prior to
the consummation of any Organic Change, the Corporation shall
make appropriate provisions (in form and substance reasonably
satisfactory to the holders of a majority of the Series A
Preferred then outstanding) to insure that each of the holders
of Series A Preferred shall thereafter have the right to
acquire and receive, in lieu of or in addition to (as the case
may be) the shares of Common immediately theretofore
acquirable and receivable
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upon the conversion of such holder's Series A Preferred, such
shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such
holder had converted its Series A Preferred immediately prior
to such Organic Change. In each such case, the Corporation
shall also make appropriate provisions (in form and substance
reasonably satisfactory to the holders of a majority of the
Series A Preferred then outstanding) to insure that the
provisions of this Section 4.c shall thereafter be applicable
to the securities issued in exchange for the Series A
Preferred (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing
entity is other than the Corporation and the value for the
Common reflected by the terms of such consolidation, merger or
sale is less than the Series A Conversion Price in effect
immediately prior to such consolidation, merger or sale, an
immediate adjustment of the Series A Conversion Price to the
value for the Common so reflected and a corresponding
immediate adjustment in the number of shares of Common
acquirable and receivable upon conversion of Series A
Preferred). The Corporation shall not effect any such
consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the
Corporation) resulting from consolidation or merger or the
entity purchasing such assets assumes by written instrument
(in form and substance satisfactory to the holders of a
majority of the Series A Preferred then outstanding) the
obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(xi) Certain Other Events. If any event occurs of the type
contemplated by the provisions of this Section 4 but not
expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then the
Board shall make an appropriate adjustment in the Series A
Conversion Price so as to protect the rights of the holders of
Series A Preferred; provided, that, no such adjustment shall
increase the Series A Conversion Price as otherwise determined
pursuant to this Section 4 or decrease the number of shares of
Common issuable upon conversion of each share of Series A
Preferred.
d. Notices.
(i) Immediately upon any adjustment of the Series A Conversion
Price, the Corporation shall give written notice thereof to
all holders of Series A Preferred, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders of
Series A Preferred at least ten (10) days prior to the date on
which the Corporation closes its books or takes a record (A)
with respect to any dividend or distribution upon Common, (B)
with respect to any pro rata subscription offer to holders of
Common or (C) for determining rights to vote with respect to
any Liquidation Event, Organic Change, dissolution or
liquidation.
(iii) The Corporation shall also give written notice to the holders
of Series A Preferred
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at least ten (10) days prior to the date on which any Organic
Change or Liquidation Event shall take place.
5. Preemptive Right.
a. If the Corporation proposes to issue or sell any securities, the
Corporation shall, as soon as practicable and in any event no later
than 30 days after the consummation of such transaction, deliver a
notice to each of the holders of the Series A Preferred stating (i)
a description of the transaction pursuant to which it issued such
securities; (ii) the number of such securities; (iii) the price, if
any, for which it sold such securities; and (iv) the identity of the
proposed purchaser(s).
b. Each holder of Series A Preferred may elect, by giving notice to the
Corporation within 15 days after receipt of the notice referenced
above, to purchase, at the same price and on the same terms and
conditions as the issuance or sale described in such notice, the
number of securities equal to the product of (i) the aggregate
number of securities issued or sold by the Corporation multiplied by
(ii) a fraction with a numerator equal to the number of shares of
Common (on a Common Equivalent Basis) that such holder owns and a
denominator equal to the number of Common Deemed Outstanding prior
to the issuance of such securities.
c. The preemptive right set forth in this Section 5 shall not apply to
Excepted Shares.
6. General.
a. Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any
certificate evidencing shares of Common or Series A Preferred, and
in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional
investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the
number of shares of such class represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall
accrue on the Common or Series A Preferred represented by such new
certificate from the date to which dividends have been fully paid on
such lost, stolen, destroyed or mutilated certificate.
b. Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage
prepaid, by reputable overnight courier service, charges prepaid or
by personal delivery, and shall be deemed to have been given (i)
three (3) business days after being sent by registered or certified
mail, (ii) one (1) business day after being deposited with such an
overnight courier service, and (iii) upon delivery, if by personal
delivery, if mailed or delivered (A) to the Corporation, at its
principal executive offices, or (B) to any stockholder, at such
holder's address as it appears in the stock records of the
Corporation (unless otherwise indicated by any such holder).
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c. Each share of Series A Preferred shall have the same relative rights
as and be identical in all respects with each other share of Series
A Preferred.
7. Definitions.
"Board" means the Board of Directors of the Corporation.
"By-laws" means the By-laws of the Corporation, as they may be
amended from time to time.
"Certificate of Designation" means this Series A Preferred
Certificate of Designation.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Corporation, as it may be amended from time to time.
"Common" means the Corporation's Common Stock, $.0001 par value per
share.
"Common Deemed Outstanding" means, at any given time, the number of
shares of Common actually outstanding at such time, plus the number of shares of
Common deemed to be outstanding pursuant to Sections 4.c(i) and 4.c(ii) whether
or not the Options or Convertible Securities are actually convertible or
exercisable at such time.
"Common Equivalent Basis" means, as of the date of such
determination, the number of shares of Common that each holder of Series A
Preferred would be entitled to receive upon conversion of its Series A Preferred
into Common.
"Conversion Date" is defined in Section 4.a(iii).
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common.
"Corporation" means AdStar, Inc., a Delaware corporation.
"Excepted Shares" is defined in Section 4.b(iii).
"Governance Agreement" means the Governance Agreement, dated as of
March 15, 2002, among the Corporation, the Investor and the stockholders of the
Corporation named therein.
"Investor" means Tribune Company, a Delaware corporation.
"Liquidation Event" has the meaning given such term in Section 3.a
above.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the Nasdaq Stock Market as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the Nasdaq
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Stock Market, the average of the highest bid and lowest asked prices on such day
in the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 30 days consisting of the day as of which "Market
Price" is being determined and the 29 consecutive business days prior to such
day. If at any time such security is not listed on any securities exchange or
quoted in the Nasdaq Stock Market or the over-the-counter market, the "Market
Price" shall be the fair value thereof determined jointly by the Corporation and
the holders of a majority of the Series A Preferred.
"Options" means any rights, warrants or options to subscribe for or
purchase Common or Convertible Securities.
"Organic Change" is defined in Section 4.c(x).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Series A Conversion Price" has the meaning given such term in
Section 4.b.
"Series A Junior Securities" means any of the Corporation's equity
securities (whether or not currently authorized or outstanding) other than the
Series A Preferred that by its terms is junior to the Series A Preferred.
"Series A Liquidation Value" means $1.244 per share of Series A
Preferred (subject to equitable adjustments to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences).
"Series A Original Issuance Date" means the date of the original
issuance of Series A Preferred.
"Series A Preferred" means the Series A Convertible Preferred Stock
of the Corporation, $.0001 par value per share.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 15th day of March, 2002.
ADSTAR, INC.
By: /s/ Leslie Bernhard
------------------------------------
Name: Leslie Bernhard
Title: President and Chief Executive
Officer