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EXHIBIT B
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES B 12% SENIOR PARTICIPATING PREFERRED STOCK
of
marchFIRST, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, [ ], [ title ], and [ ],
[ title ], of marchFIRST, Inc., a Delaware corporation (hereinafter
called the "CORPORATION"), pursuant to the provisions of Sections 103 and
151 of the General Corporation Law of the State of Delaware, do hereby make
this Certificate of Designations and do hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of
the Corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Article 1 of the Amended and Restated
Certificate of Incorporation (which authorizes 3,000,000 shares of preferred
stock, $.001 par value ("PREFERRED STOCK")), the Board of Directors hereby fixes
the powers, designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. NUMBER AND DESIGNATION. 375,000 shares of the Preferred Stock of the
Corporation shall be designated as Series B 12% Senior Participating Preferred
Stock (the "SERIES B PREFERRED STOCK").
2. DEFINITIONS. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated.
"AFFILIATE" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
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"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York
City, New York generally are authorized or required by law or other governmental
actions to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting and/or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights (other than any evidence of indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (a) any Person or Group is or becomes the beneficial owner (as defined
in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all securities that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total Voting Stock of the Corporation; or (b) the Corporation consolidates with,
or merges with or into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into the Corporation,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Corporation is converted into or exchanged for cash, securities or
other property, other than any such transaction where (i) the outstanding Voting
Stock of the Corporation is converted into or exchanged for Voting Stock of the
surviving or transferee corporation or its parent corporation and/or cash,
securities or other property in an amount which could be paid by the Corporation
under the terms of the Corporation's credit and financing agreements and (ii)
immediately after such transaction no Person or Group is the beneficial owner
(as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee corporation,
as applicable; or (c) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors or whose nomination
for election by the stockholders of the Corporation was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office.
"COMMON STOCK" means the Corporation's common stock, par value $.001
per share.
"DELAWARE LAW" means the General Corporation Law of the State of
Delaware.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"FIRST CALL DATE" means the 1-year anniversary of the Issue Date.
"FIRST PUT CONVERTED DATE" means the 1-year anniversary of the Issue
Date.
"FIRST PUT SALE DATE" means the 2-year anniversary of the Issue Date.
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"GROUP" means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
"INITIAL LIQUIDATION PREFERENCE" is an amount equal to $1,000 per whole
share of Series B Preferred Stock (as adjusted for stock splits, stock dividends
and similar transactions).
"ISSUE DATE" means the first date of issuance of shares of Series B
Preferred Stock.
"LIQUIDATION PREFERENCE" is an amount equal to $1,000.00 per whole
share of Series B Preferred Stock as adjusted as provided in Section 4(b) for
dividends not paid in full and as adjusted for stock splits, stock dividends and
similar transactions.
"MARKET PRICE" means, with respect to the Common Stock, on any given
day, (i) the price of the last trade, as reported on the Nasdaq National Market,
not identified as having been reported late to such system, or (ii) if the
Common Stock is so quoted, but not so traded, the average of the last bid and
ask prices, as those prices are reported on the Nasdaq National Market, or (iii)
if the Common Stock is not listed or authorized for trading on the Nasdaq
National Market or any comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose; PROVIDED that, in connection with (i) or (ii), the Corporation may from
time to time specify in advance the time at which the trade price or bid and ask
prices, respectively, shall be determined for purposes of a particular
calculation under this Certificate of Designations. If the Common Stock is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be the fair value per share of such security as
determined in good faith by the Board of Directors of the Corporation.
"MARKET VALUE" means with respect to some number of shares of Common
Stock, the Market Price times such number of shares.
"MINIMUM CALL STOCK PRICE TEST" shall be satisfied with respect to a
notice of redemption if the Market Price has been at least $7.50 per share
(subject to adjustment for stock splits, stock dividends and similar
transactions) for 20 of the last 30, and each of the last 5, trading days
immediately preceding the date of the notice of redemption.
"OUTSTANDING", when used with reference to shares of stock, means
issued and outstanding shares, excluding shares held by the Corporation or a
subsidiary.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust and any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"SECOND CALL DATE" means the 3-year anniversary of the Issue Date.
"SECOND PUT DATE" means the 7-year anniversary of the Issue Date.
"STOCKHOLDER APPROVAL EVENT" means the approval by the stockholders of
the Corporation at or before the next annual meeting of stockholders of the
Corporation of the
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issuance of the Series A Preferred Stock and Series B Preferred Stock, the terms
thereof and the exchange of shares of Series B Preferred Stock into shares of
Series A Preferred Stock.
"VOTING STOCK" means, with respect to any Person, the Capital Stock of
any class or kind (other than the Series B Preferred Stock) ordinarily having
the power to vote for the election of directors or other members of the
governing body of such Person.
3. RANK. (a) Any class or series of stock of the Corporation shall
be deemed to rank:
(i) prior to the Series B Preferred Stock, either as to
the payment of dividends or as to distribution of assets
upon liquidation, dissolution or winding up, or both, if the
holders of such class or series shall be entitled by the
terms thereof to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up,
in preference or priority to the holders of Series B
Preferred Stock ("SENIOR SECURITIES");
(ii) on a parity with the Series B Preferred Stock,
either as to the payment of dividends or as to distribution
of assets upon liquidation, dissolution or winding up, or
both, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof
be different from those of the Series B Preferred Stock, if
such stock shall be Series A 8% Senior Convertible
Participating Preferred Stock ( "SERIES A PREFERRED STOCK")
or if the holders of the Series B Preferred Stock and of
such class of stock or series shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up,
or both, in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation
preferences (including, but not limited to preferences as to
payment of dividends or other amounts distributable upon
liquidation), without preference or priority one over the
other and such class of stock or series is not a class of
Senior Securities ("PARITY SECURITIES"); and
(iii) junior to the Series B Preferred Stock, either as
to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up, or both,
if such stock or series shall be Common Stock or if the
holders of the Series B Preferred Stock shall be entitled by
the terms thereof to receipt of dividends, and of amounts
distributable upon liquidation, dissolution or winding up,
in preference or priority to the holders of shares of such
stock or series (including, but not limited to preferences
as to payment of dividends or other amounts distributable
upon liquidation) ("JUNIOR SECURITIES").
(b) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or options
exercisable or exchangeable for or convertible into any of the Senior
Securities, Junior Securities and Parity Securities, as the case may be.
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(c) The Series B Preferred Stock shall be subject to the
creation of Junior Securities and Parity Securities.
4. DIVIDENDS. (a) The holders of shares of Series B Preferred Stock
shall be entitled to receive with respect to each share of Series B Preferred
Stock, when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at a rate per annum equal to
twelve percent (12%) of the Liquidation Preference per share, payable in
accordance with the terms of this Section 4, at the election of the Corporation
on or before each payment date, either (A) in cash or (B) in additional shares
("ADDITIONAL SHARES") of Series B Preferred Stock. Such dividends shall be
cumulative from the Issue Date regardless of when actually paid (except that
dividends on Additional Shares shall accrue pursuant to their terms from the
date such Additional Shares are issued), whether or not in any Dividend Period
(as defined below) or Dividend Periods there shall be funds of the Corporation
legally available for the payment of such dividends, and shall be payable
semi-annually in arrears on June 30 and December 31 of each year (unless such
day is not a Business Day, in which event such dividends shall be payable on the
next succeeding Business Day) (each such date being a "DIVIDEND PAYMENT DATE"
and each such semi-annual period being a "DIVIDEND PERIOD"). Each such dividend
shall be payable to the holders of record of shares of the Series B Preferred
Stock as they appear on the share register of the Corporation on the
corresponding Record Date. As used herein, the term "RECORD DATE" means, with
respect to the dividend payable on June 30 and December 31, respectively of each
year, the preceding June 15 and December 15, or such other record date, not more
than 60 days nor less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors. Accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such record date, not more than
45 days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(b) The amount of dividends payable for each full Dividend
Period for the Series B Preferred Stock shall be computed by dividing the annual
twelve percent (12%) rate by two. The amount of dividends payable for the
initial Dividend Period, or any other period shorter or longer than a full
Dividend Period, on the Series B Preferred Stock shall be computed on the basis
of twelve 30-day months and a 360-day year. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
the Series B Preferred Stock that may be in arrears; PROVIDED that if dividends
are not paid in full on any Dividend Payment Date, dividends will cumulate as if
the Corporation elected to pay the unpaid dividends in cash and the Liquidation
Preference had been increased by the amount of unpaid dividends until paid.
(c) So long as any shares of the Series B Preferred Stock
are outstanding, no dividend, except as described in the next succeeding
sentence, shall be declared or paid or set apart for payment on any Parity
Securities, nor shall any Parity Securities be redeemed, purchased or otherwise
acquired for any consideration (or moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Securities), unless in each case full cumulative dividends have been or
contemporaneously are declared and paid or declared and consideration sufficient
for the payment thereof set apart for such payment on the Series B Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment
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of the dividend on such class or series of Parity Securities or the redemption,
purchase or other acquisition thereof. When dividends are not paid in full or
consideration sufficient for such payment is not set apart, as aforesaid, all
dividends declared upon shares of the Series B Preferred Stock and all dividends
declared upon any other class or series of Parity Securities shall be declared
ratably in proportion to the respective amounts of dividends accumulated and
unpaid on the Series B Preferred Stock and accumulated and unpaid on such Parity
Securities.
(d) So long as any shares of the Series B Preferred Stock
are outstanding, no dividends (other than dividends or distributions paid in
shares of, or to effectuate a stock split on, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) shall be declared or
paid or set apart for payment or other distribution declared or made upon Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) (any such dividend, distribution, redemption or
purchase being hereinafter referred to as a "JUNIOR SECURITIES DISTRIBUTION")
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for Junior
Securities), unless in each case (i) the full cumulative dividends on all
outstanding shares of the Series B Preferred Stock and accrued and unpaid
dividends on any other Parity Securities shall have been paid or set apart for
payment for all past Dividend Periods with respect to the Series B Preferred
Stock and all past dividend periods with respect to such Parity Securities and
(ii) sufficient consideration shall have been paid or set apart for the payment
of the dividend for the current Dividend Period with respect to the Series B
Preferred Stock and the current dividend period with respect to such Parity
Securities.
(e) If the Corporation elects to pay dividends in Additional
Shares, the number of Additional Shares to be issued as dividends will equal the
cash amount of the dividend that would have been payable if dividends were paid
in cash, divided by the Initial Liquidation Preference.
(f) In case the Corporation shall fix a record date for the
making of any dividend or distribution to holders of Common Stock (including
distributions of stock of the Corporation or its subsidiaries other than
dividends or distributions payable solely in Common Stock), the holder of each
share of Series B Preferred Stock on such record date shall be entitled to
receive an equivalent dividend or distribution based on the number of shares of
Common Stock into which one share of Series A Preferred Stock is convertible on
such record date.
5. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series B Preferred Stock shall be
entitled to receive with respect to each share of Series B Preferred Stock an
amount equal to all dividends (whether or not earned or declared) accrued and
unpaid thereon to the date of final distribution to such holders plus an amount
in cash equal to the Liquidation Preference. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the shares of Series B
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Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any Parity Securities, then such assets,
or the proceeds thereof, shall be distributed among the holders of shares of
Series B Preferred Stock and any such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares of
Series B Preferred Stock and any such other Parity Securities if all amounts
payable thereon were paid in full.
(b) Upon the completion of the distribution required by
Section 5(a) and any other distribution that may be required with respect to any
other series of preferred stock that may from time to time come into existence,
subject to the rights of any other series of preferred stock that may from time
to time come in to existence, the holders of Series A Preferred Stock and the
holders of Series B Preferred Stock shall participate with the Common Stock
ratably on an as converted basis (assuming that each share of Series B Preferred
Stock were converted at the same rate as Series A Preferred Stock) in the
distribution of assets, or the proceeds thereof, until the holders of Series B
Preferred Stock shall have received (including amounts paid pursuant to Section
5(a)) an aggregate of $1,500.00 per share of Series B Preferred Stock (in each
case as adjusted for any stock splits, stock dividends, recapitalizations or the
like); thereafter, subject to the rights of any other series of Preferred Stock
that may from time to time come into existence, if assets remain in the
Corporation, the holders of the Common Stock of the Corporation shall receive
the distribution of assets, or the proceeds thereof, until such time as the
holders of Common stock shall have received, in the aggregate, distributions
equal to their pro-rata percentage of the shares of the Corporation as if the
holders of Series A Preferred Stock and the holders of Series B Preferred Stock
were participating with the Common Stock (and were not entitled to any
preference thereto) on an as converted basis (assuming that each share of Series
B Preferred Stock were converted at the same rate as Series A Preferred Stock)
beginning with the first dollar paid in such liquidation, disqualification or
winding-up; thereafter, subject to the rights of any other series of Preferred
Stock that may from time to time come into existence, if assets remain in the
Corporation the holders of the Common Stock, the Series A Preferred Stock and
the Series B Preferred Stock shall participate in the remaining distributions on
as converted basis (assuming that each share of Series B Preferred Stock were
converted at the same rate as Series A Preferred Stock).
(c) Notwithstanding anything else in this Certificate of
Designation, a liquidation, dissolution or winding up, voluntary or involuntary,
of the Corporation shall be deemed to have occurred upon (A) (i) the acquisition
of the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation, whether of the Corporation with or into any other corporation
or corporations or of any other corporation or corporations with or into the
Corporation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation); or (ii) a sale of all or
substantially all of the assets of the Corporation; PROVIDED that a
consolidation or merger as a result of which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation possess (by reason
of such holdings) 50% or more of the voting power of the corporation surviving
such merger or consolidation (or other corporation which is the issuer of the
capital stock into which the capital stock of the Corporation is converted or
exchanged in such merger or consolidation) shall not be treated as a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation within the meaning of this paragraph 5 or (B) a transaction or
series of transactions in which a
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person or group of persons (as defined in Rule 13d-5(b)(1) of the Exchange Act)
(excluding the initial holder of the Series A Preferred Stock or any of its
Affiliates) acquires beneficial ownership (as determined in accordance with Rule
13d-3 of the Exchange Act) of more than 50% of the Common Stock or the voting
power of the Corporation. Notwithstanding the foregoing, in the event of a
deemed liquidation, dissolution or winding up pursuant to this Section 5(c) as a
result of a transaction in which substantially all of the consideration received
by the Corporation's stockholders is capital stock of the surviving corporation
or the parent thereof (such issuer, the "New Issuer"), if the Board of Directors
of the surviving corporation determines that the payment of cash pursuant to
Section 5(a) would have a material adverse effect on the surviving corporation,
the parent thereof, or the transaction, each holder of the Series B Preferred
Stock shall have the right to receive, in exchange for its shares of Series B
Preferred Stock and in lieu of payments otherwise payable pursuant to Sections
5(a) and 5(b), at its election, either (x) capital stock in such amounts and in
such form as would have been received had such holder converted all of its
Series B Preferred Stock into Common Stock immediately prior to such transaction
(assuming that each share of Series B Preferred Stock were convertible into
Common Stock at the same rate as Series A Preferred Stock) or (y) securities of
the New Issuer equivalent in rights and preferences to the Series B Preferred
Stock.
6. REDEMPTION. (a) The Series B Preferred Stock shall not be
redeemable by the Corporation prior to the First Call Date. All shares of Series
B Preferred Stock shall be redeemable at the option of the Corporation to the
extent the Corporation shall have funds legally available for such payment, at
any time in whole or from time to time in part, (i) on and after the Second Call
Date, or, (ii) if the Minimum Call Stock Price Test has been satisfied, on and
after the First Call Date, at a redemption price per share equal to the greater
of (i) the Liquidation Preference, plus accrued and unpaid dividends thereon to
the date fixed for redemption, and (ii) the Market Value on the redemption date
of the number of shares of Common Stock into which one share of Series A
Preferred Stock is convertible on such date.
(b) Shares of Series B Preferred Stock which have been
issued and reacquired in any manner, including shares purchased or redeemed,
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of the Preferred Stock; PROVIDED that no such issued and
reacquired shares of Series B Preferred Stock shall be reissued or sold as
Series B Preferred Stock.
7. PROCEDURE FOR REDEMPTION. (a) In the event that fewer than all
the outstanding shares of Series B Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be selected by lot or pro rata (with any
fractional shares being rounded to the nearest whole share) as may be determined
by the Board of Directors.
(b) In the event the Corporation shall redeem shares of
Series B Preferred Stock, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Corporation; PROVIDED that neither the failure to give such notice nor any
defect therein shall
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affect the validity of the giving of notice for the redemption of any share of
Series B Preferred Stock to be redeemed except as to the holder to whom the
Corporation has failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (i) the redemption date
(which shall be a date on or after the First Call Date); (ii) the number of
shares of Series B Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of shares to be
redeemed from such holder (which if less than all the shares outstanding, must
be on a pro-rate basis); (iii) the redemption price formula; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after
the redemption date, dividends on the shares of Series B Preferred Stock so
called for redemption shall cease to accrue, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price as aforesaid. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares without cost to the holder thereof.
8. PUT RIGHTS. (a) The holders of the Series B Preferred Stock
shall have the right to put their shares to the Corporation (the "PUT RIGHTS")
only to the extent provided for in this paragraph 8. On or after the Second Put
Date, the Put Rights shall be exercisable on all shares of Series B Preferred
Stock. On or after the earlier to occur of (A) a Change of Control and (B) the
First Put Sale Date, but prior to the Second Put Date, the Put Rights shall be
exercisable for that number of shares of Series B Preferred Stock equal to the
product of (x) the total number of shares of Series B Preferred Stock that the
Corporation has issued plus the number it is then obligated to issue in the form
of dividends on the Series A Preferred Stock or Series B Preferred Stock (the
"TOTAL B SHARES"), times (y) the quotient of (i) the number of shares of Series
A Preferred Stock that have been converted into Common Stock plus the number of
shares of Series A Preferred Stock that have been sold or otherwise transferred
by the initial holder thereof to a third party divided by (ii) the total number
of shares of Series A Preferred Stock that the Corporation has issued plus the
number it is then obligated to issue in the form of dividends on the Series A
Preferred Stock (the "TOTAL A SHARES"). If a Change of Control has not occurred,
on or after the First Put Converted Date but prior to the earlier to occur of
(A) a Change of Control and (B) the First Put Sale Date, the Put Rights shall be
exercisable for that number of shares of Series B Preferred Stock equal to the
product of (i) the Total B Shares, times (y) the quotient of (i) the number of
shares of Series A Preferred Stock that have been converted into Common Stock
divided by (ii) the Total A Shares.
With respect to that number of shares of Series B Preferred Stock for
which Put Rights are exercisable as provided above in this paragraph 8, less the
number of shares for which Put Rights have already been exercised (the "PUTTABLE
SHARES"), the holders of the shares of Series B Preferred Stock shall have the
right, at any time and from time to time, at such holder's option, to put any or
all such shares to the Corporation. With respect to each share duly put to the
Corporation pursuant to this paragraph 8, the Corporation shall pay an amount
(the "PUT
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CONSIDERATION") equal to the Market Value on the date the Put Right is exercised
of the number of Common Shares into which one share of Series A Preferred Stock
is convertible, (or would have been convertible had any Series A Preferred Stock
then been outstanding), as such number may have been adjusted, plus any amount
of cash payable on such conversion for fractional shares.
Notwithstanding the foregoing, at the Corporation's election, the
Corporation may pay the Put Consideration, in whole or in part, in the form of
shares of Common Stock valued at the Market Price on the date the Put Rights are
exercised. Notwithstanding the foregoing, in the event of any exercise of Put
Rights that would require the Corporation to pay in cash in excess of $25
million pursuant to this paragraph 8 in any 3-month period, in lieu of the cash
portion of the Put Consideration constituting such excess (the "NOTE AMOUNT"),
the holder exercising such Put Rights shall at the election of the Corporation,
be issued a promissory note (a "NOTE") by the Corporation in the amount of the
Note Amount if (i) federal or state law requires a vote of the stockholders of
the Corporation in order for the Corporation to issue Common Shares in payment
of the Put Consideration, (ii) stockholders of the Corporation have voted in
favor of issuing Notes rather than Common Stock in connection with Put Right
exercises and (iii) the Board of Directors of the Corporation determines that
the issuance of cash would have a material adverse effect on the financial
condition of the Corporation and its subsidiaries taken as a whole. Any such
Note shall be secured to the fullest extent, and have the highest priority,
permitted under the Corporation's then existing debt instruments, shall have a
two-year term, shall bear interest at the lesser of (i) the then applicable U.S.
Treasuries rate plus 850 basis points and (ii) the highest rate permitted by
applicable law, and shall be subject to documentation reasonably acceptable to
holders of a majority of the Series B Preferred Stock.
Notwithstanding any call for redemption pursuant to paragraph 6, the
right to put shares so called for redemption shall terminate at the close of
business on the date immediately preceding the date fixed for such redemption
unless the Corporation shall default in making payment of the amount payable
upon such redemption.
With respect to each holder of Series B Preferred Stock, the "HOLDER
SHARE TOTAL" shall equal the number of shares of Series B Preferred Stock that
such Holder currently holds (the "CURRENT SHARE TOTAL") plus the number of
shares of Series B Preferred Stock that such Holder has previously put pursuant
to this paragraph 8 (the "PRIOR PUT TOTAL"). Each holder of Series B Preferred
Stock shall have the right to exercise Put Rights only with respect to (i) that
proportion of its Holder Share Total that equals the proportion of the number of
shares of Series B Preferred Stock for which Put Rights are exercisable as
provided above in this paragraph 8 over the Total B Shares, less (ii) the Prior
Put Total.
(b) (i) In order to exercise the Put Rights, the holder
of the shares of Series B Preferred Stock to be put shall surrender the
certificate representing such shares at the office of the Corporation, with a
written notice of election to put completed and signed, specifying the number of
shares to be put. Unless the shares issuable on the put, if any, are to be
issued in the same name as the name in which such shares of Series B Preferred
Stock are registered, each share surrendered for the put shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or the holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
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(ii) As promptly as practicable after the surrender by
a holder of certificates for shares of Series B Preferred
Stock as aforesaid, the Corporation shall issue and shall
deliver to such holder, or on the holder's written order to
the holder's transferee, (v) the cash portion of the Put
Consideration, (w) a certificate or certificates for the
whole number of shares of Common Stock issuable upon the put
as part of the Put Consideration and (x) in the event of a
put in part, a certificate or certificates for the whole
number of shares of Series B Preferred Stock not being put.
(iii) Each put shall be deemed to have been effected
immediately prior to the close of business on the date on
which the certificates for shares of Series B Preferred
Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person in whose
name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such put, if any, shall
be deemed to have become the holder of record of the shares
of Common Stock represented thereby at such time on such
date. All shares of Common Stock delivered pursuant to this
paragraph 8 will upon delivery be duly and validly issued
and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights. Upon the
surrender of certificates representing shares of Series B
Preferred Stock, such shares shall no longer be deemed to be
outstanding and all rights of a holder with respect to such
shares surrendered for the put shall immediately terminate
except the right to receive the Common Stock and other
amounts payable pursuant to this paragraph 8 and a
certificate or certificates representing shares of Series B
Preferred Stock not put.
(c) (i) Upon delivery to the Corporation by a holder of
shares of Series B Preferred Stock of a notice of election to put, the right of
the Corporation to redeem such shares of Series B Preferred Stock shall
terminate, regardless of whether a notice of redemption has been mailed as
aforesaid.
(d) Prior to the delivery of any securities which the
Corporation shall elect to deliver upon the put of the Series B Preferred Stock,
the Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the put of the Series B Preferred Stock
pursuant hereto; PROVIDED that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the Series B Preferred Stock to be put and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
9. CONVERSION TO SERIES A PREFERRED STOCK. If a Stockholder Approval
Event shall occur, each outstanding share of Series B Preferred Stock, and
fractions thereof, shall automatically and immediately convert, on a one-for-one
basis, into shares of Series A Preferred
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Stock and (ii) any right to obtain any then accrued but unpaid dividends on each
share of Series B Preferred Stock shall automatically and immediately attach to
the resulting converted share, provided that the dividend rate on the Series B
Preferred Stock shall be applicable and dividends will accrue at such rate until
the date of such conversion. After such conversion, upon surrender to the
Corporation for cancellation of a certificate previously representing
outstanding shares of Series B Preferred Stock, together with instruments of
transfer in form satisfactory to the Corporation, the holder of such certificate
shall be entitled to receive in exchange therefor a certificate representing the
same number of shares of Series A Preferred Stock as the number of shares of
Series B Preferred Stock previously represented by the surrendered certificate.
Until so surrendered, each outstanding certificate that, prior to the time of
the conversion of the Series B Preferred Stock into Series A Preferred Stock
(the "Conversion Time"), represented outstanding shares of Series B Preferred
Stock will be deemed from and after the Conversion Time, for all corporate
purposes, to evidence the ownership of the same number of shares of Series A
Preferred Stock.
10. VOTING RIGHTS. (a) Except as otherwise required by Delaware
law, the holders of shares of Series B Preferred Stock shall not be entitled to
any voting rights. Except as expressly required under Delaware Law, on any
matter on which holders of shares of Series B Preferred Stock shall be entitled
to vote, they shall be entitled to one vote per share, voting as a single class.
(b) So long as any shares of Series B Preferred Stock
are outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose of the holders of a
majority of the shares of Series B Preferred Stock then outstanding, amend,
alter or repeal, whether by merger, consolidation, combination, reclassification
or otherwise, the Amended and Restated Certificate of Incorporation or By-laws
of the Corporation or of any provision thereof (including the adoption of a new
provision thereof) which would result in an alteration or circumvention of the
voting powers, designation and preferences and relative participating, optional
and other special rights, and qualifications, limitations and restrictions of
the Series B Preferred Stock; PROVIDED that any such amendment or alteration
that changes the dividend payable on, or the liquidation preference or the par
value of, the Series B Preferred Stock shall require the affirmative vote at a
meeting of holders of Series B Preferred Stock duly called for such purpose, or
the written consent, of the holder of each share of Series B Preferred Stock.
(c) The Corporation shall not, without first obtaining
the approval of the holders of not less than a majority of the total number of
shares of Series B Preferred Stock then outstanding:
(i) authorize, create or issue shares of any class or
series of stock having any preference or priority superior
to or on a parity with any such preference or priority of
the Series B Preferred Stock;
(ii) take any step resulting in the redemption of
shares of Parity Securities or Junior Securities, except as
set forth in paragraphs 4(c) and 4(d) of this Certificate of
Designations; or
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(iii) amend this paragraph 10.
(d) The consent or votes required in paragraph 10(b)
and 10(c) above shall be in addition to any approval of stockholders of the
Corporation which may be required by law or pursuant to any provision of the
Corporation's certificate of incorporation or bylaws.
(e) On the Issue Date, the number of directors then
constituting the Board of Directors shall be increased by one and the holders of
shares of Series B Preferred Stock, voting as a single class, shall be entitled
to elect one additional director to serve on the Board of Directors at any
annual meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Series B Preferred Stock called as
hereinafter provided. Whenever a Stockholder Approval Event has occurred or
majority of the shares of Series B Preferred Stock issued on the Issue Date have
been put to the Corporation pursuant to paragraph 8 or have been transferred by
the initial holder thereof to a Person that is not an Affiliate of the initial
holder, then the right of the holders of the Series B Preferred Stock to elect
such additional director shall cease, and the term of office of any person
elected as director by the holders of the Series B Preferred Stock shall
forthwith terminate and the number of the Board of Directors shall be reduced
accordingly. At any time after voting power to elect a director shall have
become vested and be continuing in the holders of Series B Preferred Stock
pursuant to this paragraph, or if a vacancy shall exist in the office of a
director elected by the holders of Series B Preferred Stock, a proper officer of
the Corporation may, and upon the written request of the holders of record of at
least twenty-five percent (25%) of the shares of Series B Preferred Stock then
outstanding addressed to the Secretary of the Corporation shall, call a special
meeting of the holders of Series B Preferred Stock, for the purpose of electing
the director which such holders are entitled to elect. If such meeting shall not
be called by a proper officer of the Corporation within twenty (20) days after
personal service of said written request upon the Secretary of the Corporation,
or within twenty (20) days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Corporation at its principal
executive offices, then the holders of at least twenty-five percent (25%) of the
outstanding shares of Series B Preferred Stock may designate in writing one of
their number to call such meeting at the expense of the Corporation, and such
meeting may be called by the person so designated upon the notice required for
the annual meeting of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders. Any holder of Series B
Preferred Stock so designated shall have, and the Corporation shall provide,
access to the lists of stockholders to be called pursuant to the provisions
hereof.
11. REPORTS. The Corporation shall mail to all holders of Series B
Preferred Stock those reports, proxy statements and other materials that it
mails to all of its holders of Common Stock. In the event the Corporation is not
required to file quarterly and annual financial reports with the Securities and
Exchange Commission pursuant to Section 13 or Section 15(d) of the Exchange Act,
the Corporation will furnish the holders of the Series B Preferred Stock with
reports containing the same information as would be required in such reports.
12. QUOTATION. So long as any of the Series B Preferred Stock is
outstanding, the Corporation shall use commercially reasonable efforts to
maintain the quotation of the Common Stock on the Nasdaq National Market.
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13. GENERAL PROVISIONS. (a) The headings of the paragraphs,
subparagraphs, clauses and subclauses of this Certificate of Designations are
for convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
(b) Each holder of Series B Preferred Stock, by
acceptance thereof, acknowledges and agrees that payments of dividends,
interest, premium and principal on, and exchange, redemption and repurchase of,
such securities by the Corporation are subject to restrictions on the
Corporation contained in certain credit and financing agreements.
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IN WITNESS WHEREOF, marchFIRST, Inc. has caused this Certificate of
Designations to be signed and attested by the undersigned this __ day of
________, ____.
MARCHFIRST, INC.,
By:
------------------------
Name:
Title:
ATTEST:
-----------------------------
Name:
Assistant Secretary
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