EXHIBIT 10.2
(Conformed copy)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A 8% SENIOR CONVERTIBLE
PARTICIPATING PREFERRED STOCK
of
marchFIRST, Inc.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Robert F. Bernard, Chief Executive Officer,
and Edward V. Szofer, Secretary, 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 FOURTH 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. 430,000 shares of the Preferred Stock of the
Corporation shall be designated as Series A 8% Senior Convertible Participating
Preferred Stock (the "SERIES A PREFERRED STOCK").
<PAGE>
2. DEFINITIONS. Unless the context otherwise requires, when used herein the
following terms shall have the meaning indicated.
"20 DAY MARKET PRICE" means the average of the daily Market Prices of the
Common Stock for the 20 consecutive trading days ending the day prior to the
date for which such value is to be computed.
"ADJUSTED CONVERSION PRICE" means, at any time, the Initial Liquidation
Preference divided by the Conversion Ratio in effect at such time.
"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.
"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.
"COMMON STOCK" means the Corporation's common stock, par value $.001 per
share.
"CONVERSION RATIO" means 500 as of the Issue Date, subject to adjustment
from time to time pursuant to paragraph 8(g) hereof.
"DISCLOSURE LETTER" means the Disclosure Letter dated December 13, 2000
setting forth exceptions to the Stock Purchase Agreement dated as of December
13, 2000 between the Corporation and the initial holder of the Series A
Preferred Stock.
"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.
"GROUP" means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
"INITIAL LIQUIDATION PREFERENCE" is an amount equal to $1,000.00 per
2
<PAGE>
whole share of Series A Preferred Stock (as adjusted for stock splits, stock
dividends and similar transactions).
"ISSUE DATE" means the first date of issuance of shares of Series A
Preferred Stock.
"LIQUIDATION PREFERENCE" is an amount equal to $1,000.00 per whole share
of Series A 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.
3
<PAGE>
"SECOND CALL DATE" means the 3-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 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.
3. RANK.(a) Any class or series of stock of the Corporation shall be
deemed to rank:
(i) prior to the Series A 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 A Preferred Stock ("SENIOR SECURITIES");
(ii) on a parity with the Series A 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 A
Preferred Stock, if such stock shall be Series B 12% Senior
Participating Preferred Stock ("SERIES B PREFERRED STOCK") or if the
holders of the Series A 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 A 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 A
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
4
<PAGE>
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.
(c) The Series A Preferred Stock shall be subject to the creation of
Junior Securities and Parity Securities.
4. DIVIDENDS: (a) The holders of shares of Series A Preferred Stock shall
be entitled to receive with respect to each share of Series A 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
eight percent (8%) 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 either (i) Series A Preferred Stock if a Stockholder
Approval Event shall have occurred or (ii) Series B Preferred Stock if a
Stockholder Approval Event shall not have occurred. 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 A 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 A Preferred Stock shall be computed by dividing the annual eight
percent (8%) rate by two. The amount of dividends payable for the initial
5
<PAGE>
Dividend Period, or any other period shorter or longer than a full Dividend
Period, on the Series A 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 A 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 A 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 A
Preferred Stock for all Dividend Periods terminating on or prior to the date of
payment 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 A 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 A Preferred Stock and accumulated and
unpaid on such Parity Securities.
(d) So long as any shares of the Series A 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 A 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
6
<PAGE>
Periods with respect to the Series A 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 A 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 A 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 such 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 A Preferred Stock shall be
entitled to receive with respect to each share of Series A 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 A
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 A Preferred Stock and any such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares of
Series A 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 into 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
7
<PAGE>
assets, or the proceeds thereof, until the holders of Series A Preferred Stock
shall have received (including amounts paid pursuant to Section 5(a)) an
aggregate of $1,500.00 per share of Series A 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, dissolution 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 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
8
<PAGE>
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 A
Preferred Stock shall have the right to receive, in exchange for its shares of
Series A 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 A Preferred Stock immediately prior to such transaction or
(y) securities of the New Issuer equivalent in rights and preferences to the
Series A Preferred Stock.
6. REDEMPTION. (a) The Series A Preferred Stock shall not be redeemable by
the Corporation prior to the First Call Date. All shares of Series A 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 Liquidation
Preference, plus accrued and unpaid dividends thereon to the date fixed for
redemption.
(b) Shares of Series A 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 A Preferred Stock shall be reissued or sold as Series A
Preferred Stock.
7. PROCEDURE FOR REDEMPTION. (a) In the event that fewer than all the
outstanding shares of Series A 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 A
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
9
<PAGE>
affect the validity of the giving of notice for the redemption of any share of
Series A 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 A 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 of the shares outstanding,
must be on a pro-rata 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 A 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. CONVERSION. (a) Subject to the provisions of this paragraph 8, the
holders of the shares of Series A Preferred Stock shall have the right, at any
time and from time to time, at such holder's option, to convert any or all
outstanding shares (and fractional shares) of Series A Preferred Stock, in
whole or in part, into fully paid and non-assessable shares of Common Stock.
The number of shares of Common Stock deliverable upon conversion of a share of
Series A Preferred Stock as of any date shall be an amount equal to the
Liquidation Preference divided by the Adjusted Conversion Price.
Notwithstanding any call for redemption pursuant to paragraph 6, the right to
convert 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.
(b) (i) In order to exercise the conversion privilege, the holder of
the shares of Series A Preferred Stock to be converted shall surrender the
certificate representing such shares at the office of the Corporation,
with a written notice of election to convert completed and signed,
specifying the number of shares to be converted. Unless the shares
issuable on conversion are to be issued in the same name as the name in
10
<PAGE>
which such shares of Series A Preferred Stock are registered, each share
surrendered for conversion 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.
(ii) As promptly as practicable after the surrender by a holder
of certificates for shares of Series A 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, (w) a
certificate or certificates for the whole number of shares of Common
Stock issuable upon the conversion of such shares in accordance with
the provisions of this paragraph 8, (x) any cash adjustment required
pursuant to paragraph 8(f) and (y) in the event of a conversion in
part, a certificate or certificates for the whole number of shares of
Series A Preferred Stock not being so converted.
(iii) Each conversion 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 A 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 conversion
shall be deemed to have become the holder of record of the shares of
Common Stock represented thereby at such time on such date and such
conversion shall be into a number of shares of Common Stock equal to
the product of the number of shares of Series A Preferred Stock
surrendered times the Liquidation Preference divided by the Adjusted
Conversion Price in effect at such time on such date. All shares of
Common Stock delivered upon conversion of the Series A Preferred
Stock 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 A 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 conversion 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 A Preferred Stock not
converted.
11
<PAGE>
(c) (i) Upon delivery to the Corporation by a holder of shares of
Series A Preferred Stock of a notice of election to convert, the right of
the Corporation to redeem such shares of Series A Preferred Stock shall
terminate, regardless of whether a notice of redemption has been mailed as
aforesaid.
(ii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and
unpaid dividends on shares of Series A Preferred Stock, whether or
not in arrears, on conversion of such shares or for dividends in cash
on the shares of Common Stock issued upon such conversion. (d) (i)
The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock as shall be required for
the purpose of effecting conversions of the Series A Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the
Series A 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 conversion of the Series A 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 A
Preferred Stock to be converted 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.
(f) In connection with the conversion of any shares of Series A
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied
by the Market Price per share of Common Stock on the business day on which such
shares of Series A Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the date of
issue of the Series A Preferred Stock (A) declare a dividend or make a
distribution on Common Stock payable in Common Stock, (B) subdivide or
split the outstanding Common Stock, (C) combine or
12
<PAGE>
reclassify the outstanding Common Stock into a smaller number of shares,
(D) issue any shares of its capital stock in a reclassification of Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
corporation), or (E) consolidate with, or merge with or into, any other
Person, the Conversion Ratio in effect at the time of the record date for
such dividend or distribution or of the effective date of such
subdivision, split, combination, consolidation, merger or reclassification
shall be proportionately adjusted so that the conversion of the Series A
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock or other securities of the
Corporation (or shares of any security into which such shares of Common
Stock have been combined, consolidated, merged or reclassified pursuant to
clause 8(g)(i)(C), 8(g)(i)(D) or 8(g)(i)(E) above) which, if this Series A
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification, assuming such holder of Common
Stock of the Corporation (x) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such recapitalization, sale or transfer was made,
as the case may be ("CONSTITUENT PERSON"), or an affiliate of a
constituent person and (y) failed to exercise any rights of election as to
the kind or amount of securities, cash and other property receivable upon
such reclassification, change, consolidation, merger, recapitalization,
sale or transfer (PROVIDED, that if the kind or amount of securities, cash
and other property receivable upon such reclassification, change,
consolidation, merger, recapitalization, sale or transfer is not the same
for each share of Common Stock of the Corporation held immediately prior
to such reclassification, change, consolidation, merger, recapitalization,
sale or transfer by other than a constituent person or an affiliate
thereof and in respect of which such rights of election shall not have
been exercised ("NON-ELECTING SHARE"), then for the purpose of this
subparagraph 8(g) the kind and amount of securities, cash and other
property receivable upon such reclassification, change, consolidation,
merger, recapitalization, sale or transfer by each non-electing share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such adjustment shall be made
successively whenever any event listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (other than Common Stock issued (A) pursuant to the
Corporation's stock option plans or pursuant to any other Common
Stock related employee compensation plans of the
13
<PAGE>
Corporation approved by the Corporation's Board of Directors or its
predecessors (including such plans under Section 423 of the Internal
Revenue Code of 1986, as amended) (collectively, "STOCK PLANS") or
pursuant to obligations of the Corporation existing prior to the
Issue Date to issue shares of Common Stock, other than obligations
under Employee Retention Agreements (as defined below)("EXISTING
OBLIGATIONS") or (B) upon exercise or conversion of any security the
issuance of which caused an adjustment under paragraphs 8(g)(iii) or
8(g)(iv) hereof) without consideration or for a consideration per
share less than the then Trigger Value, the Conversion Ratio to be in
effect after such issuance or sale shall be determined by multiplying
the Conversion Ratio in effect immediately prior to such issuance or
sale by a fraction, (1) the numerator of which shall be the product
of (I) the aggregate number of shares of Common Stock outstanding
immediately after such issuance or sale plus the number of shares of
Common Stock into which the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock are convertible (assuming the
Series B Preferred Stock were convertible into Common Stock at the
same rate as the Series A Preferred Stock) immediately prior to such
issuance or sale (the "CONVERT TOTAL") and (II) the Current Valuation
Per Common Share (as defined in paragraph 8(g)(vi)) immediately prior
to such issuance or sale and (2) the denominator of which shall be
the sum of (x) the product of (I) the number of shares of Common
Stock outstanding immediately prior to the time of such issuance or
sale plus the Convert Total and (II) the Current Valuation Per Common
Share immediately prior to such issuance or sale and (y) the
aggregate consideration, if any, to be received by the Corporation
upon such issuance or sale, but in no event will such fraction be
less than one. In case any portion of the consideration to be
received by the Corporation shall be in a form other than cash, the
fair market value of such noncash consideration shall be utilized in
the foregoing computation. Such fair market value shall be determined
by the Board of Directors of the Corporation; PROVIDED that if the
holders of a majority of the Series A Preferred Stock shall object to
any such determination, the Board of Directors shall retain an
independent appraiser reasonably satisfactory to such holders to
determine such fair market value. The holders shall be notified
promptly of any consideration other than cash to be received by the
Corporation and furnished with a description of the consideration and
the fair market value thereof, as determined by the Board of
Directors.
14
<PAGE>
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants to the holders of its Common
Stock or other securities entitling such holders to subscribe for or
purchase shares of Common Stock (or securities convertible into
shares of Common Stock) at a price per share of Common Stock (or
having a conversion price per share of Common Stock, if a security
convertible into shares of Common Stock) less than the then Trigger
Value on such record date, the maximum number of shares of Common
Stock issuable upon exercise of such rights, options or warrants (or
conversion of such convertible securities) shall be deemed to have
been issued and outstanding as of such record date and the Conversion
Ratio shall be adjusted pursuant to paragraph 8(g)(ii) hereof, as
though such maximum number of shares of Common Stock had been so
issued for an aggregate consideration payable by the holders of such
rights, options, warrants or convertible securities prior to their
receipt of such shares of Common Stock. In case any portion of such
consideration shall be in a form other than cash, the fair market
value of such noncash consideration shall be determined as set forth
in paragraph 8(g)(ii) hereof. Such adjustment shall be made
successively whenever such record date is fixed; and in the event
that such rights, options or warrants are not so issued or expire
unexercised, or in the event of a change in the number of shares of
Common Stock to which the holders of such rights, options or warrants
are entitled (other than pursuant to adjustment provisions therein
comparable to those contained in this paragraph 8(g)), the Conversion
Ratio shall again be adjusted to be the Conversion Ratio which would
then be in effect if such record date had not been fixed, in the
former event, or the Conversion Ratio which would then be in effect
if such holder had initially been entitled to such changed number of
shares of Common Stock, in the latter event.
(iv) In case the Corporation shall issue rights, options (other
than options issued pursuant to a Stock Plan) or warrants entitling
the holders thereof to subscribe for or purchase Common Stock (or
securities convertible into shares of Common Stock) or shall issue
convertible securities, and the price per share of Common Stock of
such rights, options, warrants or convertible securities (including,
in the case of rights, options or warrants, the price at which they
may be exercised) is less than the then Trigger Value, the maximum
number of shares of Common Stock issuable upon exercise of such
rights, options or warrants or upon conversion of such convertible
securities shall be deemed to have
15
<PAGE>
been issued and outstanding as of the date of such sale or issuance,
and the Conversion Ratio shall be adjusted pursuant to paragraph
8(g)(ii) hereof as though such maximum number of shares of Common
Stock had been so issued for an aggregate consideration equal to the
aggregate consideration paid for such rights, options, warrants or
convertible securities and the aggregate consideration payable by the
holders of such rights, options, warrants or convertible securities
prior to their receipt of such shares of Common Stock. In case any
portion of such consideration shall be in a form other than cash, the
fair market value of such noncash consideration shall be determined
as set forth in paragraph 8(g)(ii) hereof. Such adjustment shall be
made successively whenever such rights, options, warrants or
convertible securities are issued; and in the event that such rights,
options or warrants expire unexercised, or in the event of a change
in the number of shares of Common Stock to which the holders of such
rights, options, warrants or convertible securities are entitled
(other than pursuant to adjustment provisions therein comparable to
those contained in this paragraph 8(g)), the Conversion Ratio shall
again be adjusted to be the Conversion Ratio which would then be in
effect if such rights, options, warrants or convertible securities
had not been issued, in the former event, or the Conversion Ratio
which would then be in effect if such holders had initially been
entitled to such changed number of shares of Common Stock, in the
latter event. No adjustment of the Conversion Ratio shall be made
pursuant to this paragraph 8(g)(iv) to the extent that the Conversion
Ratio shall have been adjusted pursuant to paragraph 8(g)(iii) upon
the setting of any record date relating to such rights, options,
warrants or convertible securities and such adjustment fully reflects
the number of shares of Common Stock to which the holders of such
rights, options, warrants or convertible securities are entitled and
the price payable therefor.
(v) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any
such distribution made in connection with a consolidation or merger
in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property (other than dividends
payable in Common Stock or rights, options or warrants referred to
in, and for which an adjustment is made pursuant to, paragraph
8(g)(iii) hereof), the Conversion Ratio to be in effect after such
record date shall be determined by multiplying the Conversion Ratio
in effect immediately prior to such record date by a fraction, (A)
the numerator of which shall be the Current
16
<PAGE>
Valuation Per Common Share on such record date, and (B) the
denominator of which shall be the Current Valuation Per Common Share
on such record date, less the fair market value (determined as set
forth in paragraph 8(g)(ii) hereof) of the portion of the assets,
other property or evidence of indebtedness so to be distributed which
is applicable to one share of Common Stock. Such adjustments shall be
made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Conversion Ratio
shall again be adjusted to be the Conversion Ratio which would then
be in effect if such record date had not been fixed.
(vi) In the event that the Corporation, directly or indirectly,
pays consideration of more than $25 million, in the aggregate, in
excess of any insurance coverage or other right of recovery or
set-off against any third party, to the extent such right of recovery
or set-off has been finally agreed to in a binding settlement or
finally determined by a court of competent jurisdiction without a
right to appeal (such consideration, an "EXCESS PAYMENT"), in
settlement or payment of any or all damages, losses, liabilities,
expenses or claims of any kind (including, without limitation,
expenses of investigation and attorney's fees and expenses)
("DAMAGES") relating to, arising under or resulting from any action,
suit or proceeding brought by any party other than a holder or
purchaser of the Series A Preferred Stock or Series B Preferred Stock
and relating to or arising out of a misstatement or alleged
misstatement of a material fact, or omission or alleged omission of a
material fact (including, without limitation, any claim pursuant to
Rule 10b-5 under the Securities Exchange Act of 1934 or pursuant to
any comparable state law or regulation) that relates to events or
circumstances occurring in whole or in part on or prior to December
13, 2000 and was made in connection with the purchase of, failure to
purchase, sale of, failure to sell, conversion of, failure to
convert, redemption of, failure to redeem, exchange of or failure to
exchange the Corporation's or its Affiliates' (or any of its or their
predecessor or successor entity's) securities, such Excess Payment
shall be deemed an issuance of stock for which the Conversion Ratio
shall be subject to adjustment pursuant to paragraph 8(g)(ii)
(regardless of whether the Excess Payment is actually paid in stock
or is paid in cash or any other asset or security), and the aggregate
consideration received by the Corporation in connection with such
issuance shall be deemed to be $0.00. Any Excess Payment made in the
form of cash or any other asset or security shall be treated for
purposes of
17
<PAGE>
the Section 8(g)(ii) computation as a deemed issuance of stock in
which the number of shares issued equals the quotient of the fair
market value of the Excess Payment divided by the Current Valuation
Per Common Share. The adjustment of the Conversion Ratio pursuant to
this Section 8(g)(vi) shall be the sole remedy of a holder of Series
A Preferred Stock relating to an Excess Payment in respect of such
Series A Preferred Stock.
(vii) For purposes of any computation under paragraphs 8(g)(ii),
8(g)(iii), 8(g)(iv), 8(g)(v) or 8(g)(vi) hereof, on any determination
date, if the computation is being made with respect to any issuance
of stock in connection with any agreement (including any amendment,
modification or replacement thereof whenever made) (an "EMPLOYEE
RETENTION AGREEMENT") referred to in paragraph 7 of Section 3.5(b) of
the Disclosure Letter, or any substantially similar agreement
(including any amendment, modification or replacement thereof)
entered into by the Corporation, its predecessors or successors or
its or their respective Affiliates on or prior to December 13, 2000,
obligating the Corporation to deliver Common Stock to any of the
Corporation's or its Affiliates' (or any of its or their predecessor
or successor entity's) current or former employees or consultants in
respect of an agreement by such employee or consultant to remain in
the employ of, or as a consultant to, the Corporation following an
acquisition transaction, then both the "TRIGGER VALUE" and the
"CURRENT VALUATION PER COMMON SHARE" shall be the greater of the 20
Day Market Price and $4.00 (as adjusted for any stock splits, stock
dividends, recapitalization or the like) and the Corporation will be
deemed to have received aggregate consideration equal to the product
of the number of shares of Common Stock issued and the Market Price.
In the event that the Corporation satisfies an obligation to deliver
stock pursuant to an Employee Retention Agreement by delivering cash
or cash equivalents, and the Corporation has sold stock (or any
securities issuable upon conversion or exchange thereof)(other than
the issuance by the Corporation of the Series A Preferred Stock or
the Series B Preferred Stock (or any securities issuable upon
conversion or exchange thereof) or any issuance pursuant to a Stock
Plan or an Existing Obligation) within the six months prior to the
date of such cash delivery and as to which less than all of the
proceeds have previously been applied pursuant to this Section
8(g)(vii) then, to the extent of the proceeds of such offering(s)
(the "SUBSTITUTE OFFERING(S)") which have not previously been applied
for purposes of this Section (which shall be applied on a LIFO
18
<PAGE>
basis with the proceeds of the most recent offering being applied
first), the Corporation shall be deemed to have issued, in connection
with such Employee Retention Agreement, the number of shares of
Common Stock in exchange for which the Corporation received proceeds
in an amount equal to the cash delivered pursuant to such Employee
Retention Agreement, and the Conversion Ratio will be adjusted for
such issuance pursuant to this Section 8(g)(vii) as if such
adjustment had occurred at the time of the issuance by the
Corporation of such shares and no prior adjustment (if any) with
respect to such issuance had occurred. If the Conversion Ratio had
previously been adjusted as a consequence of such Substitute
Offering, the adjustment of the Conversion Ratio under this Section
shall be reduced to the extent necessary so that the adjustments
shall not be duplicative. For purposes of any computation under
paragraphs 8(g)(ii), 8(g)(iii), 8(g)(iv), 8(g)(v) or 8(g)(vi) hereof,
on any determination date, if the computation is not being made with
respect to any issuance of stock in connection with an Employee
Retention Agreement as provided above, the "CURRENT VALUATION PER
COMMON SHARE" shall be the greater of the 20 Day Market Price and the
Adjusted Conversion Price, and the "TRIGGER VALUE" shall be the 20
Day Market Price, and the aggregate consideration received by the
Corporation shall equal the fair market value of any consideration
received by the Corporation for such issuance.
(viii) No adjustment to the Conversion Ratio pursuant to
paragraphs 8(g)(ii), 8(g)(iii), 8(g)(iv) and 8(g)(v) above shall be
required unless such adjustment would require an increase or decrease
of at least 1% in the Conversion Ratio; PROVIDED HOWEVER, that any
adjustments which by reason of this paragraph 8(g)(viii) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph
8(g) shall be made to the nearest four decimal points.
(ix) In the event that, at any time as a result of the
provisions of this paragraph 8(g), the holder of this Series A
Preferred Stock upon subsequent conversion shall become entitled to
receive any shares of capital stock of the Corporation other than
Common Stock, the number of such other shares so receivable upon
conversion of this Series A Preferred Stock shall thereafter be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions contained herein.
19
<PAGE>
(h) All adjustments pursuant to this paragraph 8 shall be notified to
the holders of Series A Preferred Stock and Series B Preferred Stock and
such notice shall be accompanied by a Schedule of Computations of the
adjustments.
(i) Notwithstanding anything to the contrary contained herein, the
Corporation shall not be obligated to issue any shares of Common Stock
upon conversion of the Series A Preferred Stock if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock
which the Corporation may issue upon conversion of the Series A Preferred
Stock without breaching the Corporation's obligations under the rules or
regulations of The Nasdaq Stock Market (the "Exchange Cap"), except that
such limitation shall not apply in the event that the Corporation (a)
obtains the approval of its stockholders as required by the applicable
rules of The Nasdaq Stock Market (or any successor rule or regulation) for
issuances of Common Stock in excess of such amount ("Stockholder
Approval"), or (b) obtains a written opinion from outside counsel to the
Corporation that such approval is not required, which opinion shall be
reasonably satisfactory to the holders of a majority of the shares of
Series A Preferred Stock then outstanding (an "Opinion"). Until
Stockholder Approval or an Opinion is obtained, no holder of shares of
Series A Preferred Stock shall be issued, upon conversion of shares of
Series A Preferred Stock, any shares of Common Stock which, together with
all other shares of Common Stock issued prior thereto upon conversion of
Series A Preferred Stock, would exceed the Exchange Cap (such shares of
Common Stock which would cause the Exchange Cap to be exceeded being
hereinafter referred to as "Excess Shares"). To the extent any such holder
submits any share of Series A Preferred Stock (or portion thereof) for
conversion into Common Stock pursuant to this Section 8, which would, but
for such limitation, cause the Company to issue Excess Shares, the Company
shall immediately issue to such holder in exchange for such share of
Series A Preferred, one share (or an equivalent portion thereof) of Series
B Preferred Stock, and the Corporation shall promptly deliver to such
holder a certificate representing all shares of Series B Preferred Stock
which are issued to such holder thereby. In the event that more than one
holder of Series A Preferred Stock submits shares of Series A Preferred
Stock for conversion on the same date and the Corporation can convert
some, but not all, of such shares of Series A Preferred Stock, to the
extent the Company can convert such shares into Common Stock without
exceeding the Exchange Cap, the Company shall convert into Common Stock
from each holder of Preferred Stock electing to have Series A Preferred
Stock converted at such time a pro rata amount of such holder's shares of
Series A Preferred Stock submitted for conversion based on the number of
Shares of Series A Preferred Stock submitted for conversion on such date
by such holder relative to the total number of shares of Series A
Preferred Stock submitted for conversion on such date, and the remainder
of such holder's shares of Series A Preferred Stock submitted for
conversion shall be exchanged for Series B
20
<PAGE>
Preferred Stock as provided in the preceding sentence.
9. VOTING RIGHTS. (a) Except as otherwise provided by applicable law, the
holders of the shares of Series A Preferred Stock (i) shall be entitled to vote
with the holders of the Common Stock on all matters submitted for a vote of
holders of Common Stock, (ii) shall be entitled to a number of votes equal to
the number of votes to which shares of Common Stock issuable upon conversion of
such shares of Series A Preferred Stock would have been entitled if such shares
of Common Stock had been outstanding at the time of the applicable vote and
related record date and (iii) shall be entitled to notice of any stockholders'
meeting in accordance with the certificate of incorporation and bylaws of the
Corporation. Notwithstanding the foregoing, in the event that, at any time
before Stockholder Approval or an Opinion is obtained, the outstanding shares
of Series A Preferred Stock, plus any shares of Common Stock previously issued
upon conversion of Series A Preferred Stock, would represent greater than the
number of votes that would be held by the number of shares of Common Stock
constituting the Exchange Cap, then for voting purposes the number of votes per
share of Series A Preferred Stock shall be automatically reduced so that the
outstanding shares of Series A Preferred Stock, plus any shares of Common Stock
previously issued upon conversion of Series A Preferred Stock, represent the
number of votes that would be held by the number of shares of Common Stock
constituting the Exchange Cap.
(b) So long as any shares of Series A 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 A 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 A 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 A
Preferred Stock shall require the affirmative vote at a meeting of holders of
Series A Preferred Stock duly called for such purpose, or the written consent,
of the holder of each share of Series A 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 A Preferred Stock then outstanding:
21
<PAGE>
(i) issue any additional shares of Series A Preferred Stock
(other than as dividends on Series A Preferred Stock or upon
conversion of the Series B Preferred Stock);
(ii) 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 A Preferred Stock;
(iii) 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
(iv) amend this paragraph 9.
(d) The consent or votes required in paragraph 9(b) and 9(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, which approval shall be obtained by
vote of the stockholders of the Corporation in the manner provided in paragraph
9(a) above.
(e) On each of the Issue Date and the date of a Stockholder Approval
Event, if any, the number of directors then constituting the Board of Directors
shall be increased by one and the holders of shares of Series A Preferred
Stock, voting as a single class, shall be entitled to elect one, or if a
Stockholder Approval Event has occurred, two directors 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 A Preferred
Stock called as hereinafter provided. Whenever a majority of the shares of
Series A Preferred Stock issued on the Issue Date have been converted into
Common Stock pursuant to this Certificate of Designation 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 A Preferred
Stock to elect such additional director(s) shall cease, and the term of office
of any person elected as director by the holders of the Series A 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 A Preferred
Stock pursuant to this paragraph, or if a vacancy shall exist in the office of
a director elected by the holders of Series A 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 A Preferred
Stock then outstanding addressed to the Secretary of the Corporation shall,
call a special meeting of the holders of Series A Preferred Stock, for the
purpose of electing the director which such holders are entitled to elect. If
such meeting shall
22
<PAGE>
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 A 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 A 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.
10. RECLASSIFICATION, SUBDIVISION OR COMBINATION. The Series A Preferred
Stock may not be reclassified, subdivided or combined unless the Series B
Preferred Stock is reclassified, subdivided or combined (as the case may be)
simultaneously and in the same proportion.
11. REPORTS. The Corporation shall mail to all holders of Series A
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 A Preferred Stock
with reports containing the same information as would be required in such
reports.
12. QUOTATION. So long as any of the Series A Preferred Stock is
outstanding, the Corporation shall use commercially reasonable efforts to
maintain the quotation of the Common Stock on the Nasdaq National Market.
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 A 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.
23
<PAGE>
IN WITNESS WHEREOF, marchFIRST, Inc. has caused this Certificate of
Designations to be signed and attested by the undersigned this 27th day of
December, 2000.
marchFIRST, Inc.
By: /s/ ROBERT F. BERNARD
-----------------------------------
Name: Robert F. Bernard
Title: Chief Executive Officer
ATTEST:
By: /s/ EDWARD V. SZOFER
-------------------------------
Name: Edward V. Szofer
Title: Secretary
24
