EXHIBIT 99.2
ICEWEB, INC.
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned, John R. Signorello and Myle Phuong , do hereby certify
that:
1. They are the President and Secretary, respectively, of
ICEWEB, INC., a Delaware corporation (the "Corporation").
2. The Corporation is authorized to issue 1,666,667 shares of
preferred stock, none of which have been previously issued.
3. The following resolutions were duly adopted by the Board of
Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for a class of its authorized stock known as preferred stock, comprised of
1,666,667 shares, $0.001 par value per share, issuable from time to time in one
or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix
the dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of
preferred stock and the number of shares constituting any Series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock,
which shall consist of up to 1,666,667 shares of the preferred stock which the
corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or exchange of
other securities, rights or property and does hereby fix and determine the
rights, preferences, restrictions and other matters relating to such series of
preferred stock as follows:
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TERMS OF PREFERRED STOCK
Section 1. Definitions. Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement (as defined
below) shall have the meanings given such terms in the Purchase Agreement. For
the purposes hereof, the following terms shall have the following meanings:
"Bankruptcy Event" means any of the following events: (a) the
Corporation or any Significant Subsidiary (as such term is defined in
Rule 1.02(s) of Regulation S-X) thereof commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation or any Significant Subsidiary thereof; (b) there is
commenced against the Corporation or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after
commencement; (c) the Corporation or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the
Corporation or any Significant Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 days; (e)
the Corporation or any Significant Subsidiary thereof makes a general
assignment for the benefit of creditors; (f) the Corporation or any
Significant Subsidiary thereof calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its
debts; or (g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Investor's obligations to pay the Subscription Amount and (ii) the
Corporation's obligations to deliver the Series A Preferred Stock and
Warrants have been satisfied or waived, including the satisfaction of
all provisions of the Escrow Agreement entered into pursuant to the
terms of the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's common stock, par value
$0.001 per share, and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"Common Stock Equivalents" means any securities of the
Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
"Conversion Date" shall have the meaning set forth in Section
6(a).
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"Conversion Ratio" shall have the meaning set forth in Section
6(a).
"Conversion Value" shall have the meaning set forth in Section
6(a).
"Conversion Shares" means, collectively, the shares of Common
Stock into which the shares of Series A Preferred Stock are convertible
in accordance with the terms hereof.
"Conversion Shares Registration Statement" means a
registration statement that meets the requirements of the Registration
Rights Agreement and registers the resale of all Conversion Shares by
the Holder, who shall be named as a "selling stockholder" thereunder,
all as provided in the Registration Rights Agreement.
"Dilutive Issuance" shall have the meaning set forth in
Section 7(b) hereof.
"Effective Date" means the date that the Conversion Shares
Registration Statement is declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Corporation
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Corporation or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any securities issued hereunder, and of any convertible
securities, options or warrants issued and outstanding on the date of
this Certificate of Designations, provided that such securities have
not been amended since the date of this Certificate of Designations to
increase the number of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the
business of the Corporation and in which the Corporation receives
benefits in addition to the investment of funds, but shall not include
a transaction in which the Corporation is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities.
"Fundamental Transaction" shall have the meaning set forth in
Section 7(f)(iii) hereof.
"Holder" shall have the meaning given such term in Section 2
hereof.
"Junior Securities" means the Common Stock and all other
equity or equity equivalent securities of the Corporation other than
those securities that are explicitly senior in rights or liquidation
preference to the Series A Preferred Stock.
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"Original Issue Date" shall mean the date of the first
issuance of any shares of the Series A Preferred Stock regardless of
the number of transfers of any particular shares of Series A Preferred
Stock and regardless of the number of certificates which may be issued
to evidence such Series A Preferred Stock.
"Person" means a corporation, an association, a partnership, a
limited liability company, a business association, an individual, a
government or political subdivision thereof or a governmental agency.
"Purchase Agreement" means the Preferred Stock Purchase
Agreement, dated as March 24, 2005, to which the Corporation and the
original Holders are parties, as amended, modified or supplemented from
time to time in accordance with its terms, a copy of which is on file
at the principal offices of the Corporation.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, to which the Corporation and
the original Holder are parties, as amended, modified or supplemented
from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall have the meaning set forth in
Section 2.
"Subscription Amount" shall mean the One Million Dollars
($1,000,000.00) to be paid for the Preferred Stock purchased pursuant
to the Purchase Agreement, in United States Dollars and in immediately
available funds.
"Subsidiary" shall mean a corporation, limited liability
company, partnership, joint venture or other business entity of which
the Corporation owns beneficially or of record more than 19% of the
equity interest.
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading
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Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Purchasers
holding a majority of the principal amount of Series A Preferred Stock
then outstanding.
Section 2. Designation, Amount and Par Value. The series of
preferred stock shall be designated as the Corporation's Series A Convertible
Preferred Stock (the "Series A Preferred Stock or "Preferred Stock") and the
number of shares so designated shall be (which shall not be subject to increase
without the consent of all of the holders of the Series A Preferred Stock (each
a "Holder" and collectively, the "Holders"). Each share of Series A Preferred
Stock shall have a par value of $.001 per share. Capitalized terms not otherwise
defined herein shall have the meaning given such terms in Section 1 hereof.
Section 3. Dividends and Other Distributions. No dividends
shall be payable with respect to the Series A Preferred Stock. No dividends
shall be payable with respect to the Common Stock while the Series A Preferred
Stock is outstanding. The Common Stock shall not be redeemed while the Series A
Preferred Stock is outstanding.
Section 4. Voting Rights. The Series A Preferred Stock shall
have no voting rights. However, so long as any shares of Series A Preferred
Stock are outstanding, the Corporation shall not, without the affirmative
approval of the Holders of the shares of the Series A Preferred Stock then
outstanding, (a) alter or change adversely the powers, preferences or rights
given to the Series A Preferred Stock or alter or amend this Certificate of
Designation, (b) authorize or create any class of stock ranking as to dividends
or distribution of assets upon a Liquidation (as defined in Section 5) senior to
or otherwise pari passu with the Series A Preferred Stock, or any of preferred
stock possessing greater voting rights or the right to convert at a more
favorable price than the Series A Preferred Stock, (c) amend its certificate or
articles of incorporation or other charter documents in breach of any of the
provisions hereof, (d) increase the authorized number of shares of Series A
Preferred Stock, or (e) enter into any agreement with respect to the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to receive out of the assets of
the Corporation, whether such assets are capital or surplus, for each share of
Series A Preferred Stock an amount equal to 60 cents ($0.60), (the "Liquidation
Value") before any distribution or payment shall be made to the holders of any
Junior Securities, and if the assets of the Corporation shall be insufficient to
pay in full such amounts, then the entire assets to be distributed to the
Holders shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A Fundamental Transaction or Change of Control
Transaction shall not be treated as a Liquidation. The Corporation shall mail
written notice of any such Liquidation, not less than 70 days prior to the
payment date stated therein, to each record Holder.
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Section 6. Conversion.
a) Conversions at Option of Holder. Each share of Series A
Preferred Stock shall be initially convertible (subject to the
limitations set forth in Section 6(c)), into one (1) share of Common
Stock (as adjusted as provided below, the "Conversion Ratio") at the
option of the Holders, at any time and from time to time from and after
the Original Issue Date. Holders shall effect conversions by providing
the Corporation with the form of conversion notice attached hereto as
Annex A (a "Notice of Conversion") as fully and originally executed by
the Holder, together with the delivery by the Holder to the Corporation
of the stock certificate(s) representing the number of shares of Series
A Preferred Stock so converted, with such stock certificates being duly
endorsed in full for transfer to the Corporation or with an applicable
stock power duly executed by the Holder in the manner and form as
deemed reasonable by the transfer agent of the Common Stock. Each
Notice of Conversion shall specify the number of shares of Series A
Preferred Stock to be converted, the number of shares of Series A
Preferred Stock owned prior to the conversion at issue, the number of
shares of Series A Preferred Stock owned subsequent to the conversion
at issue, the stock certificate number and the shares of Series A
Preferred Stock represented thereby which are accompanying the Notice
of Conversion, and the date on which such conversion is to be effected,
which date may not be prior to the date the Holder delivers such Notice
of Conversion and the applicable stock certificates to the Corporation
by overnight delivery service (the "Conversion Date"). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall
be the Trading Day immediately following the date that such Notice of
Conversion and applicable stock certificates are received by the
Corporation. The calculations and entries set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical
error. Shares of Series A Preferred Stock converted into Common Stock
in accordance with the terms hereof shall be canceled and may not be
reissued. The initial value of the Series A Preferred Stock on the
Conversion Date shall be equal to 60 cents ($0.60), per share (as
adjusted pursuant to Section 7 or otherwise as provided herein, the
"Conversion Value"). If the initial Conversion Value is adjusted
pursuant to Section 7 or as otherwise provided herein, the Conversion
Ratio shall likewise be adjusted and the new Conversion Ratio shall
equal the Liquidation Value divided by the new Conversion Value.
Thereafter, subject to any further adjustments in the Conversion Value,
each share of Series A Preferred Stock shall be convertible into that
number of shares of Common Stock equal to the new Conversion Ratio.
b) Beneficial Ownership Limitation. Except as provided in
Section 6(b) above, the Corporation shall not effect any conversion of
the Series A Preferred Stock, and the Holder shall not have the right
to convert any portion of the Series A Preferred Stock to the extent
that after giving effect to such conversion, the Holder (together with
the Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect
to such conversion. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock with respect to which
the determination
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of such sentence is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) conversion of the
remaining, nonconverted shares of Series A Preferred Stock beneficially
owned by the Holder or any of its affiliates, so long as such shares of
Series A Preferred Stock are not convertible within sixty (60) days
from the date of such determination, and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the
Corporation (including the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates, so long as
such other securities of the Corporation are not exercisable nor
convertible within sixty (60) days from the date of such determination.
For purposes of this Section 6(c), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. For
purposes of this Section 6(c), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in the most recent of
the following: (A) the Corporation's most recent quarterly reports,
Form 10-Q, Form 10-QSB, Annual Reports, Form 10-K, or Form 10-KSB, as
the case may be, as filed with the Commission under the Exchange Act
(B) a more recent public announcement by the Corporation or (C) any
other written notice by the Corporation or the Corporation's transfer
agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of the Holder, the Corporation shall
within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the
Corporation, including the Series A Preferred Stock, by the Holder or
its affiliates since the date as of which such number of outstanding
shares of Common Stock was publicly reported by the Corporation. The
provisions of this Section 6(c) may be waived by the Holder upon, at
the election of the Holder, not less than 61 days' prior notice to the
Corporation, and the provisions of this Section 6(c) shall continue to
apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
c) Mechanics of Conversion
(i) Delivery of Certificate Upon Conversion. Except
as otherwise set forth herein, not later than three Trading Days after
each Conversion Date (the "Share Delivery Date"), the Corporation shall
deliver to the Holder (A) a certificate or certificates which, after
the Effective Date, shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon
the conversion of shares of Series A Preferred Stock, and (B) a bank
check in the amount of accrued and unpaid dividends (if the Corporation
has elected or is required to pay accrued dividends in cash). After the
Effective Date, the Corporation shall, upon request of the Holder,
deliver any certificate or certificates required to be delivered by the
Corporation under this Section electronically through the Depository
Trust Corporation or another established clearing corporation
performing similar functions. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as
directed by the applicable Holder by the third Trading Day after the
Conversion Date, the Holder shall be entitled to elect by
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written notice to the Corporation at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such
conversion, in which event the Corporation shall immediately return the
certificates representing the shares of Series A Preferred Stock
tendered for conversion.
i. Obligation Absolute; Partial Liquidated Damages.
The Corporation's obligations to issue and deliver the
Conversion Shares upon conversion of Series A Preferred Stock
in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Corporation or any violation or alleged
violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise
limit such obligation of the Corporation to the Holder in
connection with the issuance of such Conversion Shares. In the
event a Holder shall elect to convert any or all of its Series
A Preferred Stock, the Corporation may not refuse conversion
based on any claim that such Holder or any one associated or
affiliated with the Holder has been engaged in any violation
of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or
enjoining conversion of all or part of this Series A Preferred
Stock shall have been sought and obtained and the Corporation
posts a surety bond for the benefit of the Holder in the
amount of 150% of the Conversion Value of Series A Preferred
Stock outstanding, which is subject to the injunction, which
bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same,
the Corporation shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. If the
Corporation fails to deliver to the Holder such certificate or
certificates pursuant to Section 6(d)(i) within two Trading
Days of the Share Delivery Date applicable to such conversion,
the Corporation shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of
Conversion Value of Series A Preferred Stock being converted,
$50 per Trading Day (increasing to $100 per Trading Day after
three (3) Trading Days and increasing to $200 per Trading Day
six (6) Trading Days after such damages begin to accrue) for
each Trading Day after the Share Delivery Date until such
certificates are delivered. Nothing herein shall limit a
Holder's right to pursue actual damages for the Corporation's
failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief.
ii. Compensation for Buy-In on Failure to Timely
Deliver Certificates Upon Conversion. If the Corporation fails
to deliver to the Holder such certificate or certificates
pursuant to Section 6(d)(i) by a Share Delivery Date, and if
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after such Share Delivery Date the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a "Buy-In"),
then the Corporation shall pay in cash to the Holder the
amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled
to receive from the conversion at issue multiplied by (2) the
price at which the sell order giving rise to such purchase
obligation was executed. For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of shares of
Series A Preferred Stock with respect to which the aggregate
sale price giving rise to such purchase obligation is $10,000,
under clause (A) of the immediately preceding sentence the
Corporation shall be required to pay the Holder $1,000. The
Holder shall provide the Corporation written notice indicating
the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence
reasonably requested by the Corporation. Nothing herein shall
limit a Holder's right to pursue any other remedies available
to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Corporation's failure to timely
deliver certificates representing shares of Common Stock upon
conversion of the shares of Series A Preferred Stock as
required pursuant to the terms hereof.
iii. Reservation of Shares Issuable Upon Conversion.
The Corporation covenants that it will at all times reserve
and keep available out of its authorized and unissued shares
of Common Stock solely for the purpose of issuance upon
conversion of the Series A Preferred Stock, each as herein
provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders,
not less than such number of shares of the Common Stock as
shall (subject to any additional requirements of the
Corporation as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 7) upon the conversion
of all outstanding shares of Series A Preferred Stock. The
Corporation covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Conversion Shares Registration Statement is then effective
under the Securities Act, registered for public sale in
accordance with such Conversion Shares Registration Statement.
iv. Fractional Shares. Upon a conversion hereunder,
the Corporation shall not be required to issue stock
certificates representing fractions of shares of the Common
Stock.
v. Transfer Taxes. The issuance of certificates for
shares of the Common Stock on conversion of the Series A
Preferred Stock shall be made
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without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the
Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name
other than that of the Holder of such shares of Series A
Preferred Stock so converted and the Corporation shall not be
required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that
such tax has been paid.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at
any time while the Series A Preferred Stock is outstanding: (A) shall
pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the
Corporation pursuant to this Series A Preferred Stock), (B) subdivide
outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital
stock of the Corporation, then the Conversion Value shall be multiplied
by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) Subsequent Equity Sales. Neither the Corporation nor any
Subsidiary, as applicable, at any time while Series A Preferred Stock
is outstanding, shall offer, sell, grant any option to purchase or
offer, sell or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock at
an effective price per share less than the then Conversion Value
("Dilutive Issuance"), as adjusted hereunder (if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due
to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Value, such
issuance shall be deemed to have occurred for less than the Conversion
Value).
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c) Subsequent Rights Offerings. The Corporation, at any time
while the Series A Preferred Stock is outstanding, shall not issue
rights, options or warrants to holders of Common Stock entitling them
to subscribe for or purchase shares of Common Stock at a price per
share less than the Conversion Value.
d) Pro Rata Distributions. If the Corporation, at any time
while Series A Preferred Stock is outstanding, shall distribute to all
holders of Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for or
purchase any security, then in each such case the Conversion Value
shall be determined by multiplying such Conversion Value in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined
by the Board of Directors in good faith. In either case the adjustments
shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
e) Calculations. All calculations under this Section 7 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Corporation, and the description of any such shares of Common
Stock shall be considered on issue or sale of Common Stock. For
purposes of this Section 7, the number of shares of Common Stock deemed
to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
actually issued and outstanding.
f) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the
Conversion Value is adjusted pursuant to any of this Section
7, the Corporation shall promptly mail to each Holder a notice
setting forth the Conversion Value after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment. If the Corporation issues a variable rate
security, despite the prohibition thereon in the Purchase
Agreement, the Corporation shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities
may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the
lowest possible adjustment price in the case of an MFN
Transaction (as defined in the Purchase Agreement).
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Notice to Allow Conversion by Holder. If (A) the Corporation
shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Corporation shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the
Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or
transfer of all or substantially all of the assets of the
Corporation, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Corporation; then in each case, the Corporation
shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Series A Preferred Stock,
and shall cause to be mailed to the Holders at their last
addresses as they shall appear upon the stock books of the
Corporation, at least 70 calendar days prior to the applicable
record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and
the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure
to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action
required to be specified in such notice. Any and all
Conversion Shares issued or issuable upon conversion shall be
entitled to share in such transaction notwithstanding the
record date of such transaction so long as the Holders of the
Series A Preferred Stock elect to convert their shares of
Series A Preferred Stock into Conversion Shares prior to the
expiration of such 70-day notice period.
ii. Exempt Issuance. Notwithstanding the foregoing,
no adjustment will be made under this Section 7 in respect of
an Exempt Issuance.
iii. Fundamental Transaction. If, at any time while
this Series A Preferred Stock is outstanding, (A) the
Corporation effects any merger or consolidation of the
Corporation with or into another Person, (B) the Corporation
effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer
or exchange offer (whether by the Corporation or another
Person) is completed pursuant to which holders of Common Stock
are permitted to tender or exchange their shares for other
securities, cash or property, or (D) the Corporation effects
any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is
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effectively converted into or exchanged for other securities,
cash or property (in any such case, a "Fundamental
Transaction"), then upon any subsequent conversion of this
Series A Preferred Stock, the Holder shall have the right to
receive, for each Conversion Share that would have been
issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder
of one share of Common Stock (the "Alternate Consideration").
For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock
in such Fundamental Transaction, and the Corporation shall
apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon
any conversion of this Series A Preferred Stock following such
Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Corporation or
surviving entity in such Fundamental Transaction shall file a
new Certificate of Designations with the same terms and
conditions and issue to the Holder new preferred stock
consistent with the foregoing provisions and evidencing the
Holder's right to convert such preferred stock into Alternate
Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply
with the provisions of this paragraph (f)(iii) and insuring
that this Series A Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
Section 8. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address provided
in the Purchase Agreement, facsimile number (703) 964-0160, Attn: John
R. Signorello or such other address or facsimile number as the
Corporation may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Corporation
hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to
each Holder at the facsimile telephone number or address of such Holder
appearing on the books of the Corporation, or if no such facsimile
telephone number or address appears, at the principal place of business
of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i)
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the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after
the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section later than 5:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Certificate of Designation shall alter or impair
the obligation of the Corporation, which is absolute and unconditional,
to pay the liquidated damages (if any) on, the shares of Series A
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a
Holder's Series A Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or
destroyed certificate, a new certificate for the shares of Series A
Preferred Stock so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such
certificate, and of the ownership thereof, and indemnity, if requested,
all reasonably satisfactory to the Corporation.
d) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
e) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Certificate of Designations and
shall not be deemed to limit or affect any of the provisions hereof.
RESOLVED, FURTHER, that the Chairman, the president or any
vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file a Certificate
of Designation of Preferences, Rights and Limitations in accordance with the
foregoing resolution and the provisions of Delaware law.
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IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the 30th day of March, 2005.
/s/ John R. Signorello /s/ MyLe Phuong
------------------------ -----------------
Name: John R. Signorello Name: MyLe Phuong
Title: President and Chief Executive Officer Title: Secretary
COMMONWEALTH OF VIRGINIA:
COUNTY OF FAIRFAX : TO-WIT:
On this 31st day of March, 2005, personally appeared before me, the
undersigned Notary Public, John R. Signorello, President and Chief Executive
Officer of IceWEB, Inc., a Delaware corporation, and MyLe Phuong, Secretary of
IceWEB, Inc., a Delaware corporation, and acknowledged that this ICEWEB, INC.
CERTIFICATE OF DESIGNATIONS OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES A
CONVERTIBLE PREFERRED STOCK is the act and deed of IceWEB, Inc., a Delaware
corporation and that the facts stated therein are true.
_________________________________________
, Notary Public
NOTARIAL SEAL
MY COMMISSION EXPIRES: _________________
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF SERIES A PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the "Common Stock"), of ICEWEB, INC., a Delaware
corporation (the "Corporation"), according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Corporation in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
Date to Effect Conversion:_____________________________________________
Number of shares of Common Stock owned prior to Conversion:____________
Number of shares of Series A Preferred Stock to be Converted:__________
Value of shares of Series A Preferred Stock to be Converted:___________
Number of shares of Common Stock to be Issued:_________________________
Certificate Number of Series A Preferred Stock attached hereto:________
Number of Shares of Series A Preferred Stock represented by attached
certificate:__________
Number of shares of Series A Preferred Stock subsequent to Conversion:
________________
[HOLDER]
By:___________________________________
Name:______________________________
Title:_____________________________
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