<PAGE>
Exhibit 3.4
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
(par value $.001 per share)
of
THINKING TOOLS, INC.
a Delaware Corporation
----------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
----------
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted by the Board of Directors (the "Board of Directors") of Thinking
Tools, Inc., a Delaware corporation (the "Corporation"), at a meeting held on
July 24, 2000.
RESOLVED, that one series of a class of authorized preferred stock,
$.001 par value, of the Corporation is hereby created and that the designations,
powers, preferences and relative, participating, optional or other special
rights of the shares of such series, and qualifications, limitations or
restrictions thereof, are hereby fixed as follows (this instrument hereinafter
referred to as the "Designation"):
1. Number of Shares and Designations. 400,000 shares of the
preferred stock, $.001 par value, of the Corporation are hereby constituted as a
series of preferred stock of the Corporation designated as Series C Convertible
Preferred Stock (the "Series C Preferred Stock").
2. Dividend Provisions. Subject to the rights of any other series
of Preferred Stock that may from time to time come into existence, the holders
of shares of Series C Preferred Stock shall be entitled to receive dividends,
out of any assets legally available therefor, ratably with any declaration or
payment of any dividend with holders of the Corporation's common stock, $.001
par value per share ("Common Stock"), or other junior securities of this
Corporation, when, as and if declared by the Board of Directors, based on the
number of shares of Common Stock into which each share of Series C Convertible
Preferred Stock is then convertible.
3. Rank. The Series C Preferred Stock shall rank: (i) junior to
any other class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms senior to the Series C Preferred Stock (the
"Senior Securities"); (ii) prior to all of the Corporation's
<PAGE>
Common Stock; (iii) prior to the Series B Preferred Stock and any class or
series of capital stock of the Corporation hereafter created not specifically
ranking by its terms senior to or on parity with the Series C Preferred Stock
("Junior Securities"); and (iv) on parity with the Series A Preferred Stock and
any class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms on parity with the Series C Preferred Stock
(the "Parity Securities"), in each case as to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation.
4. Liquidation Preference.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary ("Liquidation"), the holders of
record of the shares of the Series C Preferred Stock shall be entitled to
receive, immediately after any distributions to Senior Securities required by
the Corporation's Certificate of Incorporation and any certificate(s) of
designation, powers, preferences and rights, and before and in preference to any
distribution or payment of assets of the Corporation or the proceeds thereof may
be made or set apart for the holders of Junior Securities or Common Stock, an
amount in cash equal to $10.00 per share (subject to adjustment in the event of
stock splits, combinations or similar events). If, upon such Liquidation, the
assets of the Corporation available for distribution to the holders of Series C
Preferred Stock and any Parity Securities shall be insufficient to permit
payment in full to the holders of the Series C Preferred Stock and Parity
Securities, then the entire assets and funds of the Corporation legally
available for distribution to such holders and the holders of the Parity
Securities then outstanding shall be distributed ratably among the holders of
the Series C Preferred Stock and Parity Securities based upon the proportion the
total amount distributable on each share upon liquidation bears to the aggregate
amount available for distribution on all shares of the Series C Preferred Stock
and of such Parity Securities, if any.
(b) Upon the completion of the distributions required by Section
4(a), if assets remain in the Corporation, they shall be distributed to holders
of Junior Securities in accordance with the Corporation's Certificate of
Incorporation and any certificate(s) of designation, powers, preferences and
rights.
(c) Upon the completion of the distributions required by Section
4(a) and 4(b), if assets remain in the Corporation, they shall be distributed to
the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Common Stock on a pro rata basis (based on the number of
shares of Common Stock into which each share of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock is convertible).
(d) For purposes of this Section 4, a merger or consolidation or
a sale of all or substantially all of the assets of the Corporation shall be
considered a Liquidation except in the event that in such a transaction, the
holders of capital stock of the Corporation receive securities of the surviving
corporation equal to at least fifty percent of the total outstanding shares of
capital stock of the surviving corporation immediately after such transaction
and the holders of the Series C Preferred Stock receive securities of the
surviving corporation having substantially similar rights as the Series C
Preferred Stock. Notwithstanding Section 7 hereof, such provision may be waived
in writing by a majority of the holders of the then outstanding Series C
Preferred Stock.
-2-
<PAGE>
5. Redemption. The Series C Preferred Stock is not redeemable.
6. Conversion.
(1) Automatic Conversion
(i) From and after the Conversion Date (as defined in Section
6(a)(ii)), each share of Series C Preferred Stock shall automatically, without
any further action of the holders thereof or the Corporation being required, be
converted (the "Conversion") into and be deemed and treated for all purposes to
represent ownership of twenty (20) fully paid and non-assessable shares of
Common Stock. The number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible is hereinafter referred to as the
"Conversion Rate". The Corporation hereby irrevocably agrees to take any action
that may be required to be taken by law in order to cause the Conversion to
occur on the Conversion Date.
(1) For the purposes hereof, "Conversion Date" means the
close of business on the date that the Corporation files with the Secretary of
State of the State of Delaware an amendment to the Corporation's Certificate of
Incorporation increasing the authorized number of shares of Common Stock to at
least fifty million (50,000,000) shares.
(2) After the Conversion Date, each certificate representing
Series C Preferred Stock (x) shall automatically represent the number of shares
of Common Stock into which such Series C Preferred Stock has been converted
pursuant to the provisions of Section 6(a) and (y) at the option of the holder
thereof, may be surrendered for exchange for a certificate or certificates for
that number of shares of Common Stock into which such Series C Preferred Stock
has been converted pursuant to the provisions of Section 6(a). Each certificate
for Series C Preferred Stock so surrendered shall be accompanied by written
notice to the Corporation stating the name or names (with addresses) in which
the certificate or certificates for Common Stock issuable pursuant to such
exchange shall be issued and shall, unless the Common Stock issuable on exchange
are to be issued in the same name as the registration of such certificate, be
duly endorsed by, or be accompanied by stock powers, duly endorsed for transfer
in form satisfactory to the Corporation duly executed by the holder. The
Corporation shall pay any and all transfer taxes that may be payable in respect
of the issuance or delivery of Common Stock on exchange of Series C Preferred
Stock pursuant to this Section 6. The Corporation shall not, however, be
required to pay any tax that may be payable in respect of any transfer involved
in the issue and delivery of Common Stock in a name other than that in which the
shares of Series C Preferred Stock so exchanged were registered.
(3) As soon as practicable after the receipt of certificates
for Series C Preferred Stock surrendered for exchange accompanied by the notice
required by Section 6(a)(iii) hereof (and stock powers duly endorsed for
transfer as provided in such Section 6(a)(iii)), the Corporation shall issue and
shall deliver at the transfer agent, or at the principal executive offices of
the Corporation if no transfer agent exists, to the holder of such Series C
Preferred Stock, or to such other person or persons as may be named in the
required notice, a certificate or certificates for the full number of whole
shares of Common Stock to which the holder is entitled. If the shares of Common
Stock issuable on exchange are not to be issued in the same name as the
registration of the
-3-
<PAGE>
certificate for Series C Preferred Stock surrendered for exchange, the person or
persons in whose name or names any certificate or certificates for Common Stock
shall be issuable upon such exchange shall not be deemed to have become the
holder or holders of record of the Common Stock represented thereby until the
date on which the transfer agent, or if no such transfer agent exists, the
Corporation, shall have received such certificates for Series C Preferred Stock
and the aforesaid notice.
(b) Antidilution Adjustment
(i) In case of any reorganization, reclassification or change
of the Common Stock (including any such reorganization, reclassification or
change in connection with a consolidation or merger in which the Corporation is
the continuing entity), or any consolidation of the Corporation with, or merger
of the Corporation with or into, any other entity (other than a consolidation or
merger in which the Corporation is the continuing entity), or of any sale of the
properties and assets of the Corporation as, or substantially as, an entirety to
any other person or entity, prior to the conversion date of all the Series C
Preferred Stock, each share of Series C Preferred Stock then outstanding shall
thereafter be convertible into the kind and amount of stock or other securities
or property receivable upon such reorganization, reclassification, change,
consolidation, merger or sale by a holder of the number of shares of Common
Stock into which such shares of Series C Preferred Stock would have been
converted had conversion not occurred. The provisions of this Section 6(c) shall
similarly apply to successive reorganizations, reclassifications, changes,
consolidations, mergers or sales immediately prior to such reorganization,
reclassification, change, consolidation, merger or sale.
(ii) In case the Corporation shall, prior to the conversion
of all the Series C Preferred Stock, (a) issue Common Stock as a dividend or
distribution on all shares of Common Stock of the Corporation, (b) split or
otherwise subdivide its outstanding Common Stock, (c) combine the outstanding
Common Stock into a smaller number of shares, or (d) issue by reclassification
of its Common Stock (except in the case of a merger, consolidation or sale of
all or substantially all of the assets of the Corporation any shares of the
capital stock of the Corporation), the Conversion Rate in effect on the record
date for any stock dividend or the effective date of any such other event shall
be appropriately adjusted (as determined by the Board of Directors) so that the
holder of each share of the Series C Preferred Stock shall thereafter be
entitled to receive, upon the conversion of such share, the number of shares of
Common Stock or other capital stock which it would own or be entitled to receive
immediately after the happening of any of the events mentioned above had such
share of the Series C Preferred Stock been converted immediately prior to the
close of business on such record date or effective date. The adjustments herein
provided shall become effectively immediately following the record date for any
such stock dividend or the effective date of any such other events. There shall
be no adjustment in the Conversion Rate in the event that the Corporation pays a
cash dividend.
(c) Fractional Shares. No fractional Common Stock or scrip
representing fractional Common Stock shall be issued upon the conversion of
Series C Preferred Stock. If any such conversion would otherwise require the
issuance of a fractional share of Common Stock, then the Corporation shall pay
in lieu of issuing any fractional share an amount in cash equal to the same
fraction of the Market Value (as defined below) of one share of Common Stock on
the day of
-4-
<PAGE>
conversion of the Series C Preferred Stock. For the purposes of any computation
under this Section 6(c), the "Market Value" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the 10
consecutive business days prior to the day in question. The closing price for
each day shall be the last sales price regular way or in case no sale takes
place on such day, the average of the closing high bid and low asked prices
regular way, in either case (i) as officially quoted by the NASD over the
counter bulletin board, the Nasdaq SmallCap Market or the Nasdaq National Market
or such other market on which the Common Stock is then listed for trading, or
(ii) if, in the reasonable judgment of the Board of Directors of the
Corporation, the NASD over-the-counter bulletin board, the Nasdaq SmallCap
Market or the Nasdaq National Market is no longer the principal United States
market for the Common Stock, then as quoted on the principal United States
market for the Common Stock, as determined by the Board of Directors of the
Corporation, or (iii) if, in the reasonable judgment of the Board of Directors
of the Corporation, there exists no principal United States market for the
Common Stock, then as reasonably determined by the Board of Directors of the
Corporation.
(4) Reissuance. No shares of Series C Preferred Stock which
have been converted to Common Stock shall be reissued by the Corporation;
provided, however, that any such share, upon being converted and canceled, shall
be restored to the status of an authorized but unissued share of preferred stock
without designation as to series, rights or preferences and may thereafter be
issued as a share of preferred stock not designated as Series C Preferred Stock.
7. Voting Rights.
(a) Except as otherwise provided herein, or as required by the
Delaware General Corporation Law, the holders of shares of Series C Preferred
Stock shall have the right to vote, together with the holders of all the
outstanding shares of capital stock of the Corporation as a single class, and
not as a separate class, on all matters on which holders of Common Stock shall
have the right to vote. The holders of shares of Series C Preferred Stock shall
have the right to cast such number of votes per share that equals the number of
whole shares of Common Stock into which each such share of Series C Preferred
Stock is then convertible, calculated to the nearest whole share.
(b) Whenever holders of Series C Preferred Stock are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken and signed by the holders
of the outstanding capital stock of the Corporation having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all such shares entitled to vote thereon were present and
voted. Each share of the Series C Preferred Stock shall entitle the holder
thereof to one vote on all matters to be voted on by the holders of the Series C
Preferred Stock, as set forth in this Section 8(b).
-5-
<PAGE>
IN WITNESS WHEREOF, Thinking Tools, Inc. has caused this Designation to
be executed this 23rd day of August, 2000.
THINKING TOOLS, INC.
By:
--------------------
Name: Moshe Zarmi
Title: President & Chief Executive Officer
Attest:
By:
-----------------------
Name: James Houston
Title: Secretary
-6-
