Exhibit 3.1
CERTIFICATE OF CORRECTION OF RESTATED
CERTIFICATE OF INCORPORATION
OF eGAIN COMMUNICATIONS CORPORATION
eGain Communications Corporation, a Delaware corporation, pursuant to
Section 103(f) of the General Corporation Law of the State of Delaware, hereby
certifies that:
1. The Amended and Restated Certificate of Incorporation of eGain
Communications Corporation, which was filed with the Secretary of State of the
State of Delaware on February 13, 2001, is an inaccurate record of the corporate
action therein referred to.
2. Said Amended and Restated Certificate of Incorporation is incorrect in
that it inadvertently deleted the rights, preferences and privileges of the
Corporation's outstanding preferred stock contained in (i) the Certificate of
Designation of 6.75% Series A Cumulative Convertible Preferred Stock of eGain
Communications Corporation filed with the Secretary of State of the State of
Delaware on August 21, 2000, (ii) the Certificate of Designation of 6.75% Series
B Cumulative Convertible Preferred Stock of eGain Communications Corporation
filed with the Secretary of State of the State of Delaware on August 21, 2000,
and (iii) the Certificate of Designation of Series C Cumulative Redeemable
Preferred Stock of eGain Communications Corporation filed with the Secretary of
State of the State of Delaware on August 21, 2000.
3. Article IV, the Amended and Restated Certificate of Incorporation in
correct form is as follows:
"ARTICLE IV
A. The Corporation is authorized to issue two classes of stock to be
designated respectively Preferred Stock ("Preferred Stock") and Common Stock
("Common Stock"). The total number of shares of capital stock this Corporation
is authorized to issue one hundred five million (105,000,000). The total number
of shares of Preferred Stock this Corporation shall have authority to issue is
five million (5,000,000). The total number of shares of Common Stock this
Corporation shall have authority to issue is one hundred million (100,000,000).
The Preferred Stock shall have a par value of $.001 per share and the Common
Stock shall have a par value of $.001 per share.
B. The Board of Directors of the Corporation has previously authorized
three series of Preferred Stock pursuant to the attached (i) Certificate of
Designation of 6.75% Series A Cumulative Convertible Preferred Stock of eGain
Communications Corporation, (ii) Certificate of Designation of 6.75% Series B
Cumulative Convertible Preferred Stock of eGain
-1-
Communications Corporation and (iii) Certificate of Designation of Series C
Cumulative Redeemable Preferred Stock of eGain Communications Corporation.
C. The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is expressly authorized to provide for the
issue of all or any of the remaining shares of the Preferred Stock in one or
more series, and to fix the number of shares and to determine or alter for each
such series, such voting powers, full or limited, or no voting powers, and such
designations, preferences, and relative, participating, optional, or other
rights and such qualifications, limitations, or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such shares (a "Preferred Stock
Designation") and as may be permitted by the General Corporation Law of the
State of Delaware. The Board of Directors is also expressly authorized to
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series. In case the number of shares of any such series shall be
so decreased, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the numbers
of shares of such series."
4. The Amended and Restated Certificate of Incorporation in correct form
should include the Certificates of Designation attached hereto as Exhibit A,
---------
Exhibit B and Exhibit C.
--------- ---------
IN WITNESS WHEREOF, eGain Communications Corporation, has caused this
Certificate of Correction to be signed by Ashutosh Roy, its Chief Executive
Officer, this 26th day of September, 2001.
eGAIN COMMUNICATIONS CORPORATION
By /s/ Ashutosh Roy
------------------------------------------------------
Ashutosh Roy
Chief Executive Officer
-2-
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION
OF 6.75% SERIES A CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
eGAIN COMMUNICATIONS CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
eGAIN COMMUNICATIONS CORPORATION, a corporation organized under the laws of
the State of Delaware (the "Corporation"), certifies that, pursuant to the
authority contained in its Amended and Restated Certificate of Incorporation,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors has adopted the following
resolution creating a series of its Preferred Stock, $.001 par value per share,
designated 6.75% Series A Cumulative Convertible Preferred Stock:
RESOLVED, that the series of authorized Preferred Stock, par value $.001
per share, designated 6.75% Series A Cumulative Convertible Preferred Stock of
the Corporation be hereby created, and that the designations and amounts thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
A. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section E; and
B. The Corporation shall have authority to issue 890 shares of 6.75% of
Series A Cumulative Convertible Preferred Stock, $.001 par value per share (the
"Convertible Preferred Stock").
C. The voting powers, preferences and relative, participating, optional and
other special rights of the shares of the Convertible Preferred Stock, and the
qualifications, limitations and restrictions thereof are as follows:
1. Ranking. The Convertible Preferred Stock shall, with respect to
-------
dividend rights and rights on liquidation, dissolution or winding up, rank pari
passu with the Corporation's Series B Cumulative Convertible Preferred Stock
(the "Series B Preferred Stock"), and rank senior to all other equity securities
of the Corporation, and any other series or class of the Corporation's preferred
stock, common stock or other capital stock, now or hereafter authorized.
2. Accretion of Liquidation Value; Dividends and Distributions. The
-----------------------------------------------------------
Liquidation Value of the Convertible Preferred Stock shall increase, and the
holders of shares of Convertible
Preferred Stock shall be entitled to receive dividends, as, when and if declared
by the Board of Directors out of funds legally available therefor ("Legally
Available Funds"), as follows:
(a) Accretion of Liquidation Value. The Liquidation Value of each share of
------------------------------
Convertible Preferred Stock shall increase and accumulate on a daily basis
(whether or not declared) from the Agreement Date at an annual rate equal to
6.75% of the Stated Value thereof, from the Agreement Date to the first
Compounding Date (as defined below), and thereafter of the Liquidation Value as
of the most recent Compounding Date, calculated on the basis of a 365-day year,
and shall compound on a semi-annual basis on June 30 and December 31 of each
year (each, a "Compounding Date"), whether or not declared. The cumulative
amount by which the Liquidation Value is increased pursuant to this Section
C(2)(a) shall be referred to as the "Accreted Amount."
(b) Participating Dividends. If the Board of Directors of the Corporation
-----------------------
shall declare a dividend or make any other distribution (including in cash or
other property or assets), to holders of shares of Common Stock, other than a
dividend payable solely in shares of Common Stock, then the holders of each
share of Convertible Preferred Stock shall be entitled to receive, out of
Legally Available Funds, a dividend or distribution in an amount equal to the
amount of such dividend or distribution received by a holder of the number of
shares of Common Stock for which such share of Convertible Preferred Stock is
convertible on the record date for such dividend or distribution. Any such
amount shall be paid to the holders of shares of Convertible Preferred Stock at
the same time such dividend or distribution is made to holders of Common Stock.
Dividends payable pursuant to this Section C(2)(b) shall be payable in the same
form paid to the holders of the Common Stock. The Board of Directors may fix a
record date for the determination of holders of shares of Convertible Preferred
Stock entitled to receive payment of any dividends payable pursuant to this
Section C(2)(b), which record date shall not be more than 60 days nor less than
10 days prior to the applicable dividend payment date. Upon the occurrence of
either (i) a consolidation, merger or other business combination or
recapitalization or refinancing of the Corporation resulting in the holders of
the issued and outstanding voting securities of the Corporation immediately
prior to such transaction owning or controlling less than a majority of the
voting securities of the continuing or surviving entity immediately following
such transaction, or (ii) a sale, lease, exchange, transfer or other disposition
(including by merger, consolidation or otherwise) of assets constituting all or
substantially all of the assets of the Corporation and its Subsidiaries, taken
as a whole, to a Person or group of Persons, all unpaid accrued or accumulated
dividends on Convertible Preferred Stock shall be immediately due and payable.
(c) Dividends Pro Rata. All dividends paid with respect to shares of
------------------
Convertible Preferred Stock shall be paid pro rata to the holders entitled
thereto. If the Legally Available Funds shall be insufficient for the payment of
the entire amount of cash dividends payable at any dividend payment date, such
funds shall be allocated pro rata for the payment of dividends with respect to
the shares of Convertible Preferred Stock based upon the aggregate Liquidation
Value of the outstanding shares of Convertible Preferred Stock.
3. Voting Rights. Except as required by law or by this Section C(3), the
-------------
holders of the Convertible Preferred Stock shall not be entitled to vote on any
matter voted on by the Stockholders of the Corporation. None of the following
actions may be taken, directly or
indirectly, by the Corporation or any of its Subsidiaries, without the approval
of the holders of at least 66% of all issued and outstanding shares of
Convertible Preferred Stock, voting in person or by proxy, at a special or
annual meeting called for the purpose or by written consent:
(a) The adoption of an amendment, restatement or modification of the
Amended and Restated Certificate of Incorporation, By-laws, certificates of
designation or other governance documents which would change or otherwise
adversely affect the rights of the holders of the Convertible Preferred Stock;
(b) The authorization, creation or issuance of any shares of capital stock
or other equity or equity-linked securities which are ranked prior to, or are
pari passu with, the Convertible Preferred Stock (except for up to 850 shares of
Series B Preferred Stock); and
(c) The issuance of Equity Equivalents prior to the Requisite Shareholder
Approval, if such issuance, but for the Conversion Price limitation set forth in
Section C(5)(c)(iii), would cause the Conversion Price to be reduced to an
amount less than $5.6875 (as adjusted for stock dividends, stock splits,
combinations and the like pursuant to Section 5(c)(ii)).
So long as there is a Majority Shareholder, any of the actions set forth in
Section C(3) must also be approved by a majority of the issued and outstanding
shares of Convertible Preferred Stock, excluding the shares and vote of the
Majority Shareholder, voting in person or by proxy at a special or annual
meeting called for the purpose or by written consent.
4. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Common Stock or of any other capital stock ranking in any such
event junior to the Convertible Preferred Stock, the holders of shares of
Convertible Preferred Stock shall be entitled to be paid the greater of: (i) the
Liquidation Value, or (ii) an amount equal to the amount that the holders of
shares of Convertible Preferred Stock would be entitled to receive in connection
with such liquidation, dissolution or winding up if all of the holders of
Convertible Preferred Stock had converted their shares into Common Stock
immediately prior to any relevant record date or payment in connection with such
liquidation, dissolution or winding up.
(b) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Convertible 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
the Convertible 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.
(c) A consolidation, merger or other business combination of the
Corporation resulting in the holders of the issued and outstanding voting
securities of the Corporation immediately prior to such transaction owning or
controlling a majority of the voting securities of the continuing or surviving
entity immediately following such transaction shall not be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section C(4) (unless in connection therewith the liquidation of the
Corporation is specifically approved).
5. Conversion.
----------
(a) Stockholders Right to Convert. Each share of the Convertible Preferred
-----------------------------
Stock shall be convertible at any time, at the option of the holder thereof,
into validly issued, fully paid and non-assessable shares of the Common Stock
("Conversion Shares") at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. The Conversion Price shall be
initially $9.2517 per share. The number of Conversion Shares issuable upon
conversion of a share of Convertible Preferred Stock is determined by dividing
the Liquidation Value (inclusive of any accrued and unpaid dividends) of a share
of Convertible Preferred Stock by the Conversion Price in effect on the
Conversion Date (as hereinafter defined) and rounding the result to the nearest
1/100th of a share. The Conversion Price shall be subject to adjustment as
provided in Section C(5)(c) below. If a holder converts more than one share of
Convertible Preferred Stock at the same time, the number of Conversion Shares
issuable upon the conversion shall be based upon the total number of shares of
Convertible Preferred Stock converted.
(b) Conversion Process. In order to convert shares of the Convertible
------------------
Preferred Stock into Conversion Shares, the holder thereof shall surrender at
the office of any transfer agent for the Convertible Preferred Stock (or in the
absence of any transfer agent, the Corporation) the certificate or certificates
therefor, duly endorsed to the Corporation or in blank, and give written notice
to the Corporation at said office that he or she elects to convert such shares.
Shares of the Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date of surrender of such
shares for conversion in accordance with the foregoing provisions (the
"Conversion Date"), and the person or persons entitled to receive Conversion
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Conversion Shares at such time. As promptly as
practicable after the Conversion Date, but in any event within five (5) Business
Days after the Conversion Date, the Corporation shall issue and deliver at said
office the certificate or certificates for the number of full Conversion Shares
issuable upon such conversion, together with a cash payment in lieu of any
fraction of a Conversion Share, as hereinafter provided, to the person or
persons entitled to receive the same or to the nominee or nominees of such
person or persons.
(c) Conversion Price Adjustments. The Conversion Price shall be subject to
----------------------------
adjustment as follows:
(i) If 122% of the average closing bid price per share of Common
Stock quoted on NASDAQ or, if not then traded on NASDAQ, such other
exchange, market or system on which the Common Stock is then listed or
traded, on the twenty (20) consecutive trading days immediately preceding
and including the first anniversary of the Agreement Date (the "Market
Value") is less than the Conversion Price, the Conversion Price shall be
adjusted to the greater of (x) 122% of the Market Value, and (y) $5.6875
(as adjusted below).
(ii) In case the Corporation shall (1) pay a dividend in shares of
Common Stock to holders of Common Stock, (2) make a distribution in shares
of
any class of its capital stock to all holders of Common Stock, (3)
subdivide any of its outstanding Common Stock into a greater number of
shares, or (4) combine any of its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior thereto
shall be adjusted so that the holder of any shares of Convertible Preferred
Stock thereafter surrendered for conversion shall be entitled to receive
that number of Conversion Shares representing the percentage of all
outstanding shares of Common Stock which the holder of the Convertible
Preferred Stock would have owned had such Convertible Preferred Stock been
converted immediately prior to the happening of such event and the
Conversion Price shall be adjusted accordingly. An adjustment made pursuant
to this subsection (ii) shall become effective immediately after the record
date in the case of a dividend in shares or distribution and shall become
effective immediately after the effective date in the case of subdivision
or combination.
(iii) In case the Corporation shall issue Common Stock, rights,
warrants, options or other convertible securities representing the right to
acquire Common Stock (collectively, including the Common Stock, "Equity
Equivalents") to all or substantially all holders of any class of its
Common Stock or to any other person entitling such person or persons to
subscribe for, purchase or otherwise acquire shares of Common Stock (or
securities in any manner representing the right to acquire Common Stock) at
a price per share that is less than the then Current Market Price per share
of Common Stock (as determined in accordance with subsection (v) below), at
the record date for the determination of shareholders entitled to receive
such Equity Equivalents on the date of issuance thereof or, with respect to
issuances to persons other than holders of Convertible Preferred Stock, on
the issue date, as applicable, the Conversion Price in effect immediately
prior thereto shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to such record date or issue date, as applicable, by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding on
such record date or issue date, as applicable, plus the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be offered (or the aggregate
conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price (as defined in subsection (v) below),
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date or issue date, as applicable, plus the
number of additional shares of Common Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
convertible). Such adjustment shall be made successively whenever any
Equity Equivalents are issued, and shall become effective immediately after
such record date or such sale date, as applicable. Notwithstanding the
foregoing, unless the Requisite Shareholder Approval has previously been
obtained, the Conversion Price may not be adjusted pursuant to this Section
C(5)(iii) to an amount less than $5.6875 per share (adjusted for stock
dividends, stock splits, combinations and the like pursuant to subsection
(ii) above). In case the price for subscription or purchase may be paid in
a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be determined in good faith by the Board
of Directors of the Corporation and shall be that value which is agreed
upon by at least 66% of the members thereof; provided, that if the holders
--------
of a majority of the shares of Convertible Preferred Stock object to such
valuation as determined by the Board of Directors within fifteen (15) days
of receipt of written notice of such valuation or, if such percentage of
the members of the Board of Directors of the Corporation are unable to
agree upon the value of such consideration, the value thereof shall be
determined by an independent investment bank of nationally recognized
stature that is selected by a majority of the members of the Board of
Directors. If at the end of the period during which such Equity Equivalents
are exercisable not all such Equity Equivalents shall have been exercised,
the adjusted Conversion Price shall be readjusted to what it would have
been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(iv) In case the Corporation shall distribute to all or substantially
all holders of any class of Common Stock any shares of capital stock of the
Corporation (other than Common Stock), evidences of indebtedness or other
non-cash assets (including securities of any company other than the
Corporation), or shall distribute to all or substantially all holders of
any class of Common Stock rights or warrants to subscribe for or purchase
any of its securities (excluding those referred to in subsection (iii)
above), then in each such case for the purpose of this subsection (iv), the
holders of the Convertible Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the
holders of the number of shares of Common Stock of the Corporation into
which their shares of Convertible Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution.
(v) For the purpose of any computation under subsection (iii) of
this Section C(5)(c), the current market price (the "Current Market Price")
with respect to shares of Common Stock on any date shall be deemed to be
equal to the average of the closing bid prices per share of the Common
Stock on NASDAQ or, if not then listed or traded on NASDAQ, such other
exchange, market or system that the Common Stock is then listed or traded
on, for the 20 consecutive trading days immediately prior to and including
the record date or date of issuance with respect to distributions,
issuances or other events requiring such computation under subsection (iii)
above. If on any such date the shares of such Common Stock are not listed
or admitted for trading on any national securities exchange or quoted on
NASDAQ or a similar service, the Current Market Price for such shares shall
be the fair market value of such shares on such date as determined in good
faith by the Board of Directors of the Corporation and shall be the value
which is agreed upon by at least 66% of the members thereof, or if such
percentage of the members of the Board of Directors of the Corporation are
unable to agree upon the value of such consideration, the value thereof
shall be determined by an
independent investment bank of a nationally recognized stature that is
selected by the holders of a majority of the outstanding shares of
Convertible Preferred Stock and the Corporation.
(vi) Certain Exceptions to Anti-Dilution Provisions. There shall be
----------------------------------------------
no adjustment of the Conversion Price pursuant to Section C(5)(c)(iii) in
the case of Common Stock or securities convertible into or exchangeable for
Common Stock to be issued (1) to an employee, consultant, officer or
director of the Corporation pursuant to any stock-based incentive plan that
has been duly approved by the Corporation's Board of Directors (including
the Employee Stock Purchase Plan), (2) as part of any arm's length
commercial agreement approved by the Board of Directors, so long as such
issuance (on an as converted basis) is no greater than 1% of the issued and
outstanding (non-diluted) shares of Common Stock, and all such issuances in
the aggregate are no greater than 5% of the issued and outstanding
(non-diluted) shares of Common Stock, each as in effect immediately prior
to such issuance, (3) as part of an underwritten public offering or (4)
upon conversion of the Convertible Preferred Stock or upon exercise of the
Warrants.
(vii) Amendment/Modification to Other Securities. Not withstanding any
------------------------------------------
provision in Section C(5)(c) to the contrary and without limitation to any
other provision contained in Section C(5)(c), in the event any securities
of the Corporation (other than the Convertible Preferred Stock, and those
securities set forth as exceptions in Section C(5)(c)(vi)(1))
(collectively, the "Subject Securities"), are amended or otherwise modified
by operation of their terms or otherwise (including by operation of such
Subject Securities' anti-dilution provisions) in any manner that results in
(i) the reduction of the exercise, conversion or exchange price of such
Subject Securities payable upon the exercise for, or conversion or exchange
into, Common Stock or other securities exercisable for, or convertible or
exchangeable into, Common Stock and/or (ii) such Subject Securities
becoming exercisable for, or convertible or exchangeable into (A) more
shares or dollar amount of such Subject Securities which are, in turn
exercisable for, or convertible or exchangeable into, Common Stock, or (B)
more shares of Common Stock, then such amendment or modification shall be
treated for purposes of Section C(5)(c) as if the Subject Securities which
have been amended or modified have been terminated and new securities have
been issued with the amended or modified terms. The Corporation shall make
all necessary adjustments (including successive adjustments if required) to
the Conversion Price in accordance with Section C(5)(c), but in no event
shall the Conversion Price be greater than it was immediately prior to the
application of this Subsection to the transaction in question. On the
expiration or termination of any such amended or modified Subject
Securities for which adjustment has been made pursuant to the operation of
the provisions of this Subsection under Section C(5)(c)(iii), without such
Subject Securities having been exercised, converted or exchanged in full
pursuant to their terms, the Conversion Price shall be appropriately
readjusted in the manner specified in such Section.
(d) De Minimis Adjustments. No adjustment of the Conversion Price shall be
----------------------
made if the amount of such adjustment would result in a change in the Conversion
Price per share of less than $.01, but in such case any adjustment that would
otherwise be required to be made shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment, which together
with any adjustment so carried forward, would result in a change in the
Conversion Price of $.01 or more per share. Notwithstanding the provisions of
the first sentence of this Section C(5)(d), any adjustment postponed pursuant to
this Section C(5)(d) shall be made no later than the earlier of (i) three years
from the date of the transaction that would, but for the provisions of the first
sentence of this Section C(5)(d), have required such adjustment and (ii)
immediately prior to the date of any conversion of shares of Convertible
Preferred Stock.
(e) Fractional Shares. Notwithstanding any other provision of the
-----------------
Certificate of Incorporation (including this Certificate of Designation), the
Corporation shall not be required to issue fractions of shares of Common Stock
upon conversion of any shares of Convertible Preferred Stock or to distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares, the Corporation may pay therefor, at the time of any
conversion of shares of Convertible Preferred Stock as herein provided, an
amount in cash equal to such fraction multiplied by the Current Market Price of
a share of Common Stock.
(f) Reorganization, Reclassification, Merger and Sale of Assets
-----------------------------------------------------------
Adjustment. If there occurs any capital reorganization or any reclassification
----------
of the Common Stock (other than a change for which an adjustment is provided in
Section C(5)(c)(ii), (iii) or (iv) above), the consolidation or merger of the
Corporation with or into another Person (other than a merger or consolidation of
the Corporation in which the Corporation is the continuing corporation and which
does not result in any reclassification or change of outstanding shares of
Common Stock) or the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation to another Person (each an "Extraordinary
Transaction"), then, at the option of the holder of the Convertible Preferred
Stock, either:
(i) each share of Convertible Preferred Stock shall thereafter
be convertible into the same kind and amounts of securities (including
shares of stock) or other assets, or both, which were issuable or
distributable to the holders of outstanding Common Stock upon such
reorganization, reclassification, consolidation, merger, sale or
transfer, in respect of that number of shares of Common Stock into
which such share of Convertible Preferred Stock might have been
converted immediately prior to such reorganization, reclassification,
consolidation, merger, sale or transfer; and, in any such case,
appropriate adjustments (as determined in good faith by the Board of
Directors of the Corporation) shall be made to assure that the
provisions set forth herein shall thereafter be applicable, as nearly
as reasonably may be practicable, in relation to any securities or
other assets thereafter deliverable upon the conversion of the
Convertible Preferred Stock. If, in the case of any such
consolidation, merger, sale or transfer, the stock or other securities
and property (including cash) receivable thereupon by a holder of
Convertible Preferred Stock include shares of stock or other
securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation,
merger, sale or transfer, then effective provision shall also be made
in the certificate of incorporation of such other
corporation or otherwise of such additional antidilution provisions as
are necessary to protect the interests of the holders of the
Convertible Preferred Stock by reason of the foregoing; or
(ii) each holder of the Convertible Preferred Stock may convert
its Convertible Preferred Stock into validly issued, fully paid and
non-assessable shares of Common Stock immediately prior to the closing
of such consolidation, merger, sale or conveyance (the "Transaction
Closing Date") such conversion to be calculated by dividing the
Liquidation Value as of the later of (x) the Transaction Closing Date
or (y) the third anniversary of the Agreement Date, by the applicable
Conversion Price.
The provisions of Section C(5)(f)(i) shall similarly apply to successive
consolidations, mergers, sales or transfers.
(g) Certificate as to Adjustments. Whenever the number of shares of Common
-----------------------------
Stock issuable, or the securities or other property deliverable upon the
conversion of the Convertible Preferred Stock, shall be adjusted pursuant to the
provisions hereof, the Corporation shall promptly give written notice thereof to
each holder of shares of Convertible Preferred Stock at such holder's address as
it appears on the transfer books of the Corporation and shall forthwith file, at
its principal executive office and with any transfer agent or agents for the
Convertible Preferred Stock and the Common Stock, a certificate, signed by the
President or one of the Vice Presidents of the Corporation, and by its Chief
Financial Officer, its Treasurer or one of its Assistant Treasurers, stating the
number of shares of Common Stock issuable, or the securities or other property
deliverable, per share of Convertible Preferred Stock converted, calculated to
the nearest cent or to the nearest one one-hundredth of a share and setting
forth in reasonable detail the method of calculation and the facts requiring
such adjustment and upon which such calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
(h) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available for issuance upon the conversion of the shares of
Convertible Preferred Stock the maximum number of each of its authorized but
unissued shares of Common Stock as is reasonably anticipated to be sufficient to
permit the conversion of all outstanding shares of Convertible Preferred Stock
into Common Stock and shall take all action required 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 Convertible Preferred Stock.
(i) No Conversion Charge or Tax. The issuance and delivery of certificates
---------------------------
for shares of Common Stock upon the conversion of shares of Convertible
Preferred Stock shall be made without charge to the holder of shares of
Convertible Preferred Stock for any issue or transfer tax, or other incidental
expense in respect of the issuance or delivery of such certificates or the
securities represented thereby, all of which taxes and expenses shall be paid by
the Corporation.
(j) No Amendment of Certificate of Incorporation. The Corporation will
--------------------------------------------
not, by amendment of its Amended and Restated Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any term of the Amended and Restated
Certificate of Incorporation, but will at all times in good faith assist in
carrying out of all such terms and in taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of
Convertible 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
Convertible Preferred Stock, (b) will at all times reserve and keep available
the maximum number of its authorized shares of Common Stock, free from all
preemptive rights therein, which will be sufficient to permit the full
conversion of the outstanding Convertible Preferred Stock, and (c) will take
such action as may be necessary or appropriate in order that all shares of
Common Stock as may be issued pursuant to the conversion of the Convertible
Preferred Stock will, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof.
(k) Notice of Certain Events. In case at any time prior to the conversion
------------------------
of all of the Convertible Preferred Stock:
(i) the Corporation shall authorize the granting to all the holders
of Common Stock of rights to subscribe for or purchase any shares of stock
of any class or of any other rights; or
(ii) there shall be any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
Common Stock); or
(iii) there shall be any capital reorganization by the Corporation; or
(iv) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and shareholders of
the Corporation must approve the transaction; or
(v) there shall be voluntary or involuntary dissolution, liquidation
and winding up by the Corporation or dividend or distribution to holders of
Common Stock; or
(vi) any other event described in Section C(5)(c);
(vii) then in any one or more of said cases, the Corporation shall
cause to be delivered to the holders of Convertible Preferred Stock, at the
earliest practicable time (and, in any event, not less than twenty (20)
days before any record date or the date set for definitive action), written
notice of the date on which the books of the Corporation shall close or a
record shall be taken for such dividend, distribution or subscription
rights or such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up or other transaction shall take place, as the
case may be. Such notice shall also set forth such facts as
shall indicate the effect of such action (to the extent such effect may be
known at the date of such notice) on the Conversion Price and the kind and
amount of the shares of stock and other securities and property deliverable
upon conversion of the Convertible Preferred Stock. Such notice shall also
specify the date, if known, as of which the holders of record of the Common
Stock shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their shares of the Common Stock
for securities or other property (including cash) deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up or other transaction, as the case may be.
6. Conversion at the Option of the Corporation.
-------------------------------------------
(a) Subject to the conditions set forth below, any or all of the
Convertible Preferred Stock shall be convertible, at the option of the
Corporation, into validly issued, fully paid and non-assessable shares of Common
Stock, converted in accordance with Section C(5) mutatis mutandis, at any time
following the third anniversary of the Agreement Date, if (but only if):
(i) the closing bid price per share of Common Stock on NASDAQ, or if
not then listed on NASDAQ, such other exchange or market that the Common
Stock is listed or traded on, on twenty (20) of the thirty (30) consecutive
trading days prior to the day on which the Required Conversion Notice (as
defined below) is sent to holders of the Convertible Preferred Stock equals
or is greater than 250% of the initial Conversion Price (as adjusted
pursuant to Section C(5)(c)(ii) - (vii)); and
(ii) a registration statement covering the resale of the Convertible
Preferred Stock and the Conversion Shares is effective and has been
effective for a minimum of three months; and
(iii) the Common Stock has been listed on a national market or
exchange since the effective date of such registration statement, and
delisting or suspension has not been threatened; and
(iv) from the Agreement Date through the date on which the
Corporation exercises its option to require the conversion of the
Convertible Preferred Stock (the "Required Conversion Date"), there has not
been a public announcement of a pending Extraordinary Transaction; and
(v) the Corporation has at all times complied with the terms of this
Certificate of Designation and timely delivered Common Stock upon
conversion of the Convertible Preferred Stock and exercise of the related
Warrants from the Agreement Date through the Required Conversion Date; and
(vi) on or before November 30, 2000, the Corporation obtained all
stockholder approval required pursuant to any state or federal law and the
Requisite Shareholder Approval.
(b) In order to exercise its right to require conversion, the Corporation
shall send a notice to the holders of the Convertible Preferred Stock in
accordance with Section D(1), stating the number of shares of Convertible
Preferred Stock to be converted and the exercise date (the "Required Conversion
Exercise Date") of such conversion (the "Required Conversion Notice"), the
notice to be sent a minimum of twenty (20) Business Days prior to such exercise
date.
(c) On the Required Conversion Exercise Date, (i) the Corporation shall
issue and deliver to the office of the transfer agent for its Convertible
Preferred Stock the certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion together with a cash payment in lieu
of any fraction in a Common Stock share for the benefit of the person or persons
entitled to receive the same or to the nominee or nominees of such person; and
(ii) each holder of the Convertible Preferred Stock shall surrender at said
office the certificate or certificates representing the shares of the
Convertible Preferred Stock that were the subject of the Required Conversion
Notice duly endorsed to the Corporation or in blank.
(d) If the Corporation chooses to convert only part of the issued and
outstanding shares of Convertible Preferred Stock, then a pro rata portion of
each holders shares of Convertible Preferred Stock shall be converted, such pro
rata portion to be determined in accordance with the following formula:
Number of shares Total number of shares of Convertible
of Convertible Preferred Stock to be converted
Preferred Stock x --------------------------------------------
held by holder Total number of issued and outstanding
shares of Convertible Preferred Stock
7. Redemption.
----------
(a) Mandatory Redemption. On the fifth anniversary of the Agreement Date
--------------------
(the "Mandatory Redemption Date"), the Corporation shall either (i) redeem each
outstanding share of Convertible Preferred Stock, at a redemption price per
share equal to the Liquidation Value or, at its option (but only to the extent
it is not prohibited from converting the Convertible Preferred Stock pursuant to
this Section (7)(a)), (ii) convert each outstanding share of Convertible
Preferred Stock into validly issued, fully paid and non-assessable shares of
Common Stock at a Conversion Price equal to 95% of the average closing bid price
per share of Common Stock quoted on NASDAQ or, if not then listed on NASDAQ,
such other exchange, market or system on which the Common Stock is then listed
or traded, on the twenty (20) consecutive trading days immediately preceding and
including the Mandatory Redemption Date (the "Redemption Conversion Price") in
accordance with Section C(5)(a) mutatis mutandis (applying the Redemption
Conversion Price). The total sum payable or the total number of Common Stock
shares to be received, as applicable, per share of Convertible Preferred Stock
to be redeemed or converted, as applicable (the "Redeemed Shares"), on the
Mandatory Redemption Date is hereinafter referred to as the "Redemption Price,"
and the payment to be made or the Common Stock to be received as applicable, on
the Mandatory Redemption Date for the Redeemed Shares is hereinafter referred to
as the "Redemption Payment." Upon written notice from the Corporation, to be
provided at least twenty (20) Business Days prior to the Mandatory Redemption
Date and to specify whether the Corporation is redeeming the shares in
accordance with Section C(7)(a)(i) or converting the shares in accordance with
Section C(7)(a)(ii), and payment in full of the Redemption
Payment, each holder of Convertible Preferred Stock so redeemed or converted, as
applicable, shall promptly surrender to the Corporation, at any place where the
Corporation shall maintain a transfer agent for its Convertible Preferred Stock,
certificates representing the shares so redeemed or converted, duly endorsed in
blank or accompanied by proper instruments of transfer. On the Mandatory
Redemption Date, the Corporation shall deliver to the office of said transfer
agent the Redemption Price in full (i) in cash if the Corporation redeems the
Convertible Preferred Stock in accordance with Section C(7)(a)(i), or (ii) if
the Corporation converts the Convertible Preferred Stock in accordance with
Section C(7)(a)(ii), in stock certificates of full shares of Common Stock
issuable upon such conversion, together with a cash payment in lieu of any
fractions of Common Stock, on behalf of the person or persons entitled to
receive the same or to the nominee or nominees of such person. The provisions of
this Section C(7)(a) shall only apply to shares of Convertible Preferred Stock
not converted into Common Stock prior to the Mandatory Redemption Date, and
nothing herein shall prohibit a holder of Convertible Preferred Stock from
converting its shares at any time prior to the Mandatory Redemption Date.
Notwithstanding the foregoing, unless the Requisite Shareholder Approval has
previously been obtained, the Corporation shall not issue any shares of Common
Stock pursuant to this Section C(7)(a), and the Convertible Preferred Stock may
not be redeemed for Common Stock (and instead such shares shall be redeemed for
cash) if and to the extent that the Redemption Conversion Price is less than
$5.6875 (as adjusted for stock dividends, stock splits, combinations and the
like pursuant to Section C(5)(c)(ii)).
(b) Termination of Rights. Except as otherwise set forth herein, on and
---------------------
after the Mandatory Redemption Date all rights of any holder of Convertible
Preferred Stock as a holder of Redeemed Shares shall cease and terminate; and
such Redeemed Shares shall no longer be deemed to be outstanding, whether or not
the certificates representing such shares have been received by the Corporation;
except that, if the Corporation defaults in the payment of the Redemption
Payment for any reason, the rights, preferences and privileges of the holders of
Convertible Preferred Stock shall continue to inure to the benefit of the
holders of Convertible Preferred Stock until the Corporation cures such default.
8. Status on Conversion or Redemption. Upon any conversion or redemption
----------------------------------
of shares of the Convertible Preferred Stock and payment in full of the
Redemption Price or Conversion Shares, as applicable, the shares of Convertible
Preferred Stock so converted or redeemed shall be canceled.
D. General Provisions.
------------------
1. Notices. Except as otherwise expressly provided, whenever notices or
-------
other communications are required to be made, delivered or otherwise given to
holders of shares of the Convertible Preferred Stock, the notice or other
communication shall be made in writing and shall be by registered or certified
first class mail, return receipt requested, telecopier, courier service or
personal delivery, addressed to the Persons shown on the books of the
Corporation as such holders at the addresses as they appear in the books of the
Corporation, as of a record date or dates determined in accordance with the
Corporation's Amended and Restated Certificate of Incorporation and By-laws and
applicable law, as in effect from time to time. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier
service; five (5) Business Days after being deposited in the U.S. mail, postage
prepaid, if mailed; and when receipt is acknowledged verbally or in writing (but
not mechanically), if telecopied.
2. HSR Act. If a holder of shares of Convertible Preferred Stock is
-------
required to make a filing pursuant to the HSR Act (an "HSR Filing" and such
holder an "HSR Filing Holder") prior to the conversion of its share of
Convertible Preferred Stock into Common Stock, the exercise shall be deemed to
have occurred as of the date such holder files the HSR Filing; provided,
--------
however, that the surrender of the certificates representing the shares of
-------
Convertible Preferred Stock to the Company, the issuance of the Conversion
Shares and any changes in the transfer ledgers of the Company pursuant to such
conversion, shall be subject to, and shall take place on the Business Day
following, the expiration or termination of the applicable waiting period under
the HSR Act. The HSR Filing Holder shall deliver written notice (the "HSR
Notice") of its intent to convert its shares of Convertible Preferred Stock and
to make an HSR Filing no later than one (1) Business Day prior to the date of
such filing and the Company shall be required to file its HSR Filing in
connection with such conversion no later than five (5) Business Days following
the receipt of the HSR Notice.
3. Certain Remedies. Any registered holder of shares of Convertible
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
violations 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. Notwithstanding the foregoing, the observance of any term of this
Certificate of Designation which benefits only the holders of the Convertible
Preferred Stock may be waived by holders of at least 66% of all issued and
outstanding Convertible Preferred Stock provided that, so long as there is a
Majority Shareholder, any such waiver must also be approved by a majority of the
issued and outstanding shares of Convertible Preferred Stock excluding the
shares and approval of the Majority Shareholder (either generally or in a
particular instance and either retroactively or prospectively).
4. Invalidity. If any right, preference or limitation of the Convertible
----------
Preferred Stock set forth herein (as amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this Section
2 (as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation herein set forth shall not be
deemed dependant upon any other such right, preference or limitation unless so
expressed herein.
E. Definitions. For the purposes of this Certificate of Designation, the
-----------
following terms shall have the meanings indicated:
"Agreement Date" means August 8, 2000.
"Affiliate" means any Person who is an "affiliate" as defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"Amended and Restated Certificate of Incorporation" means the Amended and
Restated Certificate of Incorporation, as amended from time to time (including,
without limitation, by any
certificate of amendment or certificate of designation), of the Corporation
and/or its Subsidiaries, as the context may require.
"Business Day" means any day except a Saturday, a Sunday, or other day on
which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"By Laws" means the by-laws, as amended, of the Corporation and/or its
Subsidiaries, as the context may require.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Corporation's Common Stock, par value $.001 per
share.
"Governmental Authority" means the government of any nation, state, city,
locality or other political subdivision of any thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"including," when followed by one or more items, means including but not
limited to such items, unless the context clearly requires otherwise.
"Liquidation Value" means, with respect to each share of Convertible
Preferred Stock, an amount equal to the Stated Value per share of Convertible
Preferred Stock plus (x) the Accreted Amount as of such date and (y) an amount
equal to any dividends accrued but not yet not paid under Section C(2)(b).
"Majority Shareholder" means the Oak Hill Entities (as defined in the
Securities Purchase Agreement) and their Affiliates, so long as they
collectively own at least 33% of the outstanding shares of the Convertible
Preferred Stock, and any transferee of the Oak Hill Entities and their
Affiliates if such transferee and its Affiliates (x) purchase over 50% of the
outstanding shares of Convertible Preferred Stock from the Oak Hill Entities and
their Affiliates and (y) continue to collectively own at least 33% of the
outstanding shares of Convertible Preferred Stock.
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of any such
entity.
"Requisite Shareholder Approval" means the approval by the stockholders of
the Corporation (i) required by the NASDAQ to permit the conversion of the
Series B Preferred Stock into Convertible Preferred Stock and any adjustments in
the number of shares of Common Stock issuable upon conversion or redemption
thereof pursuant to the provisions of this Certificate of Designations and (ii)
to permit the increase of the authorized capital of the Corporation to allow
conversion of all authorized shares of the Convertible Preferred Stock and the
exercise of the Warrants.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of August 8, 2000, among the Corporation and the initial holders of the
Convertible Preferred Stock.
"Stated Value" means $100,000 per share for each of the then outstanding
shares of Convertible Preferred Stock.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which more than 50% of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Certificate of Designation shall refer to a Subsidiary or
Subsidiaries of the Corporation.
"Warrants" means the warrants to purchase common stock of the Corporation
issued pursuant to the Securities Purchase Agreement.
EXHIBIT B
CERTIFICATE OF DESIGNATION
OF 6.75% SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
eGAIN COMMUNICATIONS CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
eGAIN COMMUNICATIONS CORPORATION, a corporation organized under the laws of
the State of Delaware (the "Corporation"), certifies that, pursuant to the
authority contained in its Amended and Restated Certificate of Incorporation,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors has adopted the following
resolution creating a series of its Preferred Stock, $.001 par value per share,
designated 6.75% Series B Cumulative Convertible Preferred Stock:
RESOLVED, that the series of authorized Preferred Stock, par value $.001
per share, designated 6.75% Series B Cumulative Convertible Preferred Stock of
the Corporation be hereby created, and that the designations and amounts thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
A. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section E; and
B. The Corporation shall have authority to issue 850 shares of 6.75% of
Series B Cumulative Convertible Preferred Stock, $.001 par value per share (the
"Convertible Preferred Stock").
C. The voting powers, preferences and relative, participating, optional and
other special rights of the shares of the Convertible Preferred Stock, and the
qualifications, limitations and restrictions thereof are as follows:
1. Ranking. The Convertible Preferred Stock shall, with respect to
-------
dividend rights and rights on liquidation, dissolution or winding up, rank pari
passu with the Corporation's Series A Cumulative Convertible Preferred Stock
(the "Series A Preferred Stock"), and rank senior to all other equity securities
of the Corporation, and any other series or class of the Corporation's preferred
stock, common stock or other capital stock, now or hereafter authorized.
2. Accretion of Liquidation Value; Dividends and Distributions. The
-----------------------------------------------------------
Liquidation Value of the Convertible Preferred Stock shall increase, and the
holders of shares of Convertible
Preferred Stock shall be entitled to receive dividends as, when and if declared
by the Board of Directors, out of funds legally available therefor ("Legally
Available Funds"), as follows:
(a) Accretion of Liquidation Value. The Liquidation Value of each share of
------------------------------
Convertible Preferred Stock shall increase and accumulate on a daily basis
(whether or not declared) from the Agreement Date at an annual rate equal to
6.75% of the Stated Value thereof, from the Agreement Date to the first
Compounding Date (as defined below), and thereafter of the Liquidation Value as
of the most recent Compounding Date, calculated on the basis of a 365-day year,
and shall compound on a semi-annual basis on June 30 and December 31 of each
year (each, a "Compounding Date"), whether or not declared. The cumulative
amount by which the Liquidation Value is increased pursuant to this Section
C(2)(a) shall be referred to as the "Accreted Amount."
(b) Participating Dividends. If the Board of Directors of the Corporation
-----------------------
shall declare a dividend or make any other distribution (including in cash or
other property or assets), to holders of shares of Common Stock, other than a
dividend payable solely in shares of Common Stock, then the holders of each
share of Convertible Preferred Stock shall be entitled to receive, out of
Legally Available Funds, a dividend or distribution in an amount equal to the
amount of such dividend or distribution received by a holder of the number of
shares of Common Stock for which such share of Convertible Preferred Stock is
convertible on the record date for such dividend or distribution. Any such
amount shall be paid to the holders of shares of Convertible Preferred Stock at
the same time such dividend or distribution is made to holders of Common Stock.
Dividends payable pursuant to this Section C(2)(b) shall be payable in the same
form paid to the holders of the Common Stock. The Board of Directors may fix a
record date for the determination of holders of shares of Convertible Preferred
Stock entitled to receive payment of any dividends payable pursuant to this
Section C(2)(b), which record date shall not be more than 60 days nor less than
10 days prior to the applicable dividend payment date. Upon the occurrence of
either (i) a consolidation, merger or other business combination or
recapitalization or refinancing of the Corporation resulting in the holders of
the issued and outstanding voting securities of the Corporation immediately
prior to such transaction owning or controlling less than a majority of the
voting securities of the continuing or surviving entity immediately following
such transaction, or (ii) a sale, lease, exchange, transfer or other disposition
(including by merger, consolidation or otherwise) of assets constituting all or
substantially all of the assets of the Corporation and its Subsidiaries, taken
as a whole, to a Person or group of Persons, all unpaid accrued or accumulated
dividends on Convertible Preferred Stock shall be immediately due and payable.
(c) Dividends Pro Rata. All dividends paid with respect to shares of
------------------
Convertible Preferred Stock shall be paid pro rata to the holders entitled
thereto. If the Legally Available Funds shall be insufficient for the payment of
the entire amount of cash dividends payable at any dividend payment date, such
funds shall be allocated pro rata for the payment of dividends with respect to
the shares of Convertible Preferred Stock based upon the aggregate Liquidation
Value of the outstanding shares of Convertible Preferred Stock.
3. Voting Rights. Except as required by law or by this Section C(3), the
-------------
holders of the Convertible Preferred Stock shall not be entitled to vote on any
matter voted on by the Stockholders of the Corporation. None of the following
actions may be taken, directly or
indirectly, by the Corporation or any of its Subsidiaries, without the approval
of the holders of at least 66% of all issued and outstanding shares of
Convertible Preferred Stock, voting in person or by proxy, at a special or
annual meeting called for the purpose or by written consent:
(a) The adoption of an amendment, restatement or modification of the
Amended and Restated Certificate of Incorporation, By-laws, certificates of
designation or other governance documents which would change or otherwise
adversely affect the rights of the holders of the Convertible Preferred Stock;
and
(b) The authorization, creation or issuance of any shares of capital stock
or other equity or equity-linked securities which are ranked prior to, or are
pari passu with, the Convertible Preferred Stock (except for 36 shares of Series
A Preferred Stock and additional shares thereof issued upon conversion hereof).
So long as there is a Majority Shareholder, any of the actions set forth in
Section C(3) must also be approved by a majority of the issued and outstanding
shares of Convertible Preferred Stock, excluding the shares and vote of the
Majority Shareholder, voting in person or by proxy at a special or annual
meeting called for the purpose or by written consent.
4. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Common Stock or of any other capital stock ranking in any such
event junior to the Convertible Preferred Stock, the holders of shares of
Convertible Preferred Stock shall be entitled to be paid the greater of: (i) the
Liquidation Value, or (ii) an amount equal to the amount that the holders of
shares of Convertible Preferred Stock would be entitled to receive in connection
with such liquidation, dissolution or winding up if all of the holders of
Convertible Preferred Stock had converted their shares into Common Stock
immediately prior to any relevant record date or payment in connection with such
liquidation, dissolution or winding up.
(b) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Convertible 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
the Convertible 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.
(c) A consolidation, merger or other business combination of the
Corporation resulting in the holders of the issued and outstanding voting
securities of the Corporation immediately prior to such transaction owning or
controlling a majority of the voting securities of the continuing or surviving
entity immediately following such transaction shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section C(4) (unless in connection therewith the liquidation of the Corporation
is specifically approved).
5. Conversion.
----------
(a) Automatic Conversion Upon Shareholder Approval. Each share of the
----------------------------------------------
Convertible Preferred Stock shall, upon the Requisite Shareholder Approval,
immediately, automatically and without any further action by or notice to or by
the Corporation, any holder thereof or any other Person, convert into one share
of the Corporation's Series A Preferred Stock. Following such automatic
conversion, each certificate that had previously represented outstanding shares
of the Convertible Preferred Stock shall represent shares of the Series A
Preferred Stock. The Corporation shall, following such automatic conversion,
upon submission by any holder of a certificate that formerly represented shares
of Convertible Preferred Stock, exchange such certificate for a new certificate
that represents an equal number of shares of the Series A Preferred Stock,
without any cost or expense to such holder.
(b) Stockholders Right to Convert. If the Requisite Shareholder Approval
-----------------------------
has not been obtained, each share of the Convertible Preferred Stock shall be
convertible at any time on or after the earlier of a Special Liquidity Event (as
defined below) or November 30, 2000, at the option of the holder thereof, into
validly issued, fully paid and non-assessable shares of the Corporation's Series
C Cumulative Redeemable Preferred Stock (the "Conversion Shares") at the
Conversion Price, determined as hereinafter provided, in effect at the time of
conversion. The Conversion Price shall be initially $92.517 per share. The
number of Conversion Shares issuable upon conversion of a share of Convertible
Preferred Stock is determined by dividing the Liquidation Value (inclusive of
any accrued and unpaid dividends) of a share of Convertible Preferred Stock by
the Conversion Price in effect on the Conversion Date (as hereinafter defined)
and rounding the result to the nearest 1/100th of a share. The Conversion Price
shall be subject to adjustment as provided in Section C(5)(d) below. If a holder
converts more than one share of Convertible Preferred Stock at the same time,
the number of Conversion Shares issuable upon the conversion shall be based upon
the total number of shares of Convertible Preferred Stock converted.
(c) Conversion Process. In order to convert shares of the Convertible
Preferred Stock into Conversion Shares, the holder thereof shall surrender at
the office of any transfer agent for the Convertible Preferred Stock (or in the
absence of any transfer agent, the Corporation) the certificate or certificates
therefor, duly endorsed to the Corporation or in blank, and give written notice
to the Corporation at said office that he or she elects to convert such shares.
Shares of the Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date of surrender of such
shares for conversion in accordance with the foregoing provisions (the
"Conversion Date"), and the person or persons entitled to receive Conversion
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Conversion Shares at such time. As promptly as
practicable after the Conversion Date, but in any event within five (5) Business
Days after the Conversion Date, the Corporation shall issue and deliver at said
office the certificate or certificates for the number of full Conversion Shares
issuable upon such conversion, together with a cash payment in lieu of any
fraction of a Conversion Share, as hereinafter provided, to the person or
persons entitled to receive the same or to the nominee or nominees of such
person or persons.
(d) Conversion Price Adjustments. The Conversion Price shall be subject to
----------------------------
adjustment as follows:
(i) If 122% of the average closing bid price per share of Common Stock
quoted on NASDAQ or, if not then traded on NASDAQ, such other exchange, market
or system on which the Common Stock is then listed or traded, on the twenty (20)
consecutive trading days immediately preceding and including the first
anniversary of the Agreement Date (the "Market Value") is less than the
Conversion Price, the Conversion Price shall be adjusted to the greater of (x)
122% of the Market Value on the first anniversary of the Agreement Date, and (y)
$56.875, (as adjusted below).
(ii) In case the Corporation shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of any class
of its capital stock to all holders of Common Stock, (3) subdivide any of its
outstanding Common Stock into a greater number of shares, or (4) combine any of
its outstanding Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the holder
of any shares of Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive that number of Conversion Shares
representing the percentage of all outstanding shares of Common Stock which the
holder of the Convertible Preferred Stock would have owned had each share of
Convertible Preferred Stock been convertible into ten (10) shares of Common
Stock in lieu of the Conversion Shares, and such conversion into Common Stock
took place immediately prior to the happening of such event and the Conversion
Price shall be adjusted accordingly. An adjustment made pursuant to this
subsection (ii) shall become effective immediately after the record date in the
case of a dividend in shares or distribution and shall become effective
immediately after the effective date in the case of subdivision or combination.
(iii) In case the Corporation shall issue Common Stock, rights, warrants,
options or other convertible securities representing the right to acquire Common
Stock (collectively, including the Common Stock, "Equity Equivalents") to all or
substantially all holders of any class of its Common Stock or to any other
person entitling such person or persons to subscribe for, purchase or otherwise
acquire shares of Common Stock (or securities in any manner representing the
right to acquire Common Stock) at a price per share that is less than the then
Current Market Price per share of Common Stock (as determined in accordance with
subsection (v) below), at the record date for the determination of shareholders
entitled to receive such Equity Equivalents on the date of issuance thereof or,
with respect to issuances to persons other than holders of Convertible Preferred
Stock, on the issue date, as applicable, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to such record date or issue date, as applicable, by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on such
record date or issue date, as applicable, plus the number of additional shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be offered (or the aggregate conversion price of the
convertible securities so to be offered) would purchase at such Current Market
Price (as defined in subsection (v) below), and of which the denominator shall
be the number of shares of Common Stock outstanding on such record date or issue
date, as applicable, plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are convertible). Such adjustment shall be made successively
whenever any Equity Equivalents are issued, and shall become effective
immediately after such record date or such sale date, as applicable. In case
such price for subscription or purchase may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be determined in good faith by the Board of Directors of the Corporation
and shall be that value which is agreed upon by at least 66% of the members
thereof; provided, that if the holders of a -------- majority of the shares of
Convertible Preferred Stock object to such valuation as determined by the Board
of Directors within fifteen (15) days of receipt of written notice of such
valuation or, if such percentage of the members of the Board of Directors of the
Corporation are unable to agree upon the value of such consideration, the value
thereof shall be determined by an independent investment bank of nationally
recognized stature that is selected by a majority of the members of the Board of
Directors. If at the end of the period during which such Equity Equivalents are
exercisable not all such Equity Equivalents shall have been exercised, the
adjusted Conversion Price shall be readjusted to what it would have been based
upon the number of additional shares of Common Stock actually issued (or the
number of shares of Common Stock issuable upon conversion of convertible
securities actually issued).
(iv) In case the Corporation shall distribute to all or substantially all
holders of any class of Common Stock any shares of capital stock of the
Corporation (other than Common Stock), evidences of indebtedness or other
non-cash assets (including securities of any company other than the
Corporation), or shall distribute to all or substantially all holders of any
class of Common Stock rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in subsection (iii) above), then in each
such case for the purpose of this subsection (iv), the holders of the
Convertible Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were the holders of the number of shares of
Common Stock of the Corporation into which their shares of Convertible Preferred
Stock would be convertible as of the record date fixed for the determination of
the holders of Common Stock entitled to receive such distribution if each share
of Convertible Preferred Stock would be convertible into ten shares of Common
Stock in lieu of each Conversion Share.
(v) For the purpose of any computation under subsection (iii) of this
Section C(5)(d), the current market price (the "Current Market Price") with
respect to shares of Common Stock on any date shall be deemed to be equal to the
average of the closing bid prices per share of the Common Stock on NASDAQ or, if
not then listed or traded on NASDAQ, such other exchange, market or system that
the Common Stock is then listed or traded on, for the 20 consecutive trading
days immediately prior to and including the record date or date of issuance with
respect to distributions, issuances or other events requiring such computation
under subsection (iii) above. If on any such date the shares of such Common
Stock are not listed or admitted for trading on any national securities exchange
or quoted on NASDAQ or a similar service, the Current Market Price for such
shares shall be the fair market value of such shares on such date as determined
in good faith by the Board of Directors of the Corporation and shall be the
value which is agreed upon by at least 66% of the members thereof, or if such
percentage of the members of the Board of Directors of the Corporation are
unable to agree upon the value of such consideration, the value thereof shall be
determined by an independent investment bank of a nationally recognized stature
that is selected by the holders of a majority of the outstanding shares of
Convertible Preferred Stock and the Corporation.
(vi) Certain Exceptions to Anti-Dilution Provisions. There shall be no
----------------------------------------------
adjustment of the Conversion Price pursuant to Section C(5)(d)(iii) in the case
of Common Stock or securities convertible into or exchangeable for Common Stock
to be issued (1) to an employee, consultant, officer or director of the
Corporation pursuant to any stock-based incentive plan that has been duly
approved by the Corporation's Board of Directors (including the Employee Stock
Purchase Plan), (2) as part of any arm's length commercial agreement approved by
the Board of Directors, so long as such issuance (on an as converted basis) is
no greater than 1% of the issued and outstanding (non-diluted) shares of Common
Stock, and all such issuances in the aggregate are no greater than 5% of the
issued and outstanding (non-diluted) shares of Common Stock, each as in effect
immediately prior to such issuance, (3) as part of an underwritten public
offering or (4) upon conversion of the Convertible Preferred Stock or upon
exercise of the Warrants.
(vii) Amendment/Modification to Other Securities. Notwithstanding any
------------------------------------------
provision in Section C(5)(d) to the contrary and without limitation to any other
provision contained in Section C(5)(d), in the event any securities of the
Corporation (other than the Convertible Preferred Stock and those securities set
forth as exceptions in Section C(5)(d)(vi)(1)) (collectively, the "Subject
Securities"), are amended or otherwise modified by operation of their terms or
otherwise (including by operation of such Subject Securities' anti-dilution
provisions) in any manner that results in (i) the reduction of the exercise,
conversion or exchange price of such Subject Securities payable upon the
exercise for, or conversion or exchange into, Common Stock or other securities
exercisable for, or convertible or exchangeable into, Common Stock and/or (ii)
such Subject Securities becoming exercisable for, or convertible or exchangeable
into (A) more shares or dollar amount of such Subject Securities which are, in
turn exercisable for, or convertible or exchangeable into, Common Stock, or (B)
more shares of Common Stock, then such amendment or modification shall be
treated for purposes of Section C(5)(d) as if the Subject Securities which have
been amended or modified have been terminated and new securities have been
issued with the amended or modified terms. The Corporation shall make all
necessary adjustments (including successive adjustments if required) to the
Conversion Price in accordance with Section C(5)(d), but in no event shall the
Conversion Price be greater than it was immediately prior to the application of
this Subsection
to the transaction in question. On the expiration or termination of any
such amended or modified Subject Securities for which adjustment has been
made pursuant to the operation of the provisions of this Subsection under
Section C(5)(d)(iii), without such Subject Securities having been
exercised, converted or exchanged in full pursuant to their terms, the
Conversion Price shall be appropriately readjusted in the manner specified
in such Section.
(e) De Minimis Adjustments. No adjustment of the Conversion Price shall be
----------------------
made if the amount of such adjustment would result in a change in the Conversion
Price per share of less than $.01, but in such case any adjustment that would
otherwise be required to be made shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment, which together
with any adjustment so carried forward, would result in a change in the
Conversion Price of $.01 or more per share. Notwithstanding the provisions of
the first sentence of this Section C(5)(e), any adjustment postponed pursuant to
this Section C(5)(e) shall be made no later than the earlier of (i) three years
from the date of the transaction that would, but for the provisions of the first
sentence of this Section C(5)(e), have required such adjustment and (ii)
immediately prior to the date of any conversion of shares of Convertible
Preferred Stock.
(f) Fractional Shares. The Corporation shall be required to issue
-----------------
fractions of Conversion Shares upon conversion of any shares of Convertible
Preferred Stock and to distribute certificates which evidence fractional shares
of Conversion Shares, rounded to the nearest 1/1000 of a share.
(g) Reorganization, Reclassification, Merger and Sale of Assets Adjustment.
----------------------------------------------------------------------
If there occurs any capital reorganization or any reclassification of the Common
Stock (other than a change for which an adjustment is provided in Section
C(5)(d)(ii), (iii) or (iv) above), the consolidation or merger of the
Corporation with or into another Person (other than a merger or consolidation of
the Corporation in which the Corporation is the continuing corporation and which
does not result in any reclassification or change of outstanding shares of
Common Stock) or the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation to another Person (each an "Extraordinary
Transaction"), then, at the option of the holder of the Convertible Preferred
Stock, either:
(i) each share of Convertible Preferred Stock shall thereafter be
convertible into the same kind and amounts of securities (including shares
of stock) or other assets, or both, which were issuable or distributable to
the holders of outstanding Common Stock upon such reorganization,
reclassification, consolidation, merger, sale or transfer, in respect of
that number of shares of Common Stock into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, consolidation, merger, sale or transfer
if each share of Convertible Preferred Stock would be convertible into ten
shares of Common Stock in lieu of each Conversion Share; and, in any such
case, appropriate adjustments (as determined in good faith by the Board of
Directors of the Corporation) shall be made to assure that the provisions
set forth herein shall thereafter be applicable, as nearly as reasonably
may be practicable, in relation to any securities or other assets
thereafter deliverable upon the conversion of the Convertible Preferred
Stock. If,
in the case of any such consolidation, merger, sale or transfer, the stock
or other securities and property (including cash) receivable thereupon by a
holder of Convertible Preferred Stock include shares of stock or other
securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger,
sale or transfer, then effective provision shall also be made in the
certificate of incorporation of such other corporation or otherwise of such
additional antidilution provisions as are necessary to protect the
interests of the holders of the Convertible Preferred Stock by reason of
the foregoing; or
(ii) each holder of the Convertible Preferred Stock may convert its
Convertible Preferred Stock into validly issued, fully paid and
non-assessable Conversion Shares immediately prior to the closing of such
consolidation, merger, sale or conveyance (the "Transaction Closing Date"),
such conversion to be calculated by dividing the Liquidation Value, as of
the later of (x) the Transaction Closing Date or (y) the third anniversary
of the Agreement Date, by the applicable Conversion Price.
The provisions of Section C(5)(g)(i) shall similarly apply to successive
consolidations, mergers, sales or transfers.
(h) Certificate as to Adjustments. Whenever the Conversion Price, or the
-----------------------------
securities or other property deliverable upon the conversion of the Convertible
Preferred Stock, shall be adjusted pursuant to the provisions hereof, the
Corporation shall promptly give written notice thereof to each holder of shares
of Convertible Preferred Stock at such holder's address as it appears on the
transfer books of the Corporation and shall forthwith file, at its principal
executive office and with any transfer agent or agents for the Convertible
Preferred Stock and the Series C Cumulative Redeemable Preferred Stock, a
certificate, signed by the President or one of the Vice Presidents of the
Corporation, and by its Chief Financial Officer, its Treasurer or one of its
Assistant Treasurers, stating the number of Conversion Shares, or the securities
or other property deliverable, per share of Convertible Preferred Stock
converted, calculated to the nearest cent or to the nearest one one-hundredth of
a share and setting forth in reasonable detail the method of calculation and the
facts requiring such adjustment and upon which such calculation is based. Each
adjustment shall remain in effect until a subsequent adjustment hereunder is
required.
(i) Reservation of Conversion Shares. The Corporation shall at all times
--------------------------------
reserve and keep available for issuance upon the conversion of the shares of
Convertible Preferred Stock the maximum number of each of its authorized but
unissued shares of Series C Cumulative Redeemable Preferred Stock as is
reasonably anticipated to be sufficient to permit the conversion of all
outstanding shares of Convertible Preferred Stock into Conversion Shares and
shall take all action required to increase the authorized number of shares of
Series C Cumulative Redeemable Preferred Stock if at any time there shall be
insufficient authorized but unissued shares of Series C Cumulative Redeemable
Preferred Stock to permit such reservation or to permit the conversion of all
outstanding shares of Convertible Preferred Stock.
(j) No Conversion Charge or Tax. The issuance and delivery of certificates
---------------------------
for shares of Common Stock upon the conversion of shares of Convertible
Preferred Stock shall be made without charge to the holder of shares of
Convertible Preferred Stock for any issue or transfer tax, or other incidental
expense in respect of the issuance or delivery of such certificates or the
securities represented thereby, all of which taxes and expenses shall be paid by
the Corporation.
(k) No Amendment of Certificate of Incorporation. The Corporation will
--------------------------------------------
not, by amendment of its Amended and Restated Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any term of the Amended and Restated
Certificate of Incorporation, but will at all times in good faith assist in
carrying out of all such terms and in taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of
Convertible Preferred Stock against dilution or other impairment. Without
limiting the generality of the foregoing, the Corporation (i) will not increase
the par value of any shares of stock receivable on the conversion of the
Convertible Preferred Stock, (ii) will at all times reserve and keep available
the maximum number of its authorized shares of Series C Cumulative Redeemable
Preferred Stock, free from all preemptive rights therein, which will be
sufficient to permit the full conversion of the Convertible Preferred Stock, and
(iii) will take such action as may be necessary or appropriate in order that all
Conversion Shares as may be issued pursuant to the conversion of the Convertible
Preferred Stock will, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof.
(l) Notice of Certain Events. In case at any time prior to the conversion
------------------------
of all of the Convertible Preferred Stock:
(i) the Corporation shall authorize the granting to all the holders
of Common Stock of rights to subscribe for or purchase any shares of stock
of any class or of any other rights; or
(ii) there shall be any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
Common Stock); or
(iii) there shall be any capital reorganization by the Corporation; or
(iv) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and shareholders of
the Corporation must approve the transaction; or
(v) there shall be voluntary or involuntary dissolution, liquidation
and winding up by the Corporation or dividend or distribution to holders of
Common Stock; or
(vi) any other event described in Section C(5)(d);
then in any one or more of said cases, the Corporation shall cause to be
delivered to the holders of Convertible Preferred Stock, at the earliest
practicable time (and, in any event, not less than
twenty (20) days before any record date or the date set for definitive action),
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or such reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up or other transaction shall take place, as the case may be. Such
notice shall also set forth such facts as shall indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the kind and amount of the shares of stock and other
securities and property deliverable upon conversion of the Convertible Preferred
Stock. Such notice shall also specify the date, if known, as of which the
holders of record of the Common Stock shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
shares of the Common Stock for securities or other property (including cash)
deliverable upon such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up or other transaction, as the case may be.
6. Redemption.
----------
(a) Mandatory Redemption. On the fifth anniversary of the Agreement Date
--------------------
(the "Mandatory Redemption Date"), the Corporation shall either (i) redeem each
outstanding share of Convertible Preferred Stock, at a redemption price per
share equal to the Liquidation Value, or, at its option, (ii) convert each
outstanding share of Convertible Preferred Stock into validly issued, fully paid
and non-assessable shares of Series C Cumulative Redeemable Preferred Stock at a
Conversion Price equal to 950% of the average closing bid price per share of
Common Stock quoted on NASDAQ or, if not then listed on NASDAQ, such other
exchange, market or system on which the Common Stock is then listed or traded,
on the twenty (20) consecutive trading days immediately preceding and including
the Mandatory Redemption Date (the "Redemption Conversion Price") in accordance
with Section C(5)(b) mutatis mutandis (applying the Redemption Conversion
Price). The total sum payable or the total number of Series C Cumulative
Redeemable Preferred Stock shares to be received, as applicable, per share of
Convertible Preferred Stock to be redeemed or converted, as applicable (the
"Redeemed Shares"), on the Mandatory Redemption Date is hereinafter referred to
as the "Redemption Price," and the payment to be made or the Conversion Shares
to be received as applicable, on the Mandatory Redemption Date for the Redeemed
Shares is hereinafter referred to as the "Redemption Payment." Upon written
notice from the Corporation, to be provided at least twenty (20) Business Days
prior to the Mandatory Redemption Date and to specify whether the Corporation is
redeeming the shares in accordance with Section C(6)(a)(i) or converting the
shares in accordance with Section C(6)(a)(ii), and payment in full of the
Redemption Payment, each holder of Convertible Preferred Stock so redeemed or
converted, as applicable, shall promptly surrender to the Corporation, at any
place where the Corporation shall maintain a transfer agent for its Convertible
Preferred Stock, certificates representing the shares so redeemed or converted,
duly endorsed in blank or accompanied by proper instruments of transfer. On the
Mandatory Redemption Date, the Corporation shall deliver to the office of said
transfer agent the Redemption Price in full (i) in cash if the Corporation
redeems the Convertible Preferred Stock in accordance with Section C(7)(a)(i),
or (ii) if the Corporation converts the Convertible Preferred Stock in
accordance with Section C(7)(a)(ii), in stock certificates representing shares
of Series C Cumulative Redeemable Preferred Stock issuable upon such conversion
on behalf of the person or persons entitled to receive the same or to the
nominee or nominees of such person. This Section C(6)(a) shall only apply to
shares of Convertible
Preferred Stock not converted into Conversion Shares prior to the Mandatory
Redemption Date, and nothing herein shall prohibit a holder of Convertible
Preferred Stock from converting its shares at any time prior to the Mandatory
Redemption Date.
(b) Termination of Rights. Except as otherwise set forth herein, on and
---------------------
after the Mandatory Redemption Date all rights of any holder of Convertible
Preferred Stock as a holder of Redeemed Shares shall cease and terminate; and
such Redeemed Shares shall no longer be deemed to be outstanding, whether or not
the certificates representing such shares have been received by the Corporation;
except that, if the Corporation defaults in the payment of the Redemption
Payment for any reason, the rights, preferences and privileges of the holders of
Convertible Preferred Stock shall continue to inure to the benefit of the
holders of Convertible Preferred Stock until the Corporation cures such default.
7. Status on Conversion or Redemption. Upon any conversion or redemption of
----------------------------------
shares of the Convertible Preferred Stock and payment in full of the Redemption
Price or Conversion Shares, as applicable, the shares of Convertible Preferred
Stock so converted or redeemed shall be canceled.
D. General Provisions.
------------------
1. Notices. Except as otherwise expressly provided, whenever notices or
-------
other communications are required to be made, delivered or otherwise given to
holders of shares of the Convertible Preferred Stock, the notice or other
communication shall be made in writing and shall be by registered or certified
first class mail, return receipt requested, telecopier, courier service or
personal delivery, addressed to the Persons shown on the books of the
Corporation as such holders at the addresses as they appear in the books of the
Corporation, as of a record date or dates determined in accordance with the
Corporation's Amended and Restated Certificate of Incorporation and By-laws and
applicable law, as in effect from time to time. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; five Business Days after being deposited in the U.S.
mail, postage prepaid, if mailed; and when receipt is acknowledged verbally or
in writing (but not mechanically), if telecopied.
2. Certain Remedies. Any registered holder of shares of Convertible
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
violations 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. Notwithstanding the foregoing, the observance of any term of this
Certificate of Designation which benefits only the holders of the Convertible
Preferred Stock may be waived by holders of at least 66% of all issued and
outstanding Convertible Preferred Stock, so long as there is a Majority
Shareholder, any such waiver must also be approved by a majority of the issued
and outstanding shares of Convertible Preferred Stock excluding the shares and
approval of the Majority Shareholder (either generally or in a particular
instance and either retroactively or prospectively).
3. Invalidity. If any right, preference or limitation of the Convertible
----------
Preferred Stock set forth herein (as amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this Section
3 (as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation herein set forth shall not be
deemed dependant upon any other such right, preference or limitation unless so
expressed herein.
E. Definitions. For the purposes of this Certificate of Designation, the
-----------
following terms shall have the meanings indicated:
"Affiliate" means any Person who is an "affiliate" as defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"Agreement Date" means August 8, 2000.
"Amended and Restated Certificate of Incorporation" means the Amended and
Restated Certificate of Incorporation, as amended from time to time (including,
without limitation, by any certificate of amendment or certificate of
designation), of the Corporation and/or its Subsidiaries, as the context may
require.
"Business Day" means any day except a Saturday, a Sunday, or other day on
which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"By Laws" means the by-laws, as amended, of the Corporation and/or its
Subsidiaries, as the context may require.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Corporation's Common Stock, par value $.001 per
share.
"Governmental Authority" means the government of any nation, state, city,
locality or other political subdivision of any thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"including," when followed by one or more items, means including but not
limited to such items, unless the context clearly requires otherwise.
"Liquidation Value" means, with respect to each share of Convertible
Preferred Stock, an amount equal to the Stated Value per share of Convertible
Preferred Stock plus (x) the Accreted Amount as of such date and (y) an amount
equal to any dividends accrued but not yet paid under Section C(2)(b).
"Majority Shareholder" means the Oak Hill Entities (as defined in the
Securities Purchase Agreement) and their Affiliates, so long as they
collectively own at least 33% of the outstanding
shares of the Convertible Preferred Stock, and any transferee of the Oak Hill
Entities and their Affiliates if such transferee and its Affiliates (x) purchase
over 50% of the outstanding shares of Convertible Preferred Stock from the Oak
Hill Entities and their Affiliates and (y) continue to collectively own at least
33% of the outstanding shares of Convertible Preferred Stock.
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of any such
entity.
"Requisite Shareholder Approval" means the approval by the stockholders of
the Corporation required by the NASDAQ to permit the conversion of the
Convertible Preferred Stock pursuant to Section C(5)(a) and any adjustments in
the number of shares of Common Stock issuable upon conversion or redemption
thereof pursuant to the provisions of this Certificate of Designations and the
Series A Preferred Stock Certificate of Designations and (ii) to permit the
increase of the authorized capital of the Corporation to allow conversion of all
authorized shares of the Series A Preferred Stock and the exercise of the
Warrants.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of August 8, 2000, among the Corporation and the initial holders of the
Convertible Preferred Stock.
"Special Liquidity Event" means the earlier of (i) an announcement by the
Corporation that it has entered into an agreement relating to an Extraordinary
Transaction or (ii) the commencement of a tender offer or exchange offer for at
least 10% of the outstanding shares of Common Stock.
"Stated Value" means $100,000 per share for each of the then outstanding
shares of Convertible Preferred Stock.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which more than 50% of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Certificate of Designation shall refer to a Subsidiary or
Subsidiaries of the Corporation.
"Warrants" means the warrants to purchase common stock of the Corporation
issued pursuant to the Securities Purchase Agreement.
EXHIBIT C
---------
CERTIFICATE OF DESIGNATION
OF SERIES C CUMULATIVE
REDEEMABLE PREFERRED STOCK
OF
eGAIN COMMUNICATIONS CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
eGAIN COMMUNICATIONS CORPORATION, a corporation organized under the laws of
the State of Delaware (the "Corporation"), certifies that, pursuant to the
authority contained in its Amended and Restated Certificate of Incorporation,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors has adopted the following
resolution creating a series of its Preferred Stock, $.001 par value per share,
designated Series C Cumulative Redeemable Preferred Stock:
RESOLVED, that the series of authorized Preferred Stock, par value
$.001 per share, designated Series C Cumulative Redeemable Preferred Stock
of the Corporation be hereby created, and that the designations and amounts
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, are as follows:
A. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section E; and
B. The Corporation shall have authority to issue 2,083,000 shares of
Series C Cumulative Redeemable Preferred Stock, $.001 par value per share (the
"Redeemable Preferred Stock").
C. The voting powers, preferences and relative, participating, optional
and other special rights of the shares of the Redeemable Preferred Stock, and
the qualifications, limitations and restrictions thereof are as follows:
1. Ranking. The Redeemable Preferred Stock shall, with respect to
-------
dividend rights and rights on liquidation, dissolution or winding up, rank
junior to the Series A Cumulative Convertible Preferred Stock (the "Series A
Preferred Stock") and the Series B Cumulative Convertible Preferred Stock (the
"Series B Preferred Stock") of the Corporation, and rank senior to all other
equity securities of the Corporation, and any other series or class of the
Corporation's preferred stock, common stock or other capital stock, now or
hereafter authorized.
2. Dividends and Distributions. The holders of shares of Redeemable
---------------------------
Preferred Stock shall be entitled to receive dividends, as, when and if declared
by the Board of Directors, of funds legally available therefor ("Legally
Available Funds"), as follows:
(a) Dividends. Dividends on each share of the Redeemable Preferred Stock
---------
shall begin to accrue and accumulate on a daily basis (whether or not declared)
from the date such share is issued (the "Issuance Date") at the following rates
per annum: (i) 12% of the Stated Value of such share, from the Issuance Date to
180 days after the Issuance Date, and (ii) thereafter, 15% of the Stated Value
of such share, in each case calculated on the basis of a 365-day year, and shall
cumulate if not declared and paid as provided below.
(b) Participating Dividends. Under no circumstances shall the Corporation
-----------------------
pay any dividend or other distribution to holders of shares of Common Stock at
any time when there is any arrears in the payment of accrued and accumulated
dividends on the Redeemable Preferred Stock. If the Board of Directors of the
Corporation shall in any calendar year declare a dividend or make any other
distribution (including in cash or other property or assets) to holders of
shares of Common Stock, other than a dividend payable solely in shares of Common
Stock, then the holders of shares of Redeemable Preferred Stock shall be
entitled to receive, out of Legally Available Funds, an additional dividend or
distribution in respect of each share of Redeemable Preferred Stock equal to the
excess, if any, of the amount of such dividend or distribution payable to the
holder of ten shares of Common Stock over the amount of dividends payable in
respect of one share of Redeemable Preferred Stock in such calendar year. The
calculation of the participating dividends pursuant to this Section C(2)(b)
shall be appropriately adjusted for any Adjusting Event.
(c) Payment; Record Date. Dividends on Redeemable Preferred Stock payable
--------------------
pursuant to Section C(2)(a) shall be payable in cash on June 30 and December 31
of each year and, if not paid on such dates, shall compound on such dates.
Dividends payable pursuant to Section C(2)(b) shall be payable in the same form
and at the same time as such dividend or distribution is made to holders of the
Common Stock. Upon the occurrence of either (a) a consolidation, merger or other
business combination or recapitalization or refinancing of the Corporation
resulting in the holders of the issued and outstanding voting securities of the
Corporation immediately prior to such transaction owning or controlling less
than a majority of the voting securities of the continuing or surviving entity
immediately following such transaction, or (b) a sale, lease, exchange, transfer
or other disposition (including by merger, consolidation or otherwise) of assets
constituting all or substantially all of the assets of the Corporation and its
Subsidiaries, taken as a whole, to a Person or group of Persons, all unpaid
accrued or accumulated dividends on Redeemable Preferred Stock shall be
immediately due and payable. The Board of Directors may fix a record date for
the determination of holders of shares of Redeemable Preferred Stock entitled to
receive payment of any dividends payable pursuant to Section C(2), which record
date shall not be more than 60 days nor less than 10 days prior to the
applicable dividend payment date.
(d) Dividends Pro Rata. All dividends paid with respect to shares of
------------------
Redeemable Preferred Stock shall be paid pro rata to the holders entitled
thereto. If the Legally Available Funds shall be insufficient for the payment of
the entire amount of cash dividends payable at any dividend payment date, such
funds shall be allocated pro rata for the payment of dividends with
respect to the shares of Redeemable Preferred Stock based upon the aggregate
Liquidation Value of the outstanding shares of Redeemable Preferred Stock.
3. Voting Rights. Except as required by law or by this Section C(3), the
-------------
holders of the Redeemable Preferred Stock shall not be entitled to vote on any
matter voted on by the stockholders of the Corporation. None of the following
actions may be taken, directly or indirectly, by the Corporation or any of its
Subsidiaries, without the approval of the holders of at least 66% of the
Aggregate Interest, voting in person or by proxy, at a special or annual meeting
called for the purpose or by written consent:
(a) The adoption of an amendment, restatement or modification of the
Amended and Restated Certificate of Incorporation, By-laws, certificates of
designation or other governance documents which would change or otherwise
adversely affect the rights of the holders of the Redeemable Preferred Stock;
and
(b) The authorization, creation or issuance of any shares of capital stock
or other equity or equity-linked securities which are ranked prior to, or are
pari passu with, the Redeemable Preferred Stock (other than the Series A and
Series B Cumulative Convertible Preferred Stock).
So long as there is a Majority Shareholder, any of the actions set forth in
Section C(3) must also be approved by a majority of the Aggregate Interest,
excluding the shares and vote of the Majority Shareholder, voting in person or
by proxy at a special or annual meeting called for the purpose or by written
consent.
4. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Common Stock or of any other capital stock ranking in any such
event junior to the Redeemable Preferred Stock, the holders of shares of
Redeemable Preferred Stock shall be entitled to be paid the Liquidation Value.
(b) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Redeemable 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 the
Redeemable 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.
(c) A consolidation, merger or other business combination of the
Corporation resulting in the holders of the issued and outstanding voting
securities of the Corporation immediately prior to such transaction owning or
controlling a majority of the voting securities of the continuing or surviving
entity immediately following such transaction shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section C(4) (unless in connection therewith the liquidation of the Corporation
is specifically approved).
5. Redemption at the Option of the Corporation.
-------------------------------------------
(a) Subject to the conditions set forth below, any or all of the
Redeemable Preferred Stock shall be redeemable, at the option of the
Corporation, at a redemption price per share (the "Redemption Price") equal to
the greater of (i) 101% of the applicable Liquidation Value and (ii) an amount
per share equal to the average Adjusted Market Price per ten (10) shares of
Common Stock on the twenty (20) consecutive trading days prior to the date of
redemption plus any accrued and unpaid dividends on such share of Redeemable
Preferred Stock on such date of redemption (the "Market Redemption Price").
(b) In order to exercise its redemption right, the Corporation shall send
a notice to the holders of the Redeemable Preferred Stock in accordance with
Section D(1), stating the aggregate number of shares of Redeemable Preferred
Stock to be redeemed, the number of shares of Redeemable Preferred Stock held by
each holder that the Corporation intends to redeem and the date (the
"Corporation Redemption Date") of such redemption (the "Redemption Notice"), the
notice to be sent a minimum of twenty (20) Business Days prior to such
redemption date.
(c) On the Corporation Redemption Date (i) the full Redemption Price for
every share redeemed shall be payable in cash by the Corporation to the person
or persons entitled to receive the same or to the nominee or nominees of such
person; and (ii) each holder of the Redeemable Preferred Stock shall surrender
to the Corporation the certificate or certificates representing the shares of
the Redeemable Preferred Stock that were the subject of the Redemption Notice,
duly endorsed to the Corporation or in blank, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued by the Corporation, at its expense, representing the unredeemed shares.
(d) If the Corporation chooses to redeemed only part of the issued and
outstanding shares of Redeemable Preferred Stock, the Corporation shall effect
such redemption pro rata according to the number of shares of Redeemable
Preferred Stock held by each holder.
6. Redemption at the Option of the Holders.
---------------------------------------
(a) Subject to the conditions set forth below, any or all of the
Redeemable Preferred Stock shall be redeemable, at the option of the holder
thereof, at a Redemption Price equal to the greater of (i) 101% of the
applicable Liquidation Value or (ii) the Market Redemption Price.
(b) In order to exercise its redemption right, the holder of the
Redeemable Preferred Stock shall send a notice to the Chief Financial Officer of
the Corporation, stating the number of shares of Redeemable Preferred Stock to
be redeemed, the aggregate number of shares of Redeemable Preferred Stock held
by such holder and the date (the "Holder Redemption Date") on or before which
such redemption shall occur (the "Holder Redemption Notice"). The Holder
Redemption Notice must be sent not less than 120 days prior to such Holder
Redemption Date, except that a Holder Redemption Notice sent between December 1,
2000 and January 31, 2001 or sent between August 1, 2005 and September 30, 2005
may be sent not less than thirty (30) days prior to such Holder Redemption Date.
The Holder Redemption Notice may be
sent contemporaneously with the notice to convert the Series B Preferred Stock
into Redeemable Preferred Stock or at any time thereafter, provided that the
notice complies with this Section C(6)(b).
(c) On or before the Holder Redemption Date (i) the full Redemption Price
for every share redeemed shall be payable in cash by the Corporation to the
person or persons entitled to receive the same or to the nominee or nominees of
such person; and (ii) each holder of the Redeemable Preferred Stock shall
surrender to the Corporation the certificate or certificates representing the
shares of the Redeemable Preferred Stock that were the subject of the Holder
Redemption Notice, duly endorsed to the Corporation or in blank, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued by the Corporation, at its expense, representing the
unredeemed shares.
7. Termination of Rights. Except as otherwise set forth herein, on and
---------------------
after a Corporation Redemption Date or a Holder Redemption Date, all rights of
any holder of Redeemable Preferred Stock as a holder of the shares redeemed on
such date shall cease and terminate, and such redeemed shares shall be canceled
and no longer be deemed to be outstanding, whether or not the certificates
representing such shares have been received by the Corporation; except that, if
the Corporation defaults in the payment of the Redemption Price in full for any
reason, the rights, preferences and privileges of the holders of Redeemable
Preferred Stock (including the accretion and payment of dividends) shall
continue to inure to the benefit of the holders of Redeemable Preferred Stock
until the Corporation cures such default.
8. Reorganization, Reclassification, Merger and Sale of Assets Adjustment.
----------------------------------------------------------------------
If there occurs any capital reorganization or any reclassification of the Common
Stock, the consolidation or merger of the Corporation with or into another
Person (other than a merger or consolidation of the Corporation in which the
Corporation is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock) or the sale,
transfer or other disposition of all or substantially all of the assets of the
Corporation to another Person (each an "Extraordinary Transaction"), then, in
addition to other rights set forth herein, each share of Convertible Preferred
Stock shall be entitled to receive the same kind and amounts of securities
(including shares of stock) or other assets, or both, which were issuable or
distributable to the holders of outstanding Common Stock upon such
reorganization, reclassification, consolidation, merger, sale or transfer, in
respect of that number of shares of Common Stock determined by dividing (x) the
greater of (i) 101% of the Liquidation Value and (ii) the Market Redemption
Price by (y) the average Adjusted Market Price per ten (10) shares of Common
Stock on the twenty (20) consecutive trading days immediately prior to such
reorganization, reclassification, consolidation, merger, sale or transfer.
D. General Provisions.
------------------
1. Notices. Except as otherwise expressly provided, whenever notices or
-------
other communications are required to be made, delivered or otherwise given to
holders of shares of the Redeemable Preferred Stock, the notice or other
communication shall be made in writing and shall be by registered or certified
first class mail, return receipt requested, telecopier, courier service or
personal delivery, addressed to the Persons shown on the books of the
Corporation as
such holders at the addresses as they appear in the books of the Corporation, as
of a record date or dates determined in accordance with the Corporation's
Amended and Restated Certificate of Incorporation and By-laws and applicable
law, as in effect from time to time. All such notices and communications shall
be deemed to have been duly given: when delivered by hand, if personally
delivered; when delivered by courier, if delivered by commercial overnight
courier service; five Business Days after being deposited in the U.S. mail,
postage prepaid, if mailed; and when receipt is acknowledged verbally or in
writing (but not mechanically), if telecopied.
2. Certain Remedies. Any registered holder of shares of Redeemable
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
violations 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. Notwithstanding the foregoing, the observance of any term of this
Certificate of Designation which benefits only the holders of the Redeemable
Preferred Stock may be waived by holders of at least 66% of the Aggregate
Interest, provided that, so long as there is a Majority Shareholder, any such
waiver must also be approved by holders of a majority of the Aggregate Interest
excluding the shares and vote of the Majority Shareholder (either generally or
in a particular instance and either retroactively or prospectively).
3. Invalidity. If any right, preference or limitation of the Redeemable
----------
Preferred Stock set forth herein (as amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this Section
2 (as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation herein set forth shall not be
deemed dependant upon any other such right, preference or limitation unless so
expressed herein.
E. Definitions. For the purposes of this Certificate of Designation, the
-----------
following terms shall have the meanings indicated:
"Adjusting Event" means any case in which the Corporation shall (1) pay a
dividend in shares of Common Stock to holders of Common Stock, (2) make a
distribution in shares of any class of its capital stock to all holders of
Common Stock, (3) subdivide any of its outstanding Common Stock into a greater
number of shares, or (4) combine any of its outstanding Common Stock into a
smaller number of shares.
"Adjusted Market Price" means the Market Price adjusted (upwards only) as
follows: in case an Adjusting Event occurs, the Market Price shall be adjusted
to represent the percentage of all outstanding shares of Common Stock which the
holder of the Redeemable Preferred Stock would have owned had each share of
Redeemable Preferred Stock been converted into ten shares of Common Stock
immediately prior to the happening of such event.
"Affiliate" means any Person who is an "affiliate" as defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"Aggregate Interest" means the aggregate interest of all issued and
outstanding Redeemable Preferred Stock and Series B Preferred Stock, such
interest to be calculated in
accordance with the Liquidation Value of each of the Redeemable Preferred Stock
and the Series B Preferred Stock, each as defined in their respective
certificates of designations.
"Business Day" means any day except a Saturday, a Sunday, or other day on
which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Common Stock" means the Corporation's Common Stock, par value $.001 per
share.
"including," when followed by one or more items, means including but not
limited to such items, unless the context clearly requires otherwise.
"Liquidation Value" means, with respect to each share of Redeemable
Preferred Stock as of any date, an amount equal to the Stated Value per share of
Redeemable Preferred Stock plus an amount equal to all dividends accrued but not
yet paid under Section C(2).
"Majority Shareholder" means the Oak Hill Entities (as defined in the
Securities Purchase Agreement) and their Affiliates, so long as they
collectively own at least 33% of the Aggregate Interest, and any transferee of
the Oak Hill Entities and their Affiliates if such transferee and its Affiliates
(x) purchase over 50% of the Aggregate Interest from the Oak Hill Entities and
their Affiliates and (y) continue to collectively own at least 33% of the
Aggregate Interest.
"Market Price" on any date shall mean the closing bid price per share of
the Common Stock on NASDAQ or, if not then listed or traded on NASDAQ, such
other exchange, market or system that the Common Stock is then listed or traded
on. If on any such date the shares of such Common Stock are not listed or
admitted for trading on any national securities exchange or quoted on NASDAQ or
a similar service, the Market Price for such shares shall be the fair market
value of such shares on such date as determined in good faith by the Board of
Directors of the Company and shall be the value which is agreed upon by at least
66% of the members thereof, or if such percentage of the members of the Board of
Directors are unable to agree upon the value of such consideration, the value
thereof shall be determined by an independent investment bank of a nationally
recognized stature that is selected by the holders of a majority of the
outstanding shares of Redeemable Preferred Stock and the Corporation.
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of any such
entity.
"Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of August 8, 2000, among the Corporation and the initial holders of the
Series B Preferred Stock.
"Stated Value" means, with respect to each share of Redeemable Preferred
Stock, the average Market Price on the twenty (20) consecutive trading days
immediately prior to the issuance of such share of Redeemable Preferred Stock
multiplied by ten (10).