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EXHIBIT 3.7
AMENDED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
HOMECOM COMMUNICATIONS, INC.
HomeCom Communications, Inc. (the "COMPANY"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the Board of Directors
of the Company by the Certificate of Incorporation of the Company, and pursuant
to Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Company at a meeting duly held, adopted resolutions
(i) authorizing a series of the Company's authorized preferred stock, $.01 par
value per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of 107 shares of Series E Convertible
Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 107 shares
of Series E Convertible Preferred Stock (the "SERIES E PREFERRED
SHARES"), $.01 par value per share, which shall have the following
powers, designations, preferences and other special rights:
(1) DIVIDENDS. The Series E Preferred Shares shall not bear
any dividends.
(2) HOLDER'S CONVERSION OF SERIES E PREFERRED SHARES. A holder
of Series E Preferred Shares shall have the right, at such holder's
option, to convert the Series E Preferred Shares into shares of the
Company's common stock, $.0001 par value per share (the "COMMON
STOCK"), on the following terms and conditions:
(a) CONVERSION RIGHT. Subject to the provisions of
Section 3(a) below, at any time or times upon the earlier to
occur of (i) a date on or after 120 days after the Issuance
Date (as defined herein) or (ii) the date that the U.S.
Securities & Exchange Commission declares the Company's
Registration Statement with respect to the Series E Preferred
Shares (the "Effective Date"), any holder of Series E
Preferred Shares shall be entitled to convert any Series E
Preferred Shares into fully paid and nonassessable shares
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(rounded to the nearest whole share in accordance with
Section 2(h) below) of Common Stock, at the Conversion Rate
(as defined below); PROVIDED, HOWEVER, that in no event
other than upon a Mandatory Conversion pursuant to Section
2(f) hereof, shall any holder be entitled to convert Series
E Preferred Shares in excess of that number of Series E
Preferred Shares which, upon giving effect to such
conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its
affiliates to exceed 4.9% of the outstanding shares of the
Common Stock following such conversion. For purposes of the
foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates
shall include the number of shares of Common Stock issuable
upon conversion of the Series E Preferred Shares with
respect to which the determination of such proviso is being
made, but shall exclude the number of shares of Common Stock
which would be issuable upon conversion of the remaining,
nonconverted Series E Preferred Shares beneficially owned by
the holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as
amended.
(b) CONVERSION RATE. The number of shares of Common
Stock issuable upon conversion of each of the Series E
Preferred Shares pursuant to Section (2)(a) shall be
determined according to the following formula (the "CONVERSION
RATE");
(.08)(N/365)(20,000) + 20,000
-----------------------------
CONVERSION PRICE
For purposes of this Certificate of Designations, the
following terms shall have the following meanings:
(i) "CONVERSION PRICE" means as, of any
Conversion Date (as defined below), the Floating
Conversion Price, as in effect as of such date and
subject to adjustment as provided herein, but in no
event shall the Conversion Price exceed the Fixed
Conversion Price;
(ii) "FIXED CONVERSION PRICE" means $3.53,
subject to adjustment, as provided herein.
(iii) "FLOATING CONVERSION PRICE" means, as
of any date of determination, the amount obtained by
multiplying the Conversion Percentage in effect as of
such date by the Average Market Price for the Common
Stock for the five (5) Trading Days immediately
preceding such date;
(iv) "CONVERSION PERCENTAGE" means 82.5%;
(v) "AVERAGE MARKET PRICE" means, with
respect to any security for any period, that price
which shall be computed as the arithmetic average of
the Closing Bid Prices (as defined below) for such
security for each trading day in such period;
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(vi) "CLOSING BID PRICE" means, for any
security as of any date, the last closing bid price
on the Nasdaq SmallCap Market(TM) (thE "NASDAQ-SM")
as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Nasdaq-SM is not the
principal trading market for such security, the last
closing bid price of such security on the principal
securities exchange or trading market where such
security is listed or traded as reported by Bloomberg
(the "Trading Market"), or if the foregoing do not
apply, the last closing bid price of such security in
the over-the-counter market on the pink sheets or
bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the last closing
trade price of such security as reported by
Bloomberg. If the Closing Bid Price cannot be
calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such
security on such date shall be the fair market value
as reasonably determined in good faith by the Board
of Directors of the Company (all as appropriately
adjusted for any stock dividend, stock split or other
similar transaction during such period); and
(vii) "N" means the number of days from, but
excluding, the Issuance Date through and including
the Conversion Date for the Series E Preferred Shares
for which conversion is being elected.
(viii) "ISSUANCE DATE" means the date of
issuance of the Series E Preferred Shares.
(ix) "TRADING DAY" means any day on which
the Company's Common Stock is traded on the Principal
Trading Market.
(c) ADJUSTMENT TO CONVERSION PRICE - DILUTION AND
OTHER EVENTS. In order to prevent dilution of the rights
granted under this Certificate of Designations, the Conversion
Price will be subject to adjustment from time to time as
provided in this Section 2(d).
(i) ADJUSTMENT OF FIXED CONVERSION PRICE
UPON SUBDIVISION OR COMBINATION OF COMMON STOCK. If
the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the
Fixed Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If
the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a
smaller number of shares, the Fixed Conversion Price
in effect immediately prior to such combination will
be proportionately increased.
(ii) REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION, MERGER, OR SALE. Any recapitalization,
reorganization reclassification, consolidation.
merger, sale of a or substantially all of the
Company's assets to another Person (as defined below)
or other similar transaction which is effected in
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such a way that holders of Common Stock are entitled
to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect
to or in exchange for Common Stock is referred to
herein as in "Organic Change." Prior to the
consummation of any Organic Change, the Company will
make appropriate provision to insure that each of the
holders of the Series E Preferred Shares will
thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such
holder's Series E Preferred Shares, such shares of
stock, securities or assets as may be issued or
payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such
holder's Series E Preferred Shares had such Organic
Change not taken place. In any such case, the Company
will make appropriate provision (in form and
substance satisfactory to the holders of a majority
of the Series E Preferred Shares then outstanding)
with respect to such holders' rights and interests to
insure that the provisions of this Section 2(c) will
thereafter be applicable to the Series E Preferred
Shares. The Company will not effect any such
consolidation, merger or sale, unless prior to the
consummation thereof the successor entity (if other
than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes,
by written instrument (in form and substance
satisfactory to the holders of a majority of the
Series E Preferred Shares then outstanding), the
obligation to deliver to each holder of Series E
Preferred Shares such shares of stock, securities or
assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
For purposes of this Agreement, "PERSON" shall mean
an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or
any department or agency thereof.
(iii) NOTICES.
(A) Immediately upon any adjustment
of the Conversion Price, the Company will
give written notice thereof to each holder
of Series E Preferred Shares, setting forth
in reasonable detail and certifying the
calculation of such adjustment.
(B) The Company will give written
notice to each holder of Series E Preferred
Shares at least twenty (20) days prior to
the date on which the Company closes its
books or takes a record (I) with respect to
any dividend or distribution upon the Common
Stock, (II) with respect to any pro rata
subscription offer to holders of Common
Stock or (III) for determining rights to
vote with respect to any Organic Change,
dissolution or liquidation.
(C) The Company will also give
written notice to each holder of Series E
Preferred Shares at least twenty (20) days
prior
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to the date on which any Organic Change (as
defined below), dissolution or liquidation
will take place.
(d) MECHANICS OF CONVERSION. Subject to the Company's
inability to fully satisfy its obligations under a Conversion
Notice (as defined below) as provided for in Section 5 below:
(i) HOLDER'S DELIVERY REQUIREMENTS. To
convert Series E Preferred Shares into full shares of
Common Stock on any date (the "CONVERSION DATE"), the
holder thereof shall (A) deliver or transmit by
facsimile, for receipt on or prior to 11:59 p.m.,
Eastern Standard Time, on such date, a copy of a
fully executed notice of conversion in the form
attached hereto as Exhibit I (the "CONVERSION
NOTICE") to the Company or its designated transfer
agent (the "TRANSFER AGENT"), and (B) surrender to a
common carrier for delivery to the Company or the
Transfer Agent as soon as practicable following such
date, the original certificates representing the
Series E Preferred Shares being converted (or an
indemnification undertaking with respect to such
shares in the case of their loss, theft or
destruction) (the "PREFERRED STOCK CERTIFICATES") and
the originally executed Conversion Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the
Company of a facsimile copy of a Conversion Notice,
the Company shall immediately send, via Facsimile, a
confirmation of receipt of such Conversion Notice to
such holder. Upon receipt by the Company or the
Transfer Agent of the Preferred Stock Certificates to
be converted pursuant to a Conversion Notice,
together with the originally executed Conversion
Notice, the Company or the Transfer Agent (as
applicable) shall, within five (5) business days
following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery
to the address as specified in the Conversion Notice,
a certificate, registered in the name of the holder
or its designee, for the number of shares of Common
Stock to which the holder shall be entitled or (B)
credit the aggregate number of shares of Common Stock
to which the holder shall be entitled to the holder's
or its designee's balance account at The Depository
Trust Company.
(iii) DISPUTE RESOLUTION. In the case of a
dispute as to the determination of the Average Market
Price or the arithmetic calculation of the Conversion
Rate, the Company shall promptly issue to the holder
the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via
facsimile within three (3) business days of receipt
of such holder's Conversion Notice. If such holder
and the Company are unable to agree upon the
determination of the Average Market Price or
arithmetic calculation of the Conversion Rate within
three (3) business days of such disputed
determination or arithmetic calculation being
submitted to the holder, then the Company shall
within one (1) business day submit via facsimile
(A) the disputed determination of the Average Market
Price to an independent, reputable investment bank or
(B) the disputed arithmetic
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calculation of the Conversion Rate to its
independent, outside accountant. The Company shall
cause the investment bank or the accountant, as the
case may be, to perform the determinations
calculations and notify the Company and the holder
of the results or no later than forty-eight (48)
hours from the time it receives the disputed
determinations or calculations. Such investment
bank's or accountant's determination or
calculation, as the case may be, shall be binding
upon all parties absent manifest error.
(iv) RECORD HOLDER. The person or persons
entitled to receive the shares of Common Stock
issuable upon a conversion of Series E Preferred
Shares shall be treated for all purposes as the
record holder or holders of such shares of Common
Stock on the Conversion Date.
(e) NASDAQ LISTING. So long as the Common Stock is
listed for trading on Nasdaq-SM or an exchange or quotation
system with a rule substantially similar to Rule 4460(i) then,
notwithstanding anything to the contrary contained herein if,
at any time, the aggregate number of shares of Common Stock
then issued upon conversion of the Series E Preferred Shares
(including any shares of capital stock or rights to acquire
shares of capital stock issued by the Corporation which are
aggregated or integrated with the Common Stock issued or
issuable upon conversion of the Series C Preferred Stock for
purposes of such rule) equals 19.99% of the "Outstanding
Common Amount" (as hereinafter defined), the Series C
Preferred Stock shall, from that time forward, cease to be
convertible into Common Stock in accordance with the terms
hereof, unless the Corporation (i) has obtained approval of
the issuance of the Common Stock upon conversion of the Series
C Preferred Stock by a majority of the total votes cast on
such proposal, in person or by proxy, by the holders of the
then-outstanding Common Stock (not including any shares of
Common Stock held by present or former holders of Series C
Preferred Stock that were issued upon conversion of Series C
Preferred Stock (the "STOCKHOLDER Approval"), or (ii) shall
have otherwise obtained permission to allow such issuances
from Nasdaq in accordance with Nasdaq Rule 4460(i). If the
Corporation's Common Stock is not then listed on Nasdaq or an
exchange or quotation system that has a rule substantially
similar to Rule 4460(i) then the limitations set forth herein
shall be inapplicable and of no force and effect. For purposes
of this paragraph, "OUTSTANDING COMMON AMOUNT" means (i) the
number of shares of the Common Stock outstanding on the date
of issuance of the Series C Preferred Stock pursuant to the
Purchase Agreement plus (ii) any additional shares of Common
Stock issued thereafter in respect of such shares pursuant to
a stock dividend, stock split or similar event. The maximum
number of shares of Common Stock issuable as a result of the
19.99% limitation set forth herein is hereinafter referred to
as the "MAXIMUM SHARE AMOUNT." With respect to each holder of
Series C Preferred Stock, the Maximum Share Amount shall refer
to such holder's pro rata share thereof. In the event that
Corporation obtains Stockholder Approval or the approval of
Nasdaq, or by reason of the inapplicability of the rules of
Nasdaq or otherwise, the Corporation concludes that it is able
to increase the number of shares to be issued above the
Maximum Share Amount (such increased number being the "NEW
MAXIMUM SHARE AMOUNT"), the references to Maximum Share
Amount, above, shall be deemed to be, instead,
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references to the greater New Maximum Share Amount. In the
event that Stockholder Approval is obtained and there are
insufficient reserved or authorized shares, or a
registration statement covering the additional shares of
Common Stock which constitute the New Maximum Share Amount
is not effective prior to the Maximum Share Amount being
issued (if such registration statement is necessary to
allow for the public resale of such securities), the
Maximum Share Amount shall remain unchanged; provided,
however, that the holders of Series C Preferred Stock may
grant an extension to obtain a sufficient reserved or
authorized amount of shares or of the effective date of
such registration statement. In the event that (a) the
aggregate number of shares of Common Stock actually issued
upon conversion of the outstanding Series C Preferred Stock
represents at least twenty percent (20%) of the Maximum
Share Amount and (b) the sum of (x) the aggregate number of
shares of Common Stock issued upon conversion of Series C
Preferred Stock plus (y) the aggregate number of shares of
Common Stock that remain issuable upon conversion of Series
C Preferred Stock and based on the Conversion Price then in
effect), represents at least one hundred percent (100%) of
the Maximum Share Amount, the Corporation will use its best
reasonable efforts to seek and obtain Stockholder Approval
(or obtain such other relief as will allow conversions
hereunder in excess of the Maximum Share Amount) as soon as
practicable following the Triggering Event and before the
Mandatory Redemption Date.
(f) MANDATORY CONVERSION. If any Series E Preferred
Shares remain outstanding on April 14, 2003, then all such
Series E Preferred Shares shall be converted as of such date
in accordance with this Section 2 as if the holders of such
Series E Preferred Shares had given the Conversion Notice on
April 14, 2003, and the Conversion Date had been fixed as of
April 14, 2003, (the "MANDATORY CONVERSION DATE") for all
purposes of this Section 2, and all holders of Series E
Preferred Shares shall thereupon and within two (2) business
days thereafter surrender all Preferred Stock Certificates,
duly endorsed for cancellation, to the Company or the Transfer
Agent. No person shall thereafter have any rights in respect
of Series E Preferred Shares, except the right to receive
shares of Common Stock on conversion thereof as provided in
this Section 2.
(g) FRACTIONAL SHARES. The Company shall not issue
any fraction of a share of Common Stock upon any conversion.
All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of the Series
E Preferred Shares by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in
the issuance of a fraction of a share of Common Stock. lf,
after the aforementioned aggregation, the issuance would
result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share.
(h) TAXES. The Company shall pay any and all taxes
which may be imposed upon it with respect to the issuance and
delivery of Common Stock upon the conversion of the Series E
Preferred Shares.
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(i) LOCK-UP. If the Lock-Up Conditions (as defined
below) are satisfied, but only for that period of time that
the Lock-Up Conditions are satisfied, the Company may at its
option at any time after the 90th day following the Issuance
Date through April 14, 2002 (the "LOCK-UP EXERCISE PERIOD"),
prohibit holders of the Series E Preferred Shares from
exercising any conversion rights granted pursuant to Section
(2) (a) (the "LOCK-UP") for a period (the "LOCK-UP PERIOD")
beginning on the Lock-Up Notice Delivery Date (as defined
below) until the earlier of (Y) ninety (90) days after the
Lock-Up Notice Delivery Date and (Z) such time as the Lock-Up
Conditions (as defined below) are no longer satisfied;
PROVIDED, HOWEVER, that if the Lock-Up Notice Delivery Date is
on or after the 646st day following the Issuance Date, the
Lock-Up Period shall terminate on the 725th day following the
Issuance Date.
(i) LOCK-UP CONDITIONS. The "LOCK-UP
CONDITIONS" shall be deemed satisfied only for such
period of time as the Board of Directors of the
Company is in possession of material, non-public
information relating to a business transaction
involving the Company which would be required to be
disclosed to the public before any member of the
Board of Directors would be able to sell any equity
securities of the Company in compliance with the
anti-fraud provisions of the Securities Act of 1933.
The Company shall give prompt notice to each of the
holders of the Series E Preferred Shares if at any
time during the Lock-Up period such condition is not
properly satisfied.
(ii) CONSIDERATION FOR LOCK-UP. In
consideration for the Company's exercise of the
Lock-Up, the Company shall within five (5) Trading
Days of the end of each calendar month during the
Lock-Up Period deliver to the holder of Series E
Preferred Shares at the Company's election (i) a cash
payment equal to 3% of the principal amount of the
Series E Preferred Shares then held by each such
holder for each thirty (30) days of the Lock-Up
Period (the "LOCK-UP PERIOD PRINCIPAL") (pro rated
for partial months) or (ii) deliver Common Stock to
such holder of Series E Preferred Shares in an amount
equal to the Lock-Up Period Principal divided by the
Average Market Price for the Common Stock for the
twenty Trading Days immediately preceding the end of
each calendar month during the Lock-Up Period.
(ii) MECHANICS OF LOCK-UP. To effect the
Lock-Up, the Company shall (x) deliver or transmit by
facsimile, for receipt on or prior to 11:59 p.m.,
Eastern Standard Time on any date (the "LOCK-UP
NOTICE DELIVERY DATE") during the Lock-Up Exercise
Period, to each holder of Series E Preferred Shares
(I) a copy of a fully executed notice in the form of
Exhibit II hereto (the "LOCK-UP NOTICE") and (II)
executed agreements ("LOCK-UP AGREEMENTS"), in the
form attached hereto as Exhibit III, from each
officer or director of the Company or any subsidiary
of the Company who beneficially owns, or has any
disposition power with respect to 5% or more of the
total outstanding shares of Common Stock as of the
Lock-Up Notice Delivery Date which, for the benefit
of the holders of the Series E Preferred Shares,
obligates such persons not to sell or
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otherwise dispose of any shares of Common Stock
until one day after each of the holders of the
Series E Preferred Shares has received written
notice form the Company that the Lock-Up Period
has ended, and (y) surrender to a common carrier
for delivery to each Series C Preferred Share
holder as soon as practicable following such date,
an originally executed Lock-Up Notice, originally
executed Lock-Up Agreements; PROVIDED, HOWEVER,
that such Lock-Up Notice shall not be effective
with respect to the conversion of any shares of
Series E Preferred Shares for which a holder of
such shares has, prior to receipt of the Lock-Up
Notice, properly delivered a Conversion Notice
pursuant to Section (2)(d)(i).
(3) COMPANY'S RIGHT TO REDEEM AT ITS ELECTION.
(a) At any time after the Issuance Date, the Company
shall have the right, in its sole discretion, to redeem
("REDEMPTION AT COMPANY'S ELECTION"), from time to time, any
or all of the Series E Preferred Shares; provided (i) Company
shall first provide ten (10) days advance written notice as
provided in subparagraph 3(a)(ii) below, and (ii) that the
Company shall only be entitled to redeem Series E Preferred
Shares having an aggregate Stated Value (as defined below) of
at least Five Hundred Thousand Dollars ($500,000). If the
Company elects to redeem some, but not all, of the Series E
Preferred Shares, the Company shall redeem a pro-rata amount
from each holder of the Series E Preferred Shares.
(i) REDEMPTION PRICE AT COMPANY'S ELECTION.
The "REDEMPTION PRICE AT COMPANY'S ELECTION" shall be
calculated as (1) 105% of the Stated Value for the
first 30 days following the Issuance Date, as defined
below; (2) 110% of the Stated Value for the next 90
days thereafter and (3) 120% of Stated Value
following 120 days from the Isssuance Date of the
Series E Preferred Shares. For purposes hereof,
"STATED VALUE" shall mean the original purchase price
of Preferred Stock being redeemed.
(ii) MECHANICS OF REDEMPTION AT COMPANY'S
ELECTION. The Company shall effect each such
redemption by giving at least ten (10) days prior
written notice ("NOTICE OF REDEMPTION AT COMPANY'S
ELECTION") to (A) the holders of the Series E
Preferred Shares selected for redemption at the
address and facsimile number of such holder appearing
in the Company's Series E Preferred Shares register
and (B) the Transfer Agent, which Notice of
Redemption At Company's Election shall be deemed to
have been delivered three (3) business days after the
Company's mailing (by overnight or two (2) day
courier, with a copy by facsimile) of such Notice of
Redemption at Company's Election. Such Notice of
Redemption At Company's Election shall indicate (i)
the number of shares of Series E Preferred Shares
that have been selected for redemption, (ii) the date
which such redemption is to become effective (the
"DATE OF REDEMPTION AT COMPANY'S ELECTION") and
(iii) the applicable Redemption Price At Company's
Election, as defined in subsection (a)(i) above.
Notwithstanding the above, the holder may convert
into Common Stock, prior to the close of business on
the Date of
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Redemption at Company's Election, any Series E
Preferred Shares which it is otherwise entitled to
convert, including Series E Preferred Shares that
has been selected for redemption at Company's
election pursuant to this subsection 3(a).
(b) COMPANY MUST HAVE IMMEDIATELY AVAILABLE FUNDS OR
CREDIT FACILITIES. The Company shall not be entitled to send
any Redemption Notice and begin the redemption procedure under
Section 3(a) unless it has:
(i) the full amount of the redemption price
to cash, available in a demand or other immediately
available account in a bank or similar financial
institution; or
(ii) immediately available credit
facilities, in the full amount of the redemption
price with a bank or similar financial institution,
or
(iii) an agreement with a standby
underwriter willing to purchase from the Company a
sufficient number of shares of stock to provide
proceeds necessary to redeem any stock that is not
converted prior to redemptions; or
(iv) a combination of the items set forth in
(i), (ii), and (iii) above, aggregating the full
amount of the redemption price.
(c) PAYMENT OF REDEMPTION PRICE. Each holder
submitting Series E Preferred Shares being redeemed under this
Section 3 shall send their Preferred Stock Certificates to
redeemed to the Company or its Transfer Agent, and the Company
shall pay the applicable redemption price to that Holder
within five (5) business days of the Date of Redemption at
Company's Election.
(4) REISSUANCE OF CERTIFICATES. In the event of a conversion
or redemption pursuant to this Certificate of Designations of less than
all of the Series E Preferred Shares represented by a particular
Preferred Stock Certificate, the Company shall promptly cause to be
issued and delivered to the holder of such Series E Preferred Shares a
Preferred Stock Certificate representing the remaining Series E
Preferred Shares which have not been so converted or redeemed.
(5) RESERVATION OF SHARES. The Company shall, so long as any
of the Series E Preferred Shares are outstanding reserve and keep
available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Series E Preferred
Shares, such number of shares of Common Stock as shall from time to
time be sufficient to affect the conversion of all of the Series E
Preferred Shares then outstanding; provided that the number of shares
of Common Stock so reserved shall at no time be less than 100% of the
number of shares of Common Stock for which the Series E Preferred
Shares are at any time convertible,
(6) VOTING RIGHTS. Holders of Series E Preferred Shares shall
have no voting rights, except as required by law, including but not
limited to the General Corporation
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Law of the State of Delaware and as expressly provided in this
Certificate of Designations.
(7) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the
Company, the holders of the Series E Preferred Shares shall be entitled
to receive in cash out of the assets of the Company, whether from
capital or from earnings available for distribution to its stockholders
(the "PREFERRED FUNDS"), before any amount shall be paid to the holders
of any of the capital stock of the Company of any class junior in rank
to the Series E Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and
winding up of the Company, an amount per Series C Preferred Share equal
to the sum of (i) $20,000 and (ii) an amount equal to the product of
(.08) (N/365) ($20,000) (where "N" has the meaning specified in Section
2(b)(viii); (such sum being referred to as the "LIQUIDATION VALUE");
provided that, if the Preferred Funds are insufficient to pay the full
amount due to the holders of Series E Preferred Shares and holders of
shares of other classes or series of preferred stock of the Company
that are of equal rank with the Series E Preferred Shares as to
payments of Preferred Funds (the "PARI PASSU SHARES"), then each holder
of Series E Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of Preferred
Funds payable to such holder as a liquidation preference, in accordance
with their respective Certificate of Designations, Preferences and
Rights, as a percentage of the full amount of Preferred Funds payable
to all holders of Series E Preferred Shares and Pari Passu Shares. The
purchase or redemption by the Company of stock of any class in any
manner permitted by law, shall not for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person,
nor the sale or transfer by the Company of less than substantially all
of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company. No holder of
Series E Preferred Shares shall be entitled to receive any amounts with
respect thereto upon any liquidation, dissolution or winding up of the
Company other than the amounts provided for herein.
(8) PREFERRED RATE. All shares of Common Stock shall be of
junior rank to all Series E Preferred Shares in respect to the
preferences as to distributions and payments upon the liquidation,
dissolution, and winding up of the Company. The rights of the shares of
Common Stock shall be subject to the Preferences and relative rights of
the Series B Convertible Preferred Stock and Series E Preferred Shares.
Except for the Series B Convertible Preferred Stock, the Series E
Preferred Shares shall be of greater than any Series of Common or
Preferred Stock hereinafter issued by the Company. Without the prior
express written consent of the holders of not less than a majority of
the then outstanding Series E Preferred Shares, the Company shall not
hereafter authorize or issue additional or other capital stock that is
of senior or equal rank to the Series E Preferred Shares in respect of
the preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company. Without the prior express
written consent of the holders of not less than a majority of the then
outstanding Series E Preferred Shares, the Company shall not hereafter
authorize or make any amendment to the Company's Certificate of
Incorporation or bylaws, or make any resolution of the board of
directors with the Delaware Secretary of State containing any
provisions, which would materially and adversely affect or otherwise
impair the rights or relative priority of
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the holders of the Series E Preferred Shares relative to the holders
of the Common Stock or the holders of any other class of capital
stock. In the event of the merger or consolidation of the Company
with or into another corporation, the Series E Preferred Shares
shall maintain their relative powers, designations, and preferences
provided for herein and no merger shall result inconsistent
therewith.
(9) RESTRICTION ON DIVIDENDS. If any Series E Preferred Shares
are outstanding, without the prior express written consent of the
holders of not less than a majority of the then outstanding Series E
Preferred Shares, the Company shall not directly or indirectly declare,
pay or make any dividends or other distributions upon any of the Common
Stock so long as written notice thereof has been given to holders of
the Series E Preferred Shares at least 30 days prior to the earlier of
(a) the record date taken for or (b) the payment of any such dividend
or other distribution. Notwithstanding the foregoing, this Section 9
shall not prohibit the Company from declaring and paying a dividend in
cash with respect to the Common Stock so long as the Company: (i) pays
simultaneously to each holder of Series E Preferred Shares an amount in
cash equal to the amount such holder would have received had all of
such holder's Series E Preferred Shares been converted to Common Stock
pursuant to Section 2 hereof one business day prior to the record date
for any such dividend, and (ii) after giving effect to the payment of
any dividend and any other payments required in connection therewith
including to the holders of the Series E Preferred Shares, the Company
has in cash or cash equivalents an amount equal to the aggregate of:
(A) all of its liabilities reflected on its most recently available
balance sheet, (B) the amount of any indebtedness incurred by the
Company or any of its subsidiaries since its most recent balance sheet
and (C) 120% of the amount payable to all holders of any shares of any
class of preferred stock of the Company assuming a liquidation of the
Company as the date of its most recently available balance sheet.
(10) VOTE TO CHANGE THE TERMS OF SERIES E PREFERRED SHARES.
The affirmative vote at a meeting duly called for such purpose, or the
written consent without a meeting of the holders of not less than a
majority of the then outstanding Series E Preferred Shares, shall be
required for any change to this Certificate of Designations or the
Company's Certificate of Incorporation which would amend, alter, change
or repeal any of the powers, designations, preferences and rights of
the Series E Preferred Shares.
(11) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company
of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Stock Certificates representing the
Series E Preferred Shares, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the holder to the
Company and, in the case of mutilation, upon surrender and cancellation
of the Preferred Stock Certificate(s), the Company shall execute and
deliver new preferred stock certificate(s) of like tenor and date;
provided, however, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests
the Company to convert such Series E Preferred Shares into Common
Stock.
(12) WITHHOLDING TAX OBLIGATIONS. Notwithstanding anything
herein to the contrary, to the extent that the Company receives advice
in writing from its counsel that there is a reasonable basis to believe
that the Company is required by applicable federal laws or regulations
and delivers a copy of such written advice to the holders of the Series
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E Preferred Shares so effected, the Company may reasonably condition
the making of any distribution (as such term is defined under
applicable federal tax law and regulations) in respect of any Series E
Preferred Shares on the holder of such Series E Preferred Shares
depositing with the Company an amount of cash sufficient to enable the
Company to satisfy its withholding tax obligations (the "WITHHOLDING
TAX") with respect to such distribution. Notwithstanding the foregoing
or anything to the contrary, if any holder of the Series E Preferred
Shares so effected receives advice in writing from its counsel that
there is a reasonable basis to believe that the Company is not so
required by applicable federal laws or regulations and delivers a copy
of such written advice to the Company, the Company shall not be
permitted to condition the making of any such distribution in respect
of any Series C Preferred Share on the holder of such Series E
Preferred Shares depositing with the Company any Withholding Tax with
respect to such distribution, PROVIDED, HOWEVER, the Company may
reasonably condition the making of any such distribution in respect of
any Series C Preferred Share on the holder of such Series E Preferred
Shares executing and delivering to the Company, at the election of the
holder, either: (i) if applicable, a properly completed Internal
Revenue Service Form 4224, or (a) an indemnification agreement in
reasonably acceptable form, with respect to any federal tax liability,
penalties and interest that may be imposed upon the Company by the
Internal Revenue Service as a result of the Company's failure to
withhold in connection with such distribution to such holder.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS AMENDED
CERTIFICATE OF DESIGNATIONS TO BE SIGNED BY JAMES ELLSWORTH, ITS CHIEF FINANCIAL
OFFICER, AS OF THE ____ DAY OF APRIL, 2000.
HOMECOM COMMUNICATIONS, INC.
By:
------------------------------------
James Ellsworth
Chief Financial Officer
EXHIBIT I
HOMECOM COMMUNICATIONS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights of HomeCom Communications, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series E Convertible Preferred
Stock, $.01 par value per share (the "SERIES E PREFERRED SHARES"), of HomeCom
Communications, Inc., a Delaware corporation (the "COMPANY"), indicated below
into shares of Common Stock, $.0001 par value per share (the "COMMON STOCK"), of
the Company, by tendering the stock certificate(s) representing the share(s) of
Series E Preferred Shares specified below as of the date specified below.
The undersigned acknowledges that any sales by the undersigned of the
securities issuable to the undersigned upon conversion of the Series E Preferred
Shares shall be made only pursuant to (i) a registration statement effective
under the Securities Act of 1933, as amended (the "ACT"), or (ii) advice of
counsel that such sale is exempt from registration required by Section 5 of the
Act.
Date of Conversion:
------------------------------------------------
Number of Series E
Preferred Shares to be converted
------------------------------------------------
Stock certificate no(s). of Series E
Preferred Shares to be converted:
------------------------------------------------
Please confirm the following information:
Conversion Price:
------------------------------------------------
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Five Days Comprising Pricing Period and Prices:
------------------------------------------------
Number of shares of Common
Stock to be issued:
------------------------------------------------
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please issue the Common Stock into which the Series E Preferred Shares are being
converted in the following name and to the following address:
Issue to:(1)
------------------------------------------------
Facsimile Number:
------------------------------------------------
Authorization:
------------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
Dated:
------------------------------------------
ACKNOWLEDGED AND AGREED:
HOMECOM COMMUNICATIONS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
----------------------------------
---------------
(1) If other than to the record holder of the Series E Preferred Shares, any
applicable transfer tax must be paid by the undersigned.
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EXHIBIT II
HOMECOM COMMUNICATIONS, INC.
LOCK-UP NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights (the "CERTIFICATE OF DESIGNATIONS") of HomeCom Communications, Inc. (the
"COMPANY"). In accordance with and pursuant to Section (2)(i) of the Certificate
of Designations, the Company hereby elects to exercise its Lock-Up rights (as
set forth in the Certificate of Designations), effective as of the date hereof.
Consequently, the Company shall not be required to convert any Series E
Preferred Shares which have a Conversion Date (as defined in the Certificate of
Designations) during the period beginning on the date hereof and ending on the
earlier of (i) that date which is ninety (90) days from the date hereof and (ii)
the 725th day following the Issuance Date (as defined in the Certificate of
Designations).
Authorization:
------------------------------------------------
By:
----------------------------------
Title:
----------------------------------
Dated:
----------------------------------
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EXHIBIT III
HOMECOM COMMUNICATIONS, INC.
FORM OF LOCK-UP AGREEMENT
Reference is made to the Certificate of Designations, Preferences and
Rights (the "CERTIFICATE OF DESIGNATIONS") of HomeCom Communications, Inc. (the
"COMPANY"). The undersigned has been advised that in accordance with and
pursuant to Section (2)(i) of the Certificate of Designations, effective as of
____________________________ (the "LOCK-UP COMMENCEMENT DATE"), the Company has
elected to exercise its Lock-Up rights (as set forth in the Certificate of
Designations) with respect to shares of Series C Convertible Preferred Stock
(the "SERIES E PREFERRED SHARES"), $.01 par value per share. Consequently, the
Company shall not be required to convert any Series E Preferred Shares which
have a Conversion Date (as defined in the Certificate of Designations) during
the period (the "LOCK-UP PERIOD") beginning on the Lock-Up Commencement Date and
ending on the earlier of (i) that date which is ninety (90) days from the
Lock-Up Commencement Date and (ii) the 725th day following the Issuance Date (as
defined in the Certificate of Designations).
In consideration of the agreement by the holders of the Series E
Preferred Shares not to convert any Series C Preferred Share pursuant to the
Lock-Up rights, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that, until one day after each of the holders of the
Series E Preferred Shares has received written notice form the Company that the
Lock-Up Period has ended, the undersigned will not, directly or indirectly,
without the prior written consent of the holders representing a majority of the
outstanding Series E Preferred Shares, sell, contact to sell, pledge, grant any
option for the sale of or otherwise dispose or cause the disposition of any
shares of the Company's common stock, $.0001 par value per share (the "COMMON
STOCK"), or an securities convertible into or exchangeable or exercisable for
any shares of Common Stock owned by the undersigned. Notwithstanding the
foregoing, the undersigned shall not need to obtain such written consent with
respect to (1) a transfer (not involving a sale in the public market) of shares
of Common Stock by the undersigned in a bona fide charitable or other donative
transaction or in any estate planning transaction so long as in each case the
transferee of such agreement to holders of the Series E Preferred Shares prior
to effecting any such transfer and (2) a transfer (not involving a sale in the
public market) of shares of Common Stock, if the undersigned is a natural
person, due to the death or disability of the undersigned so long as the
transferee of such shares agrees in writing to be bound by the terms of this
agreement and furnishes a copy of such agreement to holders of the Series E
Preferred Shares prior to effecting any such transfer.
IN FURTHERANCE OF THE FOREGOING, THE COMPANY AND THE COMPANY'S TRANSFER
AGENT AND REGISTRAR ARE HEREBY AUTHORIZED TO DECLINE TO MAKE ANY TRANSFER OR
SECURITIES IF SUCH TRANSFER WOULD CONSTITUTE A VIOLATION OR BREACH OF THIS
AGREEMENT.
Very truly yours,
------------------------------------------------
Signature
------------------------------------------------
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Print Name
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