CERTIFICATE OF DESIGNATIONS
OF RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF SERIES B
CONVERTIBLE PREFERRED STOCK OF
ADATOM.COM, INC.
Adatom.com, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware(the
"Corporation"), in accordance with the provisions of Section 151(g) thereof,
DOES HEREBY CERTIFY that, by unanimous written consent in lieu of a meeting of
the Board of Directors of the Corporation dated September 22, 2000:
FIRST: The following resolution was duly adopted by the Board of
Directors of the Corporation:
RESOLVED, that pursuant to Article Fourth of the Amended and Restated
Certificate of Incorporation of the Corporation, there be and hereby is
authorized and created one series of Preferred Stock, hereby designated as
Series B Convertible Preferred Stock to consist of one thousand one hundred
(1,200) shares, with a par value $0.01 per share and a stated value of $1,000
per share (the "Stated Value"), and that the designations, preferences and
relative, participating, optional or other rights of the Series B Convertible
Preferred Stock (the "Series B Preferred Stock") and qualifications, limitations
or restrictions thereof, shall be as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever
used in this Certificate of Designations have the following respective meanings:
"ADDITIONAL CAPITAL SHARES" has the meaning set forth in
Section 5.1(c).
"AFFILIATE" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
"ADDITIONAL AMOUNT" means the result of the following formula:
[(0.06)(N/365)($1,000)], where N means the number of days from, but excluding
the Issue Date through and including (1) the Conversion Date for the Series B
Preferred Stock for which conversion is being elected, or (2) such other date of
determination, as the case may be.
"BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks located in the State of California are authorized or
obligated to close.
"CAPITAL SHARES" means the Common Shares and any other shares
of any other class or series of common stock, whether now or hereafter
authorized and however designated,
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which have the right to participate in the distribution of earnings and assets
upon dissolution, liquidation or winding-up) of the Corporation.
"CLOSING DATE" has the meaning set forth in the Securities
Purchase Agreement.
"CLOSING PRICE" per share of Common Stock means the closing
bid price as reported on the Principal Market for the Trading Day immediately
preceding the Closing Date.
"COMMON SHARES" or "COMMON STOCK" means shares of common
stock, $0.01 par value, of the Corporation.
"COMMON STOCK ISSUED AT CONVERSION" when used with reference
to the securities issuable upon conversion of the Series B Preferred Stock,
means all Common Shares now or hereafter outstanding and securities of any other
class or series into which the Series B Preferred Stock hereafter shall have
been changed or substituted, whether now or hereafter created and however
designated.
"CONVERSION AMOUNT" has the meaning set forth in Section 5.1.
"CONVERSION DATE" means any day on which all or any portion of
shares of the Series B Preferred Stock is converted in accordance with the
provisions hereof.
"CONVERSION NOTICE" has the meaning set forth in Section 5.2.
"CONVERSION PRICE" means on any date of determination the
applicable price for the conversion of shares of Series B Preferred Stock into
Common Shares on such day as set forth in Section 5.1.
"CONVERSION RATIO" on any date means determination of the
applicable percentage of the Market Price for conversion of shares of Series B
Preferred Stock into Common Shares on such day as set forth in Section 5.1.
"CORPORATION" means Adatom.com, Inc., a Delaware corporation,
and any successor or resulting corporation by way of merger, consolidation, sale
or exchange of all or substantially all of the Corporation's assets, or
otherwise.
"CURRENT MARKET PRICE" on any date of determination means the
closing bid price of a Common Share on such day as reported on the Principal
Market.
"EFFECTIVE DATE" means the date upon which the Registration
Statement, as defined in the Registration Rights Agreement, is declared
effective by the SEC.
"HOLDER" means the persons signatory to the Securities
Purchase Agreement (other than the Corporation), any successor thereto, or any
Person to whom the Series B Preferred Stock is subsequently transferred in
accordance with the provisions hereof.
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"ISSUE DATE" means the date upon which the shares of Series B
Preferred Stock being sold pursuant to the Securities Purchase Agreement are
issued.
"MARKET DISRUPTION EVENT" means any event that results in a
material suspension or limitation of trading of Common Shares on the NASDAQ.
"MARKET PRICE" on any given date shall mean the average of the
two lowest closing bid prices of the Common Stock on the Principal Market as
reported by Bloomberg L.P. for any Valuation Period.
"MAXIMUM CONVERSION PRICE" has the meaning set forth in
Section 5.1.
"OUTSTANDING" when used with reference to Common Shares or
Capital Shares (collectively, "Shares"), means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding warrants, options, scrip or any certificates representing
fractional interests in such Shares; provided, however, that any such Shares
directly or indirectly owned or held by or for the account of the Corporation or
any Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.
"PERSON" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the
NASDAQ SmallCap Market, the American Stock Exchange, the New York Stock
Exchange, or the OTC Bulletin Board, whichever is at the time the principal
trading exchange or market for the Common Stock.
"REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement related to the Series B Preferred Stock between
the Corporation and the other persons signatory to the Securities Purchase
Agreement.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as in effect at the
time.
"SECURITIES PURCHASE AGREEMENT" means that certain Securities
Purchase Agreement related to the Series B Preferred Stock between the
Corporation and the other persons signatory thereto.
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"SERIES B PREFERRED STOCK" means the Series B Convertible
Preferred Stock of the Corporation or such other convertible Preferred Stock
exchanged therefor as provided in Section 2.1.
"SUBSIDIARY" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
"TRADING DAY" means any day on which purchases and sales of
securities authorized for quotation on the Principal Market are reported thereon
and on which no Market Disruption Event has occurred.
"VALUATION EVENT" has the meaning set forth in Section 5.1.
"VALUATION PERIOD" means the ten Trading Day period
immediately preceding the Conversion Date.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE 2
RANK
The Series B Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than "Pari Passu Securities" (collectively,
with the Common Stock, "Junior Securities"); and (iii) pari passu with any class
or series of capital stock of the Corporation hereafter created specifically
ranking on parity with the Series B Preferred Stock ("Pari Passu Securities").
ARTICLE 3
DIVIDENDS
No holder of Series B Preferred Stock shall be entitled to
receive any dividends.
ARTICLE 4
LIQUIDATION PREFERENCE
(a) If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts
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generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Series B Preferred Stock, subject
to Article 4, shall have received the Liquidation Preference (as defined in
subparagraph(c) of this Article 4) with respect to each share. If upon the
occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series B Preferred Stock and holders of
any class or series of capital stock ranking on a parity as to preference upon
liquidation ("Pari Passu Securities") with the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series B Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate liquidation preference payable on all such shares.
(b) At the option of each Holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of the
Corporation with or into any other Person (as defined below) or Persons when the
Corporation is not the survivor shall be deemed to be a liquidation, dissolution
or winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
transaction an amount equal to the Liquidation Preference with respect to each
outstanding share of Series B Preferred Stock in accordance with and subject to
the terms of this Article 4; provided, that all holders of Series B Preferred
Stock shall be deemed to elect the option set forth above if at least a majority
in interest of such holders elect such option. "Person" shall mean any
individual, corporation, limited liability company, partnership, association,
trust or other entity or organization.
(c) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series B Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof, plus (ii) the Additional Amount.
(d) The Series B Preferred Stock shall rank on a parity with
the Corporation's Series A Convertible Preferred Stock as to the distribution of
the assets of the Corporation upon liquidation, dissolution or winding up of the
Corporation.
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ARTICLE 5
CONVERSION OF SERIES B PREFERRED STOCK
SECTION 5.1 Conversion; Conversion Price. Subject to the terms,
conditions and restrictions of this Section 5, at the option of the Holder,
commencing on the Issue Date, the shares of Series B Preferred Stock may be
converted into Common Shares (calculated as to each such conversion to the
nearest 1/100th of a share), equal to the sum of the Additional Amount and the
Stated Value of such share or shares of Series B Preferred Stock (such sum being
hereinafter referred to as the "Conversion Amount"), divided by the Market
Price, after discounting the Market Price by 15% to determine the conversion
price (the "Conversion Price"); provided that in no event shall the Conversion
Price be greater than 115% of the Market Price on the Issue Date (the "Maximum
Conversion Price"). The right of each holder to convert shares of Series B
Preferred Stock into shares of Common Stock is subject to the limitations set
forth in Sections 5.10 and 5.11 below, and for the purpose of complying with the
limitation in Section 5.11, shall be prorated among the original purchasers of
the shares of Series B Preferred Stock (the "Initial Holders") and their
transferees, if any, based upon the number of shares of Series B Preferred Stock
purchased by the Initial Purchasers.
Within two (2) Business Days of the occurrence of a Valuation Event,
the Corporation shall send notice (the "Valuation Event Notice") of such
occurrence to the Holder. Notwithstanding anything to the contrary contained
herein, if a Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately following the occurrence of
such Valuation Event and end on the Conversion Date; provided, further, that the
Holder may, in its discretion, postpone such Conversion Date to a Trading Day
which is no more than three (3) Trading Days after the occurrence of the latest
Valuation Event by delivering a notification to the Corporation within two (2)
Business Days of the receipt of the Valuation Event Notice. In the event that
the Holder deems the Valuation Period to be other than the three (3) Trading
Days immediately prior to the Conversion Date, the Holder shall give written
notice of such fact to the Corporation in the related Conversion Notice at the
time of conversion.
For purposes of this Section 5.1, a "Valuation Event" shall mean an
event in which the Corporation at any time during a Valuation Period takes any
of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution of its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital
Shares"), otherwise than as provided in the foregoing Sections 5.1(a) and 5.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under presently outstanding warrants,
options or convertible securities, to officers, directors or employees of the
Company, or otherwise under the Company's stock option plans;
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(d) issues any warrants, options or other rights to subscribe for
or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable
or exercisable for Capital Shares and the consideration per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible, exchangeable or exercisable securities shall be less
than the Current Market Price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for the payment of dividends under
applicable law or any distribution to such holders made in respect of the sale
of all or substantially all of the Corporation's assets (other than under the
circumstances provided for in the foregoing Sections 5.1(a) through 5.1(e)); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Sections 5.1(a)
through 5.1(f), inclusive, which in the opinion of the Corporation's Board of
Directors, determined in good faith, would have a material adverse effect upon
the rights of the Holder at the time of a conversion of the Preferred Stock.
SECTION 5.2 Exercise of Conversion Privilege. (a) Conversion of the
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Series B Preferred Stock may be exercised, in whole or in part, by the Holder by
telecopying an executed and completed notice of conversion in the form annexed
hereto as Annex I (the "Conversion Notice") to the Corporation. Each date on
which a Conversion Notice is telecopied to and received by the Corporation in
accordance with the provisions of this Section 5.2 shall constitute a Conversion
Date. The Corporation shall convert the Preferred Stock and issue the Common
Stock Issued at Conversion effective as of the Conversion Date at the time set
forth in the Conversion Notice. The Conversion Notice also shall state the name
or names (with addresses) of the persons who are to become the holders of the
Common Stock Issued at Conversion in connection with such conversion. If such
conversion will result in the conversion of all of such holder's shares of
Series B Preferred Stock the Holder shall deliver the shares of Series B
Preferred Stock to the Corporation by express courier within 30 days following
the date on which the telecopied Conversion Notice has been transmitted to the
Corporation. Upon surrender for conversion, the Series B Preferred Stock shall
be accompanied by a proper assignment hereof to the Corporation or be endorsed
in blank. As promptly as practicable after the receipt of the Conversion Notice
as aforesaid, but in any event not more than three Business Days after the
Corporation's receipt of such Conversion Notice, the Corporation shall (i) issue
the Common Stock issued at Conversion in accordance with the provisions of this
Article 5, and (ii) cause to be mailed for delivery by overnight courier to the
Holder a certificate or certificate(s) representing the number of Common Shares
to which the Holder is entitled by virtue of such conversion, together with
cash, as provided in Section 5.3, in respect of any fraction of a Share issuable
upon such conversion. Holder shall indemnify the Corporation for any damages to
third
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parties as a result of a claim by such third party to ownership of the Preferred
Stock converted prior to the receipt of the Series B Preferred Stock by the
Corporation. Such conversion shall be deemed to have been effected at the time
at which the Conversion Notice indicates so long as the Series B Preferred Stock
shall have been surrendered, if required, as aforesaid at such time, and at such
time the rights of the Holder of the Series B Preferred Stock, as such, shall
cease and the Person and Persons in whose name or names the Common Stock Issued
at Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby. The Conversion
Notice shall constitute a contract between the Holder and the Corporation,
whereby the Holder shall be deemed to subscribe for the number of Common Shares
which it will be entitled to receive upon such conversion and, in payment and
satisfaction of such subscription (and for any cash adjustment to which it is
entitled pursuant to Section 5.4), to surrender the Series B Preferred Stock and
to release the Corporation from all liability thereon.
(b) If, at any time (i) the Corporation challenges, disputes or
denies the right of the Holder hereof to effect the conversion of the Series B
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 5.2 (other than with
respect to the calculation of the number of Common Shares covered by the
Conversion Notice) or (ii) any third party commences any lawsuit or proceeding
or otherwise asserts any claim before any court or public or governmental
authority which seeks to challenge, deny, enjoin, limit, modify, delay or
dispute the right of the Holder hereof to effect the conversion of the Series B
Preferred Stock into Common Shares, then the Holder shall have the right, by
written notice to the Corporation, to require the Corporation to promptly redeem
the Series B Preferred Stock for cash at a redemption price equal to one hundred
and forty percent (140%) of the Conversion Amount of the shares sought to be
converted by the holder that are the subject of such injunction (the "Mandatory
Purchase Amount"). Under any of the circumstances set forth above, the
Corporation shall be responsible for the payment of all costs and expenses of
the Holder, including reasonable legal fees and expenses, as and when incurred
in disputing any such action or pursuing its rights hereunder (in addition to
any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under 11 U.S.C. ss. 101
et seq. (the "Bankruptcy Code").In the event the Corporation is a debtor under
the Bankruptcy Code, the Corporation hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in respect of
the holder's conversion privilege. The Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. ss. 362 in
respect of the conversion of the Series B Convertible Preferred Stock. The
Corporation agrees, without cost or expense the Holder, to take or consent to
any and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
SECTION 5.3 Fractional Shares. No fractional Common Shares or scrip
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representing fractional Common Shares shall be issued upon conversion of the
Series B Preferred Stock. Instead of any fractional Common Shares which
otherwise would be issuable upon conversion of the Series B Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction.
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SECTION 5.4 Reclassification, Consolidation, Merger or Mandatory Share
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Exchange; Adjustments for Splits, Combinations. (a) At any time while the Series
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B Preferred Stock remains outstanding and any shares thereof have not been
converted, in case of any reclassification or change of Outstanding Common
Shares issuable upon conversion of the Series B Preferred Stock (other than a
change in par value, or from par value to no par value per share, or from no par
value per share to par value or as a result of a subdivision or combination of
outstanding securities issuable upon conversion of the Series B Preferred Stock)
or in case of any consolidation, merger or mandatory share exchange of the
Corporation with or into another corporation (other than a merger or mandatory
share exchange with another corporation in which the Corporation is a continuing
corporation and which does not result in any reclassification or change, other
than a change in par value, or from par value to no par value per share, or from
no par value per share to par value, or as a result of a subdivision or
combination of Outstanding Common Shares upon conversion of the Series B
Preferred Stock), or in the case of any sale or transfer to another corporation
of the property of the Corporation as an entirety or substantially as an
entirety, the Corporation, or such successor, resulting or purchasing
corporation, as the case may be, shall, without payment of any additional
consideration therefor, execute a new Series B Preferred Stock providing that
the Holder shall have the right to convert such new Series B Preferred Stock
(upon terms and conditions not less favorable to the Holder than those in effect
pursuant to the Series B Preferred Stock) and to receive upon such exercise, in
lieu of each Common Share theretofore issuable upon conversion of the Series B
Preferred Stock, the kind and amount of shares of stock, other securities, money
or property receivable upon such reclassification, change, consolidation,
merger, mandatory share exchange, sale or transfer by the holder of one Common
Share issuable upon conversion of the Series B Preferred Stock had the Series B
Preferred Stock been converted immediately prior to such reclassification,
change, consolidation, merger, mandatory share exchange or sale or transfer. The
provisions of this Section 5.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
(b) The Conversion Price and the number of Common Shares into
which the Series B Preferred Stock shall be convertible shall be adjusted for
stock splits, combinations, or other similar events. Additionally, an adjustment
will be made in the case of an exchange of Common Shares, consolidation or
merger of the Corporation with or into another corporation or sale of all or
substantially all of the assets of the Corporation in order to enable the holder
of Series B Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of Common Shares that might otherwise have been issued upon the
conversion of the Series B Preferred Stock. No adjustment to the Conversion
Price will be made for dividends (other than stock dividends), if any, paid on
the Common Shares.
SECTION 5.5 Adjustments to Conversion Ratio. For so long as any shares
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of the Series B Preferred Stock are outstanding, if after the Issue Date the
Corporation issues and sells (A) Common Shares at a purchase price on the date
of issuance thereof that is lower than the Conversion Price at such date, other
than with respect to the exercise of options, warrants or convertible securities
outstanding on the Issue Date or with respect to the Warrants or on conversion
of the Series B Preferred (B) warrants or options with an exercise price
representing a
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percentage of the Current Market Price with an exercise price on the date of
issuance of the warrants or options that is lower than the Conversion Price at
such date, except for employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Conversion Price on the
Issue Date, as applicable, of such convertible, exchangeable or exercisable
securities, except, in each case, for stock option agreements or stock incentive
agreements, then the Conversion Ratio shall be reduced to equal the lowest of
any such lower rates since the most recently received Conversion Notice, and
such Adjusted Conversion Price shall apply to any future Conversion Notices
received by the Corporation. The Adjusted Conversion Price as it may exist from
time to time shall not apply retroactively to any shares of Series B Preferred
Stock converted prior to the implementation of such Adjusted Conversion Price.
SECTION 5.6 Optional Redemption. At any time after the first
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anniversary of the Issue Date, the Corporation, upon notice delivered to the
Holder as provided in Section 5.7, may redeem the Series B Preferred Stock (but
only with respect to such shares as to which the Holder has not theretofore
furnished a Conversion Notice in compliance with Section 5.2), at a price (the
"Optional Redemption Price") equal to the greater of (i) the sum of $1,400 and
the Additional Amount per share of such Series B Preferred Stock and (ii) the
Market Price of the Common Stock into which such shares of Series B Preferred
Stock could be converted on the date of such notice.
SECTION 5.7 Notice of Redemption. (a)Notice of redemption pursuant to
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Section 5.6 shall be provided by the Corporation to the Holder in writing (by
registered mail or overnight courier at the Holder's last address appearing in
the Corporation's security registry) not less than ten (10) nor more than thirty
(30) days prior to the dated stipulated by the Corporation for the redemption of
the Series B Preferred Stock (the "Redemption Date"), which notice shall specify
the Redemption Date and refer to Section 5.6 and this Section 5.7.
(b) Upon receipt of the Redemption Notice, the recipient thereof
shall have the option, at its sole election, to specify what portion of the
Series B Preferred Stock called for redemption in the Redemption Notice shall be
redeemed as provided in Section 5.6 or converted into Common Stock in the manner
provided in Section 5.1. If the holder of the Series B Preferred Stock called
for redemption elects to convert any of such shares, then such conversion shall
take place on the Conversion Date specified by the holder, but in no event after
the Redemption Date, in accordance with the terms of Section 5.1.
SECTION 5.8 Surrender of Preferred Stock. Upon any redemption of the
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Series B Preferred Stock pursuant to Sections 5.6 or 5.7, the Holder shall
either deliver the Series B Preferred Stock by hand to the Corporation at its
principal executive offices or surrender the same to the Corporation at such
address by express courier. Payment of the Optional Redemption Price specified
in Section 5.6 shall be made by the Corporation to the Holder against receipt of
the Series B Preferred Stock (as provided in this Section 5.8) by wire transfer
of immediately available funds to such account(s) as the Holder shall specify to
the Corporation. If payment of such redemption price is not made in full by the
Mandatory Redemption Date or the Redemption
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Date, as the case may be, the Holder shall again have the right to convert the
Series B Preferred Stock as provided in Article 5 hereof.
SECTION 5.9 Mandatory Conversion. On the fourth anniversary of the
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Issue Date (the "Mandatory Conversion Date"), the Corporation shall convert all
Series B Preferred Stock outstanding, together with the Additional Amount
thereon, at the Conversion Price or, at the option of the Corporation, buy out
all such holders (including the Additional Amount on the shares of Series B
Preferred Stock then outstanding) in cash, at the then effective Conversion
Price. Notwithstanding the previous sentence, unless the Corporation shall have
obtained the approval of its voting stockholders to such issuance in accordance
with the rules of the NASDAQ or such other stock market as the Corporation shall
be required to comply with, the Corporation shall not issue shares of Common
Stock upon conversion of any shares of Series B Preferred Stock if such issuance
of Common Stock, when added to the number of shares of Common Stock previously
issued by the Corporation (i) upon conversion of shares of the Series B
Preferred Stock and (ii) upon exercise of the Warrants issued pursuant to the
terms of the Securities Purchase Agreement, would equal or exceed twenty percent
(20%) of the number of shares of the Corporation's Common Stock which were
issued and outstanding on the Closing Date (the "Maximum Issuance Amount"). In
the event that a Mandatory Conversion would require the Corporation to issue
shares of Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall complete such Mandatory Conversion by (i) converting shares of
Series B Preferred Stock which would result in the Corporation issuing shares of
Common Stock equal to one less than an amount which would result in the
Corporation issuing shares equal to the maximum Issuance Amount and (ii)
redeeming the remaining shares of Series B Preferred Stock in cash at a price
equal to the Optional Redemption Price.
SECTION 5.10 Compliance with Section 13(d). Notwithstanding anything
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herein to the contrary, except on the Mandatory Conversion Date, the Holder
shall not have the right, and the Company shall not have the obligation, to
convert all or any portion of the Series B Preferred Stock if and to the extent
that the issuance to the Holder of shares of Common Stock upon such conversion
would result in the Holder being deemed the "beneficial owner" of more than 5%
of the then outstanding shares of Common Stock within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder. If any court of competent jurisdiction shall determine
that the foregoing limitation is ineffective to prevent a Holder from being
deemed the beneficial owner of more than 5% of the then outstanding shares of
Common Stock, then the Corporation shall redeem so many of such Holder's shares
(the "Redemption Shares") of Series B Preferred Stock as are necessary to cause
such Holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series B Preferred Stock and the Holder shall have no interest in or
rights under such Redemption Shares. Such redemption shall be for cash at the
Optional Redemption Price.
SECTION 5.11 Stockholder Approval. Unless the Corporation shall have
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obtained the approval of its voting stockholders to such issuance in accordance
with the rules of the
11
NASDAQ or such other stock market as the Corporation shall be required to comply
with, the Corporation shall not issue shares of Common Stock upon conversion of
any shares of Series B Preferred Stock, if such issuance of Common Stock, when
added to the number of shares of Common Stock previously issued by the
Corporation (i) upon conversion of shares of the Series B Preferred Stock and
(ii) upon exercise of the Warrants issued pursuant to the terms of the
Securities Purchase Agreement, would equal or exceed twenty percent (20%) of the
number of shares of the Corporation's Common Stock which were issued and
outstanding on the Closing Date (the "Maximum Issuance Amount"). If in the event
of the circumstances provided in the preceding sentence, a properly executed
Conversion Notice is received by the Corporation which would require the
Corporation to issue shares of Common Stock equal to or in excess of the Maximum
Issuance Amount, the Corporation shall honor such conversion request by (i)
converting the number of shares of Series B Preferred Stock stated in the
Conversion Notice not in excess of the Maximum Issuance Amount and (ii)
redeeming the number of shares of Series B Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum Issuance Amount in cash
at the Optional Redemption Price of the shares of Series B Preferred Stock to be
so redeemed.
SECTION 5.12 Notice of Certain Events. In the case of the occurrence of
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any event described in subparagraphs (a), (b) or (f) of Section 5.1 or Section
5.4 of this Certificate of Designations, the Corporation shall cause to be
mailed to the Holder of the Series B Preferred Stock at its last address as it
appears in the Corporation's security registry, at least twenty (20) days prior
to the applicable record, effective or expiration date hereinafter specified
(or, if such twenty (20) days notice is not practicable, at the earliest
practicable date prior to any such record, effective or expiration date), a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, issuance or granting of rights, options or
warrants, or if a record is not to be taken, the date as of which the holders of
record of Series B Preferred Stock to be entitled to such dividend,
distribution, issuance or granting of rights, options or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Series B Preferred Stock will be entitled to exchange their shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale transfer, dissolution, liquidation or winding-up.
ARTICLE 6
VOTING RIGHTS
Holders of the Series B Preferred Stock have no voting power, except as
otherwise provided by the Delaware General Corporation Law ("DGCL"), in this
Article 6, and in Article 7 below.
Notwithstanding the above, the Corporation shall provide each Holder of
Series B Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). In the event of any taking by the Corporation of a record of its
stockholders for the purpose of determining stockholders who are
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entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any
proposed liquidation, dissolution or winding up of the Corporation, the
Corporation shall mail a notice to each Holder, at least thirty (30) days prior
to (or such shorter period that the Corporation first becomes aware of) the
consummation of the transaction or event, whichever is earlier), of the date on
which any such action is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time.
To the extent that under the DGCL the vote of the holders of the Series
B Preferred Stock, voting separately as a class or series applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series B
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of the holders of a majority of the shares of Series B
Preferred Stock (except as otherwise may be required under the DGCL) shall
constitute the approval of such action by the class. Holders of the Series B
Preferred Stock shall be entitled to notice of all stockholder meetings or
written consents (and copies of proxy materials and other information sent to
stockholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.
ARTICLE 7
PROTECTIVE PROVISIONS
So long as shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the holders of at least 85% of the then
outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series B Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("Senior Securities")
or alter or change the rights, preferences or privileges of any Senior
Securities so as to affect adversely the Series B Preferred Stock;
(c) increase the authorized number of shares of Series B Preferred
Stock; or
(d) do any act or thing not authorized or contemplated by this
Certificate of Designations which would result in taxation of the holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
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In the event holders of at least 85% of the then outstanding shares of
Series B Preferred Stock agree to allow the Corporation to alter or change the
rights, preferences or privileges of the shares of Series B Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series B Preferred Stock,
then the Corporation will deliver notice of such approved change to the holders
of the Series B Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of thirty (30) days to convert pursuant to the terms of this Certificate
of Designations as they exist prior to such alteration or change or continue to
hold their shares of Series B Preferred Stock.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Loss, Theft, Destruction of Preferred Stock. Upon receipt
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of evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of shares of Series B Preferred Stock and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security reasonably
satisfactory to the Corporation, or, in the case of any such mutilation, upon
surrender and cancellation of the Series B Preferred Stock, the Corporation
shall make, issue and deliver, in lieu of such lost, stolen, destroyed or
mutilated shares of Series B Preferred Stock, new shares of Series B Preferred
Stock of like tenor. The Series B Preferred Stock shall be held and owned upon
the express condition that the provisions of this Section 8.1 are exclusive with
respect to the replacement of mutilated, destroyed, lost or stolen shares of
Series B Preferred Stock and shall preclude any and all other rights and
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement of negotiable instruments or other
securities without the surrender thereof.
SECTION 8.2 Who Deemed Absolute Owner. The Corporation may deem the
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Person in whose name the Series B Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series B Preferred Stock for the purpose of the conversion of the Series
B Preferred Stock and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series B Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
SECTION 8.3 Register. The Corporation shall keep at its principal
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office a register in which the Corporation shall provide for the registration of
the Series B Preferred Stock. Upon any transfer of the Series B Preferred Stock
in accordance with the provisions hereof, the Corporation shall register such
transfer on the Series B Preferred Stock register.
The Corporation may deem the person in whose name the Series B
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series B Preferred Stock
for the purpose of the conversion of the Series B Preferred Stock and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary. All such conversions shall be valid and effective to satisfy and
discharge the liability upon the Series B Preferred Stock to the extent of the
conversion or conversions so made.
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SECTION 8.4 Reservation of Stock. The Corporation, upon the effective
--------------------
date of this Certificate of Designations, has a sufficient number of shares of
Common Stock available to reserve for issuance upon the conversion of all
outstanding shares of Series B Preferred Stock, including the Additional Amount,
at an assumed Conversion Price of $0.25. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series B Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series B Preferred Stock. The
Corporation covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued, fully paid and non-assessable. The Corporation
will take all such action as may be so taken without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed to have a sufficient number of
authorized but unissued shares of Common Stock to issue upon conversion of the
Series B Preferred Stock. The Corporation will not take any action which results
in any adjustment of the conversion rights if the total number of shares of
Common Stock issued and issuable after such action upon conversion of the Series
B Preferred Stock would exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of Incorporation, as amended.
SECTION 8.5 Withholding. To the extent required by applicable law, the
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Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
B Preferred Stock.
SECTION 8.6 Headings. The headings of the Articles and Sections of
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this Certificate of Designations are inserted for convenience only and do not
constitute a part of this Certificate of Designations.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its duly authorized officers on this 22nd day of
September, 2000.
ADATOM.COM, INC.
By:/s/RICHARD S. BARTON
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Name: Richard S. Barton
Title: President and CEO
By:/s/MICHAEL M. WHEELER
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Name: Michael M. Wheeler
Title: Controller
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ANNEX I
[FORM OF CONVERSION NOTICE]
TO:
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The undersigned owner of this Series B Convertible Preferred Stock (the
"Series B Preferred Stock") issued by Adatom.com, Inc. (the "Corporation")
hereby irrevocably exercises its option to convert _______ shares of the Series
B Preferred Stock into shares of the common stock, $.01 par value, of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations. The undersigned hereby instructs the Corporation to convert the
number of shares of the Series B Preferred Stock specified above into Shares of
Common Stock Issued at Conversion in accordance with the provisions of Article 5
of the Certificate of Designations. The undersigned directs that the Common
Stock issuable and certificates therefor deliverable upon conversion, the Series
B Preferred Stock recertificated, if any, not being surrendered for conversion
hereby, together with any check in payment for fractional Common Stock, be
issued in the name of and delivered to the undersigned unless a different name
has been indicated below. All capitalized terms used and not defined herein have
the respective meanings assigned to them in the Certificate of Designations.
Dated:
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Signature
Fill in for registration of Series B Preferred Stock:
Please print name and address (including zip code number):
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