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EXHIBIT 3.1
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CERTIFICATE OF INCORPORATION
OF
CORECHANGE, INC.
FIRST. The name of the Corporation is: Corechange, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 8,000,000 shares, consisting of (i)
6,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"), and
(ii) 2,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred
Stock").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the Corporation entitled to
vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
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4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
FIFTH. The name and mailing address of the sole incorporator are as
follows:
NAME MAILING ADDRESS
Ulf Arnetz c/o Corechange, Inc.
260 Franklin Street
Boston, MA 02110
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
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SEVENTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
EIGHTH. 1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF
THE CORPORATION. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and, to the extent permitted by law, amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware shall determine upon application that, despite the
adjudication of such liability but in view of all
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the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or NOLO CONTENDERE by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his right
to be indemnified, the Indemnitee must notify the Corporation in writing as soon
as practicable of any action, suit, proceeding or investigation involving him
for which indemnity will or could be sought. With respect to any action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee. After notice from the Corporation to the
Indemnitee of its election so to assume such defense, the Corporation shall not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as provided
below in this Section 4. The Indemnitee shall have the right to employ his own
counsel in connection with such claim, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
thereof shall be at the expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel
to the Indemnitee shall have reasonably concluded that there may be a conflict
of interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the Corporation
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the Corporation, except as otherwise expressly provided by
this Article. The Corporation shall not be entitled, without the consent of the
Indemnitee, to assume the defense of any claim brought by or in the right of the
Corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; PROVIDED,
HOWEVER, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
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6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, (c)
independent legal counsel (who may, to the extent permitted by law, be regular
legal counsel to the Corporation), or (d) a court of competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. OTHER RIGHTS. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf
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in connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of Delaware.
12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of Delaware is
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute and this Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
EXECUTED on May 12, 1997.
/s/ Ulf Arnetz
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Incorporator
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CERTIFICATE OF MERGER
OF
CORECHANGE, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
INTO
CORECHANGE, INC.
(A DELAWARE CORPORATION)
Corechange, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the name and state of incorporation of each of the constituent
entities of the merger is as follows:
<TABLE>
<CAPTION>
NAME STATE OF DOMICILE
<S> <C>
Corechange, LLC Delaware
Corechange, Inc. Delaware
</TABLE>
SECOND: That an Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent entities in accordance with the requirements of Subsection
(c) of Section 264 of the General Corporation Law of the State of Delaware and
Subsection (b) of Section 18-209 of the Delaware Limited Liability Company Act.
THIRD: That the name of the surviving corporation of the merger is
Corechange, Inc.
FOURTH: That the Certificate of Incorporation of Corechange, Inc., a
Delaware corporation which will survive, shall be the Certificate of
Incorporation of the surviving corporation.
FIFTH: That the executed Agreement and Plan of Merger is on file at the
principal place of business of the surviving corporation. The address of said
principal place of business shall be 260 Franklin Street, Boston, MA 02110.
SIXTH: That a copy of the Agreement and Plan of Merger will be furnished by
the surviving corporation upon request and without cost to any stockholder of
any constituent corporation or any member of any constituent limited liability
company.
SEVENTH: That this Certificate of Merger shall be effective upon the filing
of this Certificate of Merger.
IN WITNESS WHEREOF, Corechange, Inc. has caused this Certificate to be
executed by its President this 12th day of May, 1997.
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CORECHANGE, INC.
(a Delaware corporation)
By: /s/ Ulf Arnetz
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President
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Certificate of Designation of Preferred Stock
of
Corechange, Inc.
to be Designated
Series I Junior Convertible Preferred Stock
Corechange, Inc., a Delaware corporation (the "Corporation"), pursuant to
authority conferred on the Board of Directors of the Corporation by the
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, certifies that the
Board of Directors of the Corporation, by unanimous written consent acting in
accordance with Section 141(f) of the General Corporation Law of the State of
Delaware, duly adopted the following resolution:
RESOLVED: That, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation, as amended (the "Certificate"), a series of
Preferred Stock of the Corporation be and hereby is established, consisting of
413,635 shares, to be designated "Series I Junior Convertible Preferred Stock",
$0.01 par value per share (hereinafter "Series I Stock"); that the Board of
Directors be and hereby is authorized to issue such shares of Series I Stock
from time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate, the powers, designations, preferences and relative,
participating, optional or other special rights of, and the qualifications,
limitations or restrictions upon, the Series I Stock shall be as follows:
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any distributions (as
defined below) on shares of Common Stock until the holders of the Series I Stock
then outstanding shall have first received, or simultaneously receive, a
distribution on each outstanding share of Series I Stock in an amount at least
equal to the product of (i) the per share amount, if any, of the dividends or
other distributions to be declared, paid or set aside for the Common Stock,
multiplied by (ii) the number of whole shares of Common Stock into which such
share of Series I Stock is then convertible.
(b) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such
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repurchase at a price equal to the original issue price of such shares and
other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series I
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any other class or series of stock of the Corporation ranking on liquidation
prior and in preference to the Series I Stock (collectively referred to as
"Senior to Series I Stock"), but before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking on liquidation
junior to the Series I Stock (such Common Stock and other stock being
collectively referred to as "Junior to Series I Stock") by reason of their
ownership thereof, an amount equal to $6.38 for each share of Series I Stock
then held by them (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares). If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
I Stock the full amount to which they shall be entitled, the holders of shares
of Series I Stock and any class or series of stock ranking on liquidation on a
parity with the Series I Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior to I Series Stock, Series I Stock and any other class
or series of stock of the Corporation ranking on liquidation on a parity with
the Series I Stock, upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Junior to I Stock then outstanding shall
be entitled to receive the remaining assets and funds of the Corporation
available for distribution to its stockholders.
(c) A merger or consolidation of the Corporation into or with another
corporation, or a sale of all or substantially all the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 2.
3. VOTING.
(a) Each holder of outstanding shares of Series I stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series I Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law or by the provisions establishing any other series of
Preferred Stock, holders of Series I Stock and of any
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other outstanding series of Preferred Stock shall vote together with the holders
of Common Stock as a single class.
(b) The number of authorized shares of Series I Stock may be increased
or decreased (but not below the number of shares then outstanding) by the
directors of the Corporation pursuant to Section 151 of the General Corporation
Law of Delaware or by the affirmative vote of the holders of a majority of the
then outstanding shares of the Common Stock, Series I Stock and all other
classes or series of stock of the Corporation entitled to vote thereon, voting
as a single class, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
4. OPTIONAL CONVERSION. The holders of the Series I Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series I Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing $6.38 by the Series I Conversion Price (as defined
below) in effect at the time of conversion. The conversion price at which shares
of Common Stock shall be deliverable upon conversion of Series I Stock without
the payment of additional consideration by the holder thereof (the "Series I
Conversion Price") shall initially be $6.38. The initial Series I Conversion
Price, and the rate at which shares of Series I Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below. In the
event of a liquidation of the Corporation, the Conversion Rights shall terminate
at the close of business on the first full day preceding the date fixed for the
payment of any amounts distributable on liquidation to the holders of Series I
Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Series I Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective applicable Series I
Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series I Stock to convert shares of
Series I Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series I Stock, at the office of
the transfer agent for the Series I Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of the Series I Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series I Stock, or to his or its
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nominees, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled, together with cash in lieu of any
fraction of a share.
(ii) The Corporation shall at all times when the Series I Stock
shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series I
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Series I
Stock. Before taking any action which would cause an adjustment reducing the
Series I Conversion Price below the then par value of the shares of Common Stock
issuable upon conversion of the Series I Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Series I Conversion Price.
(iii) Upon any such conversion, no adjustment to the Series I
Conversion Price shall be made for any accrued and unpaid dividends on the
Series I Stock surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series I Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. Any shares of Series I Stock so converted shall be
retired and cancelled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series I Stock accordingly.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Corporation
shall at any time or from time to time after the date on which shares of Series
I Stock is first issued (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock, the Series I Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Series I Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to time after the Original Issue Date,
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series I
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series I Conversion
Price then in effect by a fraction:
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(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series I Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series I
Conversion Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made if the holders of Series I Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series I Stock had been converted
into Common Stock on the date of such event.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time or from time to time after the original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of such Series I
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series I Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Series I Stock; and
provided further, however, that no such adjustment shall be made if the holders
of Series I Stock simultaneously receive a dividend of other distribution of
such securities in an amount equal to the amount of such securities as they
would have received if all outstanding shares of Series I Stock had been
converted into Common Stock on the date of such event.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If the
Common Stock issuable upon the conversion of the Series I Stock shall be changed
into the same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of each such share of Series I Stock
shall have the right thereafter to convert such share into the kind and amount
of shares of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the number of
shares of Common Stock into which such shares of Series I Stock might have been
converted immediately prior to such reorganization, reclassification, or change,
all subject to further adjustment as provided herein.
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<PAGE>
(h) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series I Stock shall thereafter be convertible into
the kind and amount of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such Series I Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Series I Stock, to the end
that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Series I Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Series I Stock.
(i) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series I Stock against impairment.
(j) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series I Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series I Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Series I Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Series I Conversion Price then in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which then would be
received upon the conversion of such Series I Stock.
(k) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into
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<PAGE>
or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series I Stock, and shall cause to be mailed
to the holders of the Series I Stock at their last addresses as shown on the
records of the Corporation or such transfer agent, at least ten days prior to
the record date specified in (A) below or twenty days before the date specified
in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
5. MANDATORY CONVERSION.
(a) On the Mandatory Conversion Date (as defined below), (i) all
outstanding shares of Series I Stock shall automatically be converted into
shares of Common Stock, at the then current Series I Conversion Price and (ii)
the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series I Stock, and all provisions included under the caption "Series I Stock"
in this Certificate, and all references to the Series I Stock in this
Certificate, shall be deleted and shall be of no further force or effect. For
purposes of this Section 5, the Mandatory Conversion Date shall occur upon the
first to occur of the following:
(A) upon the closing of the sale of shares of Common Stock in a
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of gross
proceeds to the Corporation; or
(B) the date on which there are issued and outstanding a number of
shares of Series I Stock equal to less than 50% of the total number of shares of
Series I Stock ever issued by the Corporation (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares).
(b) All holders of record of shares of Series I Stock shall be given
written notice of the Mandatory Conversion Date and the place designated for
mandatory conversion of
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<PAGE>
all such shares of Series I Stock pursuant to this Section 5. Such notice need
not be given in advance of the occurrence of the Mandatory Conversion Date. Such
notice shall be sent by first class or registered mail, postage prepaid, to each
record holder of Series I Stock at such holder's address last shown on the
records of the transfer agent for the Series I Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series I Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series I Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series I Stock has been
converted, and payment of which shall be deemed to be declared by the Board of
Directors on the Mandatory Conversion Date). If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
I Stock, the Corporation shall cause to be issued and delivered to such holder,
or on his or its written order, a certificate or certificates for the number of
full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Section 4(b) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series I Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and cancelled and the shares of Series I Stock represented thereby
converted into Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such appropriate action (without the
need for stockholder action) as may be necessary to reduce the authorized Series
I Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Designation of Preferred Stock of the
Corporation to be signed on its behalf by its President this 20th day of June,
1997.
CORECHANGE INC.
By: /s/ Neil Gelfand
-----------------------------------------
Neil Gelfand, Vice President
8
<PAGE>
Certificate of Designation Of Preferred Stock
of
Corechange, Inc.
To be Designated
Series II Junior Convertible Preferred Stock
Corechange, Inc., a Delaware corporation (the "Corporation"), pursuant to
authority conferred on the Board of Directors of the Corporation by the
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, certifies that the
Board of Directors of the Corporation, by unanimous written consent acting in
accordance with section 141(f) of the General Corporation Law of the State of
Delaware, duly adopted the following resolution:
RESOLVED: That, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation, as amended (the "Certificate"), a series of
Preferred Stock of the Corporation be and hereby is established, consisting of
336,021 shares, to be designated "Series II Junior Convertible Preferred Stock",
$0.01 par value per share (hereinafter "Series II Stock"); that the Board of
Directors be and hereby is authorized to issue such shares of Series II Stock
from time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate, the powers, designations, preferences and relative,
participating, optional or other special rights of, and the qualifications,
limitations or restrictions upon, the Series II Stock shall be as follows:
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any distributions (as
defined below) on shares of Common Stock until the holders of the Series II
Stock then outstanding shall have first received, or simultaneously receive, a
distribution on each outstanding share of Series II Stock in an amount at least
equal to the product of (i) the per share amount, if any, of the dividends or
other distributions to be declared, paid or set aside for the Common Stock,
multiplied by (ii) the number of whole shares of Common Stock into which such
share of Series II Stock is then convertible.
(b) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
other than redemptions
<PAGE>
in liquidation or dissolution of the Corporation) for cash or property,
including any such transfer, purchase or redemption by a subsidiary of this
Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series II
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any other class or series of stock of the Corporation ranking on liquidation
prior and in preference to the Series II Stock (collectively referred to as
"Senior to Series II stock"), but before any payment shall be made to the
holders of Common Stock or any other class or series of stock ranking on
liquidation junior to the Series II Stock (such Common Stock and other stock
being collectively referred to as "Junior to Series II Stock"), by reason of
their ownership thereof, an amount equal to $7.44 for each share of Series II
Stock then held by them (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization
affecting such shares). If upon any such liquidation, dissolution or winding up
of the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series II Stock the full amount to which they shall be entitled, the
holders of shares of Series II Stock and of Series I Stock (which shall rank on
liquidation on a parity with the Series II Stock) and any other class or series
of stock ranking on liquidation on a parity with the Series II Stock shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the respective amounts which would otherwise be payable in
respect of the shares held by them upon such distribution if all amounts payable
on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior to Series I Stock, Series II Stock and Series I Stock
and any other class or series of stock of the Corporation ranking on liquidation
on a parity with the Series II Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior to I Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A merger or consolidation of the Corporation into or with another
corporation, or a sale of all or substantially all the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 2.
3. VOTING.
(a) Each holder of outstanding shares of Series II Stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series II Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law or by the provisions establishing any other series of
Preferred Stock, holders of Series II Stock and of any
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<PAGE>
other outstanding series of Preferred Stock shall vote together with the holders
of Common Stock as a single class.
(b) The number of authorized shares of Series II stock may be
increased or decreased (but not below the number of shares then outstanding) by
the directors of the Corporation pursuant to Section 151 of the General
Corporation Law of Delaware or by the affirmative vote of the holders of a
majority of the then outstanding shares of the Common Stock, Series II Stock and
all other classes or series of stock of the Corporation entitled to vote
thereon, voting as a single class, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of Delaware.
4. OPTIONAL CONVERSION. The holders of the Series II stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series II Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing $7.44 by the Series II Conversion Price (as defined
below) in effect at the time of conversion. The conversion price at which shares
of common Stock shall be deliverable upon conversion of Series II Stock without
the payment of additional consideration by the holder thereof (the "Series II
Conversion Price") shall initially be $7.44. The initial Series II Conversion
Price, and the rate at which shares of Series II Stock may be converted into
shares of common Stock, shall be subject to adjustment as provided below. In the
event of a liquidation of the Corporation, the Conversion Rights shall terminate
at the close of business on the first full day preceding the date fixed for the
payment of any amounts distributable on liquidation to the holders of Series II
Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Series II Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective applicable Series II
Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series II Stock to convert shares of
Series II Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series II Stock, at the office of
the transfer agent for the Series II Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of the Series II Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series
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<PAGE>
II Stock, or to his or its nominees, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series II Stock
shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series II
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to affect the conversion of all outstanding Series II
Stock. Before taking any action which would cause an adjustment reducing the
Series II Conversion Price below the then par value of the shares of Common
Stock issuable upon conversion of the Series II Stock, the Corporation will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Series II Conversion
Price.
(iii) Upon any such conversion, no adjustment to the Series II
Conversion Price shall be made for any accrued and unpaid dividends on the
Series II Stock surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series II Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. Any shares of Series II Stock so converted shall be
retired and cancelled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series II Stock accordingly.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Corporation
shall at any time or from time to time after the date on which shares of Series
II Stock is first issued (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock, the Series II Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to time after the original Issue Date
combine the outstanding shares of common Stock, the Series II Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to time after the Original Issue Date,
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series II
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series II Conversion
Price then in effect by a fraction:
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<PAGE>
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series II Conversion Price shall be recomputed accordingly
as of the close of business an such record date and thereafter the Series II
Conversion Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made if the holders of Series II Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series II Stock had been converted
into Common Stock on the date of such event.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of such Series II
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series II Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Series II Stock; and
provided further, however, that no such adjustment shall be made if the holders
of Series II Stock simultaneously receive a dividend of other distribution of
such securities in an amount equal to the amount of such securities as they
would have received if all outstanding shares of Series II Stock had been
converted into Common Stock on the date of such event.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If the
Common Stock issuable upon the conversion of the Series II Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of Series
II Stock shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the number of
shares of Common Stock into which such shares of Series II Stock might have been
converted immediately prior to such reorganization, reclassification, or change,
all subject to further adjustment as provided herein.
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<PAGE>
(h) ADJUSTMENT FOX MERGER OR REORGANIZATION, ETC. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series II Stock shall thereafter be convertible into
the kind and amount of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such Series II Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Series II Stock, to the end
that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Series II Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Series II Stock.
(i) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series II Stock against impairment.
(j) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series II Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series II Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Series II Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Series II Conversion Price then in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which then would be
received upon the conversion of such Series II Stock.
(k) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii)of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into
6
<PAGE>
or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series II Stock, and shall cause to be
mailed to the holders of the Series II Stock at their last addresses as shown on
the records of the Corporation or such transfer agent, at least ten days prior
to the record date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
5. MANDATORY CONVERSION.
(a) On the Mandatory Conversion Date (as defined below), (i) all
outstanding shares of Series II Stock shall automatically be converted into
shares of Common Stock, at the then current Series II Conversion Price and (ii)
the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series II Stock, and all provisions included under the caption "Series II Stock"
in this Certificate, and all references to the Series II Stock in this
Certificate, shall be deleted and shall be of no further force or effect. For
purposes of this Section 5, the Mandatory Conversion Date shall occur upon the
first to occur of the following:
(A) upon the closing of the sale of shares of Common Stock in a
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of gross
proceeds to the Corporation; or
(B) the date on which there are issued and outstanding a number of
shares of Series II Stock equal to less than 50% of the total number of shares
of Series II Stock ever issued by the Corporation (subject, to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares).
(b) All holders of record of shares of Series II Stock shall be given
written notice of the Mandatory Conversion Date and the place designated for
mandatory conversion of
7
<PAGE>
all such shares of Series II Stock pursuant to this Section 5. Such notice need
not be given in advance of the occurrence of the Mandatory Conversion Date. Such
notice shall be sent by first class or registered mail, postage prepaid, to each
record holder of Series II Stock at such holder's address last shown on the
records of the transfer agent for the Series II Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series II Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series II Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common stock into which such Series II Stock has
been converted, and payment of any declared or accrued but unpaid dividends
thereon (all of which shall be deemed to be declared by the Board of Directors
on the Mandatory Conversion Date). If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
II Stock, the Corporation shall cause to be issued and delivered to such holder,
or on his or its written order, a certificate or certificates for the number of
full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Section 4(b) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series II stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and cancelled and the shares of Series II Stock represented thereby
converted into Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such appropriate action (without the
need for stockholder action) as may be necessary to reduce the authorized Series
II Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Designation of Preferred Stock of the
Corporation to be signed on its behalf by its President this 20th day of June,
1997.
CORECHANGE INC.
By: /s/ Neil Gelfand
--------------------------------------
Neil Gelfand, Vice President
8
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATION
OF PREFERRED STOCK OF
CORECHANGE, INC.
TO BE DESIGNATED SERIES I JUNIOR CONVERTIBLE PREFERRED STOCK
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON JUNE 20, 1997
Corechange, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
1. The name of the corporation is Corechange, Inc.
2. That a Certificate of Designation of Preferred Stock of
Corechange, Inc.to be Designated Series I Junior Convertible Preferred Stock was
filed by the Secretary of State of Delaware on June 20, 1997 (the "Certificate")
and that said Certificate requires correction as permitted by Section 103 of the
General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected as
follows:
The number of shares of stock to be designated as Series I Junior
Convertible Preferred Stock in the first sentence of the resolution set forth in
said Certificate is incorrect.
4. The Certificate is corrected by replacing the number 413,635 in
the first sentence of the resolution set forth in said Certificate with the
number 413,965 in lieu thereof.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be signed by its Vice President this 27th day of June, 1997.
CORECHANGE, Inc.
By: /s/ Neil Gelfand
------------------------------
Neil Gelfand, Vice President
<PAGE>
Certificate of Designation of Preferred Stock
of
Corechange, Inc.
To be Designated
Series III Junior Convertible Preferred Stock
Corechange, Inc., a Delaware corporation (the "Corporation"), pursuant
to authority conferred on the Board of Directors of the Corporation by the
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, certifies that the
Board of Directors of the Corporation, by unanimous written consent acting in
accordance with Section 141(f) of the General corporation Law of the State of
Delaware, duly adopted the following resolution:
RESOLVED: That, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation in accordance with the
provisions of its Certificate of Incorporation, as amended (the "Certificate"),
a series of Preferred Stock of the Corporation be and hereby is established,
consisting of 215,000 shares, to be designated "Series III Junior Convertible
Preferred Stock", $0.01 par value per share (hereinafter "Series III Stock");
that the Board of Directors be and hereby is authorized to issue such shares of
Series III Stock from time to time and for such consideration and on such terms
as the Board of Directors shall determine; and that, subject to the limitations
provided by law and by the Certificate, the powers, designations, preferences
and relative, participating, optional or other special rights of, and the
qualifications, limitations or restrictions upon, the Series III Stock shall be
as follows:
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any distributions (as
defined below) on shares of Common Stock until the holders of the Series III
Stock then outstanding shall have first received, or simultaneously receive, a
distribution on each outstanding share of Series III Stock in an amount at least
equal to the product of (i) the per share amount, if any, of the dividends or
other distributions to be declared, paid or set aside for the Common Stock,
multiplied by (ii) the number of whole shares of Common Stock into which such
share of Series III Stock is then convertible.
(b) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
other than redemptions
<PAGE>
in liquidation or dissolution of the Corporation) for cash or property,
including any such transfer, purchase or redemption by a subsidiary of this
Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series
III Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any other class or series of stock of the Corporation ranking on liquidation
prior and in preference to the Series III Stock (collectively referred to as
"Senior to Series III Stock"), but before any payment shall be made to the
holders of Common Stock or any other class or series of stock ranking on
liquidation junior to the Series III Stock (such Common Stock and other stock
being collectively referred to as "Junior to Series III Stock") by reason of
their ownership thereof, an amount equal to $7.49 for each share of Series III
Stock then held by them (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization
affecting such shares). If upon any such liquidation, dissolution or winding up
of the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series III Stock the full amount to which they shall be entitled, the
holders of shares of Series III Stock and of Series I Stock and Series II Stock
(which shall rank on liquidation on a parity with the Series III Stock) and any
other class or series of stock ranking on liquidation on a parity with the
Series III Stock shall share ratably in any distribution of the remaining assets
and funds of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(b) After the payment of all preferential amounts required to be
paid to the holders of Senior to Series III stock, Series III Stock, Series II
Stock and Series I Stock and any other class or series of stock of the
Corporation ranking on liquidation on a parity with the Series III Stock, upon
the dissolution, liquidation or winding up of the Corporation, the holders of
shares of Junior to III Stock then outstanding shall be entitled to receive the
remaining assets and funds of the Corporation available for distribution to its
stockholders.
(c) A merger or consolidation of the Corporation into or with
another corporation, or a sale of all or substantially all the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 2.
3. VOTING.
(a) Each holder of outstanding shares of Series III Stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series III Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law or by the provisions establishing any other series of
Preferred Stock, holders of Series III Stock and
2
<PAGE>
of any other outstanding series of Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) The number of authorized shares of Series III Stock may be
increased or decreased (but not below the number of shares then outstanding) by
the directors of the Corporation pursuant to Section 151 of the General
Corporation Law of Delaware or by the affirmative vote of the holders of a
majority of the then outstanding shares of the Common Stock, Series II Stock and
all other classes or series of stock of the Corporation entitled to vote
thereon, voting as a single class, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of Delaware.
4. OPTIONAL CONVERSION. The holders of the Series III Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series III Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing $7.49 by the Series III Conversion Price (as defined
below) in effect at the time of conversion. The conversion price at which shares
of Common Stock shall be deliverable upon conversion of Series III Stock without
the payment of additional consideration by the holder thereof (the "Series III
Conversion Price") shall initially be $7.49. The initial Series III Conversion
Price, and the rate at which shares of Series III Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below. In the
event of a liquidation of the Corporation, the Conversion Rights shall terminate
at the close of business on the first full day preceding the date fixed for the
payment of any amounts distributable on liquidation to the holders of Series III
Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Series III Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective applicable Series III
Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series III Stock to convert shares
of Series III Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series III Stock, at the office
of the transfer agent for the Series III Stock (or at the principal office of
the Corporation if the Corporation serves as its own transfer agent), together
with written notice that such holder elects to convert all or any number of the
shares of the Series III Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon
3
<PAGE>
as practicable after the Conversion Date, issue and deliver at such office to
such holder of Series III Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series III
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series III
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Series
III Stock. Before taking any action which would cause an adjustment reducing the
Series III Conversion Price below the then par value of the shares of Common
Stock issuable upon conversion of the Series III Stock, the Corporation will
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Series III Conversion
Price.
(iii) Upon any such conversion, no adjustment to the Series III
Conversion Price shall be made for any accrued and unpaid dividends on the
Series III Stock surrendered for conversion or on the Common Stock delivered
upon conversion.
(iv) All shares of Series III Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. Any shares of Series III Stock so converted shall be
retired and cancelled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series III Stock accordingly.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Corporation
shall at any time or from time to time after the date on which shares of Series
III Stock is first issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock, the Series III Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Series III Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to time after the Original Issue Date,
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series II
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series III Conversion
Price then in effect by a fraction:
4
<PAGE>
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in payment
of such dividend or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series III Conversion Price shall be recomputed accordingly
as of the close of business on such record date and thereafter the Series III
Conversion Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made if the holders of Series III
Stock simultaneously receive a dividend or other distribution of shares of
Common Stock in a number equal to the number of shares of Common Stock as they
would have received if all outstanding shares of Series III Stock had been
converted into Common Stock on the date of such event.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of such Series III
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received bad their Series III Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Series III Stock; and
provided further, however, that no such adjustment shall be made if the holders
of series III Stock simultaneously receive a dividend of other distribution of
such securities in an amount equal to the amount of such securities as they
would have received if all outstanding shares of Series III Stock had been
converted into Common Stock on the date of such event.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If
the Common Stock issuable upon the conversion of the Series III Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of Series
III Stock shall have the right thereafter to convert such share into the kind
and amount of shares of stock and other securities and property receivable upon
such reorganization, reclassification, or other change, by holders of the number
of shares of Common Stock into which such shares of Series III Stock might have
been converted immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
5
<PAGE>
(h) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series III Stock shall thereafter be convertible into
the kind and amount of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such Series III Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Series III Stock, to the
end that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Series III Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Series III Stock.
(i) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series III Stock against impairment.
(j) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series III Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series III Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Series III Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Series III Conversion Price then in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which then would be
received upon the conversion of such Series III Stock.
(k) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock
or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock or a stock
dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into
6
<PAGE>
or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series III stock, and shall cause to be
mailed to the holders of the Series III Stock at their last addresses as shown
on the records of the Corporation or such transfer agent, at least ten days
prior to the record date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be
taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution,
subdivision or combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale,
dissolution or winding up.
5. MANDATORY CONVERSION.
(a) On the Mandatory Conversion Date (as defined below), (i) all
outstanding shares of Series III Stock shall automatically be converted into
shares of Common Stock, at the then current Series III Conversion Price and (ii)
the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series III Stock, and all provisions included under the caption "Series III
Stock" in this Certificate, and all references to the Series III Stock in this
Certificate, shall be deleted and shall be of no further force or effect. For
purposes of this Section 5, the Mandatory Conversion Date shall occur upon the
first to occur of the following:
(A) upon the closing of the sale of shares of Common Stock in a
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of gross
proceeds to the Corporation; or
(B) the date on which there are issued and outstanding a number
of shares of Series III Stock equal to less than 50% of the total number of
shares of Series III Stock ever issued by the Corporation (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
similar recapitalizations affecting such shares).
(b) All holders of record of shares of Series III Stock shall be given
written notice of the Mandatory Conversion Date and the place designated for
mandatory conversion of
7
<PAGE>
all such shares of Series III Stock pursuant to this Section 5. Such notice need
not be given in advance of the occurrence of the Mandatory Conversion Date. Such
notice shall be sent by first class or registered mail, postage prepaid, to each
record holder of Series III Stock at such holder's address last shown on the
records of the transfer agent for the Series III Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series III Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series III Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series III Stock has
been converted, and payment of any declared or accrued but unpaid dividends
thereon (all of which shall be deemed to be declared by the Board of Directors
on the Mandatory Conversion Date). If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
III Stock, the Corporation shall cause to be issued and delivered to such
holder, or on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in accordance
with the provisions hereof and cash as provided in Section 4(b) in respect of
any fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series III Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and cancelled and the shares of Series III Stock represented
thereby converted into Common Stock for all purposes, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or
prior to such date. The Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the
authorized Series III Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed thereto and this Certificate of Designation of Preferred Stock of the
corporation to be signed on its behalf by its President this 19th day of
November, 1997.
CORECHANGE INC.
By: /s/ Ulf Arnetz
-----------------------------
Ulf Arnetz, President
8
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CORECHANGE, INC
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
------------------------------------------------
CORECHANGE, INC. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
By written action of the Board of Directors of the Corporation, a
resolution was duly adopted, pursuant to Sections 141(f) and 242 of the General
Corporation Law Of the State of Delaware, setting forth an amendment to the
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment by written consent in accordance with Sections 228 and 242 of the
General Corporation Law of the State of Delaware, and written notice of such
consent will be given to all stockholders who have not consented in writing to
said amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
Corporation be and hereby is deleted in its entirety and that
Article FOURTH in the form attached hereto as EXHIBIT A be
inserted in lieu thereof.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 21st day of January, 1998.
CORECHANGE INC.
By: /s/ Ulf Arnetz
-----------------------
Ulf Arnetz
President
<PAGE>
EXHIBIT A
Exhibit A to the Certificate of Amendment of the
Certificate of Incorporation of Corechange, Inc.
------------------------------------------------
1. Article FOURTH of the Certificate of incorporation of the
Corporation is hereby amended to read as follows:
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 14,000,000 shares, consisting of
(a) 9,000,000 shares of Common Stock, $.01 par value (the "Common Stock") and
(b) 5,000,000 shares of Preferred Stock, $.01 par value (the "Preferred").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by Part B of this Article IV fixing
the relative powers, preferences and rights and the qualifications, limitations
or restrictions of any series of Preferred Stock, the entire voting power of the
shares of the Corporation for the election of Directors and for all other
purposes, as well as all other rights appertaining to shares of the Corporation,
shall be vested exclusively in the Common Stock. Each share of Common Stock
shall have one vote upon all matters to be voted on by the holders of the Common
Stock at all meetings of stockholders (and written actions in lieu of meetings).
There shall be no cumulative voting. The number of authorized shares of Common
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the corporation entitled to vote, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of Delaware.
Each share of Common Stock shall be entitled to participate equally in
all dividends payable with respect to the Common Stock and to share equally,
subject to the rights and preferences of any Preferred Stock, in all assets of
the Corporation, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, or upon any
distribution of the assets of the Corporation.
B. PREFERRED STOCK. Preferred Stock may be issued from time to time in
one or more series, each of such series to have such terms as stated or
expressed herein and in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors of the Corporation as hereinafter
provided. Any shares of Preferred Stock which may be redeemed, purchased or
acquired by the Corporation may be reissued except as otherwise provided by law.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purposes of voting by classes unless
expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to
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EXHIBIT A
<PAGE>
determine and fix such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions thereof,
including without limitation thereof, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. Except as otherwise provided in this Certificate of Incorporation, no vote
of the holders of the Preferred Stock or Common Stock shall be a prerequisite to
the designation or issuance of any shares of any series of the Preferred Stock
authorized by and complying with the conditions of this Certificate of
Incorporation, the right to have such vote being expressly waived by all present
and future holders of the capital stock of the Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK. 2,884,598 shares of the
authorized Series A Preferred Stock of the Corporation are hereby designated
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock") with the
powers, preferences and rights, and the qualifications, limitations or
restrictions set forth below:
1. DIVIDENDS. (a) The holders of Series A Preferred Stock shall be
entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available for the purpose. The Board of
Directors may fix a record date for the determination of holders of Series
A Preferred Stock entitled to receive payment of a dividend declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof. The Corporation shall not pay
dividends on or make any other distribution on the Common Stock unless
simultaneously therewith dividends are paid, or a distribution is made, on
the Series A Preferred Stock in an amount such that the holders of Series
A Preferred Stock shall be entitled to receive in respect of each share of
Series A Preferred Stock an amount equal to the amount of the dividend
payable or the distribution made in respect of each share of Common Stock
multiplied by the number of shares of Common Stock issuable upon
conversion of each share of Series A Preferred Stock.
(b) For purposes of this Section 1, unless the context requires
otherwise, "dividend" or "distribution" shall mean the transfer of cash or
property without consideration, whether by way of dividend or otherwise,
payable other than in Common Stock or other securities of the Corporation,
or the purchase or redemption of shares of the Corporation (other than
repurchases of Common Stock held by employees or directors of, or
consultants to, the Corporation upon termination of their employment or
services pursuant to agreements providing for such repurchase at a price
equal to the original issue price of such shares and other than
redemptions in liquidation or dissolution of the Corporation) for cash or
property, including any such transfer, purchase or redemption by a
subsidiary of the Corporation.
2. LIQUIDATION RIGHTS. Upon any liquidation, dissolution or winding up
of the affairs of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for
2
EXHIBIT A
<PAGE>
distribution to its stockholders on a parity with the Series I Stock,
Series II Stock and Series III Stock and after and subject to the payment
in full of all amounts required to be distributed to the holders of any
other class or series of stock of the corporation ranking on liquidation
prior and in preference to the Series A Preferred Stock (collectively
referred to as "Senior to Series A Preferred Stock"), but before any
payment shall be made to the holders of Common Stock or any other class or
series of stock ranking on liquidation junior to the Series A Preferred
Stock (such Common Stock and other stock being collectively referred to as
"Junior to Series A Preferred Stock") by reason of their ownership
thereof, an amount equal to $4.160024 for each share of Series A Preferred
Stock then held by them (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) plus a sum equal to all declared
but unpaid dividends, if any, on the Series A Preferred Stock.
If the assets distributable in any such event to the holders of the
Series A Preferred Stock are insufficient to permit the payment to such
holders of the full preferential amounts to which they may be entitled,
such assets shall be distributed ratably among the holders of the Series A
Preferred Stock and of any other class of series of stock ranking on
liquidation on a parity with the Series A Preferred Stock in proportion to
the full preferential amount each such holder would otherwise be entitled
to receive if all amounts payable on or with respect to such shares were
paid in full. After the payment of all preferential amounts required to be
paid to the holders of Senior to Series A Preferred Stock, Series A
Preferred Stock and any other class or series of stock of the Corporation
ranking on liquidation on a parity with the Series A Preferred Stock, upon
the dissolution, liquidation or winding up of the Corporation, the holders
of shares of Junior to Series A Preferred Stock then outstanding shall be
entitled to receive the remaining assets and funds of the Corporation
available for distribution to its stockholders. For purposes of this
Section 2, the sale of all or substantially all of the Corporation's
property and assets or the acquisition of this Corporation by another
entity by means of merger or consolidation resulting in the exchange of
all of the outstanding shares of this Corporation for securities issued or
other consideration paid, by the acquiring Corporation or any parent or
subsidiary thereof (except for a merger or consolidation after the
consummation of which the shareholders of this Corporation own in excess
of 51% of the voting securities of the surviving corporation or its parent
corporation) shall be deemed a voluntary dissolution, liquidation or
winding up of the affairs of the Corporation.
3. CONVERSION. The Series A Preferred Stock shall be convertible as
follows:
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock shall
be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation or
any transfer agent for the Series A Preferred Stock, into the number of
fully paid and nonassessable shares of Common Stock determined by dividing
$4.160024 by the Conversion Price in effect at the time of conversion. The
Conversion Price shall initially be $4.160024, and shall be adjusted and
3
EXHIBIT A
<PAGE>
readjusted from time to time as provided in this Section 3. Certain
capitalized terms used in this Section 3 have the meanings specified in
paragraph (d) of this Section 3.
(b) AUTOMATIC CONVERSION. (i) PUBLIC OFFERING. Each share of Series
A Preferred Stock shall automatically be converted into Common Stock at
the then effective Conversion Price applicable to such share of Series A
Preferred Stock upon the closing (the date of such closing being referred
to as the "Mandatory Conversion Date") of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering the
offer and sale of Common Stock for the account of the Corporation to the
public at a public offering price per share to the public of at least two
times the then effective Series A Conversion Price and resulting in gross
proceeds to the Corporation of not less than $20,000,000 (in the event of
which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted such Series A Preferred Stock until immediately
prior to the closing of such offering). Each person who holds of record
Series A Preferred Stock immediately prior to such automatic conversion
shall be entitled to all dividends which have been declared but unpaid
prior to the time of the automatic conversion. Such dividends shall be
paid to all such holders within 30 days of the automatic conversion.
(c) MANDATORY CONVERSION. (i) On the Mandatory Conversion Date the
number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been
designated as Series A Preferred Stock, and all provisions included under
the caption "Series A Preferred Stock" in this certificate, and all
references to the Series A Preferred Stock in this Certificate, shall be
deleted and shall be of no further force or effect.
(ii) All holders of record of shares of Series A Preferred Stock
shall be given written notice of the Mandatory Conversion Date and the
place designated for mandatory conversion of all such shares of Series A
Preferred Stock pursuant to this Section 3(b). Such notice need not be
given in advance of the occurrence of the Mandatory Conversion Date. Such
notice shall be sent by first class or registered mail, postage prepaid,
to each record holder of Series A Preferred Stock at such holder's address
last shown on the records of the transfer agent for the Series A Preferred
Stock (or the records of the Corporation, if it serves as its own transfer
agent). Upon receipt of such notice, each holder of shares of Series A
Preferred Stock shall surrender his or its certificate or certificates for
all such shares to the Corporation at the place designated in such notice,
and shall thereafter receive certificates for the number of shares of
Common Stock to which such holder is entitled pursuant to this Section
3(b). On the Mandatory Conversion Date, all rights with respect to the
Series A Preferred Stock so converted, including the rights, if any, to
receive notices and vote, will terminate, except only the rights of the
holders thereof, upon surrender of their certificate or certificates
therefor, to receive certificates for the number of shares of Common Stock
into which such Series A Preferred Stock has been converted, and payment
of any declared or accrued but unpaid dividends thereon (all of which
shall be deemed to be declared by the Board of Directors on the Mandatory
Conversion Date). It so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or
4
EXHIBIT A
<PAGE>
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the registered holder or by his or its attorney duly
authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for
Series A Preferred Stock, the Corporation shall cause to be issued and
delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as
provided in Section 3(c) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(iii) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance
with the provisions hereof shall, from and after the Mandatory Conversion
Date, be deemed to have been retired and cancelled and the shares of
Series A Preferred Stock represented thereby converted into Common Stock
for all Purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The
Corporation may thereafter take such appropriate action (without the need
for stockholder action) as may be necessary to reduce the authorized
Series A Preferred Stock accordingly.
(d) MECHANICS OF CONVERSION. (i) No fractional shares of Common
Stock shall be issued upon conversion of the Series A Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied
by the then effective Conversion Price applicable to such share of Series
A Preferred Stock. Before any holder of Series A Preferred Stock shall be
entitled to convert the same into Common Stock (or, in the case of
automatic conversion of Series A Preferred Stock pursuant to Section 3(b)
hereof, before any holder of such Series A Preferred Stock so converted
shall be entitled to receive a certificate or certificates evidencing the
shares of Common Stock issuable upon such conversion), he shall surrender
to the Corporation at the office of the corporation or of any transfer
agent for the Series A Preferred Stock, the certificate or certificates
representing such Series A Preferred Stock, accompanied by written notice
to the Corporation that he elects to convert all or a specified number of
such shares (or, in the case of such automatic conversion, he is
surrendering the same) and stating therein his name or the name or names
of his nominees in which he wishes the certificate or certificates for
Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the
corporation, duly executed by the registered holder or his or its attorney
duly authorized in writing. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, or to his nominee or nominees, a certificate or
certificates representing the number of shares of Common Stock to which he
shall be entitled as aforesaid, together with cash in lieu of any fraction
of a share and, if less than the full number of shares of Series A
Preferred Stock evidenced by such surrendered certificate or certificates
are being converted, a new certificate or certificates, of like tenor, for
the number of shares of Series A Preferred Stock evidenced by such
surrendered certificate less the number of such shares being converted.
Any conversion made at the election of a holder of Series A Preferred
Stock shall be deemed to have been made immediately
5
EXHIBIT A
<PAGE>
prior to the close of business on the date of such surrender of the Series
A Preferred Stock to be converted, and the person or persons entitled to
receive the Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock on such
date.
(ii) Upon any such conversion, no adjustment to the Conversion
Price shall be made for any accrued and unpaid dividends on the Series A
Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iii) All shares of Series A Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares,
including the rights, if any, to receive notices and to vote, shall
immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any declared and unpaid dividends thereon. Any
shares of Series A Preferred Stock so converted shall be retired and
cancelled and shall not be reissued, and the Corporation may from time to
time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
(e) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this Section 3(d), the
following definitions shall apply:
(1) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Shares of
Common Stock or Convertible Securities.
(2) "ORIGINAL ISSUE DATE" shall mean the date on which a
share of Series A Preferred was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than shares of Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 3(e)(iii), deemed
to be issued) by the Corporation after the Original Issue Date, other than
Common Stock issued or issuable:
(A) upon conversion of Series A Preferred Stock, Series
I Preferred Stock, Series II Preferred Stock or Series III Preferred
Stock; or
(B) up to 963,451 shares of Common Stock issued to
directors, officers or employees of, or consultants to, the Corporation
pursuant to a stock purchase or option plan or other employee stock
incentive program;
6
EXHIBIT A
<PAGE>
(C) shares of Common Stock issued or issuable as a
dividend or distribution pro rata (calculated on an as-converted basis) on
all shares of Preferred Stock;
(D) with respect to a series of Preferred Stock, shares
of Common Stock issued or issuable as a dividend or distribution on such
series of Preferred Stock;
(E) shares of Common Stock issued or issuable as a
result of any stock split, combination, dividend, distribution,
reclassification, exchange or substitution for which an adjustment is
provided in Subsection 3(f), (g), (h) or (i) below;
(F) up to 120,984 shares of Common Stock issuable to
Cambridge Technology Partners;
(G) up to 38,382 shares of Common Stock to be issued to
Benjamin Weissberg and Jonathan Leitersdorf pursuant to the Agreement
dated June 30, 1997 between the Corporation and them;
(H) up to 15,000 shares of Common Stock issuable to
Gustin Partners pursuant to an oral agreement between Gustin Partners and
the Company;
(I) 71,000 shares of Common Stock to be issued to
Montgomery Securities;
(J) shares of Common Stock issuable upon the exercise of
warrants held by Tucker Anthony Incorporated pursuant to a letter
agreement between the Company and Tucker Anthony Incorporated dated
November 19, 1997; and
(K) up to 15,000 shares of Common Stock issuable to
strategic partners of the Company.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Common Stock into which the Series A Preferred Stock
is convertible shall be made, by adjustment in the Conversion Price, in
respect of the issuance of Additional Shares of Common Stock or otherwise,
(a) unless the consideration per share (determined pursuant to Section
3(c)(v) hereof) for Additional Shares of Common Stock issued or deemed to
be issued by the Corporation is less than the Conversion Price in effect
on the date of, and immediately prior to, the issue of such Additional
Shares of Common Stock, or (b) if prior to such issuance, the Corporation
receives written notice from the holders of at least a majority of the
then outstanding shares of such series agreeing that no such adjustment
shall be made as the result of the issuance of Additional Shares of Common
Stock with respect to such series.
7
EXHIBIT A
<PAGE>
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
Corporation at any time or from time to time after the Original Issue Date
shall issue, sell, grant or assume any Options or Convertible Securities
or shall fix a record date for the determination of holders of any class
of securities entitled to receive any such Options or Convertible
Securities, then, and in each such case, the maximum number of shares of
Common Stock (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the
close of business on such record date, PROVIDED that Additional Shares of
Common Stock shall not be deemed to have been issued for purposes of
adjusting the Conversion Price unless the consideration per share
(determined pursuant to Section 3(e)(v) hereof) of such Additional Shares
of Common Stock would be less than the Conversion Price in effect on the
date of and immediately prior to such issue, or such record date, as the
case may be, and provided further that in any such case in which
Additional Shares of Common Stock is deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or
Common Stock upon the exercise of such Options or conversion or exchange
of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any decrease in
the consideration payable to the Corporation, or increase in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such decrease or
increase becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities which are outstanding at such
time;
(C) upon the expiration or termination of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been fully exercised, converted or
exchanged, the Conversion Price computed upon the original issue, sale,
grant or assumption thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(I) in the case of such Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock
issued or sold were the shares of Common Stock, if any, actually issued or
sold upon the
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EXHIBIT A
<PAGE>
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received for such Additional Shares of
Common Stock was, in the case of Options, the consideration actually
received by the Corporation for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon much exercise, or, in the case
of Convertible Securities, the consideration actually received by the
Corporation for the issue, sale or assumption of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, it any, actually issued or
sold upon the exercise thereof were issued at the time of issue, sale,
grant or assumption of such Options, and the consideration received by the
Corporation for the Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by the Corporation for
the issue, sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 3(e)(v)) upon the issue or
sale of the Convertible Securities with respect to which such Options were
actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (i) the Conversion Price on the original
adjustment date or (ii) the Conversion Price that would have resulted from
any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Conversion Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C) above;
and
(F) if any such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Series A Conversion Price
which became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to subparagraph 3(d)(vi) as of the actual date
of their issuance.
(2) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND SUBDIVISION.
In the event the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in shares of Common Stock, or
shall effect a subdivision of the outstanding Common Stock, into a greater
number of shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock), then and in each such
event, Additional Shares of Common Stock, shall be deemed to have been
issued:
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EXHIBIT A
<PAGE>
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive
such dividend or distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such
corporate action becomes effective.
It such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the
adjustment previously made in the applicable Conversion Price which
became effective on such record date shall be cancelled as of the close
of business on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to subparagraph 3(e)(vi) as of the time of
actual payment of such dividend or distribution.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event the Corporation shall at any time
after the Original Issue Date issue or be deemed to issue Additional
Shares of Common Stock (excluding Additional Shares of Common Stock deemed
to be issued pursuant to Section 3(e)(iii)(2), which event is dealt with
in Section 3(e)(vi)) for a consideration per share less than the
Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue or sale in order to increase the number of
shares of Common Stock into which the Series A Preferred Stock is
convertible, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction (x) the numerator of which
shall be (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock
which the aggregate consideration received by the Corporation for the
total number of Additional Shares of Common Stock so issued would purchase
at such Conversion Price, and (y) the denominator of which shall be (1)
the number of shares of Common Stock outstanding immediately prior to such
issue plus (2) the number of such Additional Shares of Common Stock so
issued, PROVIDED THAT, for the purpose of this subsection 3(e)(iv), (i)
all shares of Common Stock issuable upon exercise or conversion of Options
or Convertible Securities outstanding immediately prior to such issue
shall be deemed to be outstanding, and (ii) the number of shares of Common
Stock deemed issuable upon conversion of such outstanding Options and
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible
Securities resulting from the issuance of Additional Shares of Common
Stock that is the subject of this calculation; and PROVIDED FURTHER that
the Conversion Price shall not be so reduced at such time if the amount of
such reduction would be an amount less than $.05, but any such amount
shall be carried forward and reduction with respect thereto made at the
time of and together with any subsequent reduction which, together with
such amount and any other amount or amounts so carried forward, shall
aggregate $.05 or more.
(v) DETERMINATION OF CONSIDERATION. For purposes of this Section
3(d), the consideration received (or deemed to be received) by the
Corporation
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EXHIBIT A
<PAGE>
for the issue or sale of any Additional Shares of Common Stock (or any
Additional Shares of Common Stock deemed to be issued pursuant to Section
3(e)(iii)(1)) shall be computed as follows:
(1) CASH AND PROPERTY: The consideration per share
received by the Corporation for the issue or sale of Additional Shares of
Common Stock shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue or
sale, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (A) and (B)
above, allocable to such Additional Shares of Common Stock as determined
in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share deemed to be received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to Section
3(e)(iii)(1), relating to Options and Convertible Securities, shall be
determined by dividing
(x) the total amount, if any, actually received by
the Corporation as consideration for the issue, sale, grant or assumption
of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments
relating to such Options or Convertible Securities without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise in full of
such Options or the conversion or exchange of such Convertible Securities,
or in the case of Options for Convertible Securities, the exercise of such
options for Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of Additional Shares of
Common Stock (as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(vi) ADJUSTMENT FOR STOCK DIVIDENDS, DISTRIBUTIONS,
SUBDIVISIONS, COMBINATIONS OR CONSOLIDATION OF COMMON STOCK.
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(1) STOCK DIVIDENDS, DISTRIBUTIONS AND SUBDIVISION. In the
event the Corporation shall issue Additional Shares of Common Stock
pursuant to Section 3(e)(iii)(2), relating to stock dividends,
distributions and subdivisions, the Conversion Price in effect immediately
prior to such stock dividend, distribution or subdivision shall,
concurrently with the effectiveness of such stock dividend, distribution
or subdivision, be proportionately decreased, and such adjustment shall
become effective at the close of business on the date the event becomes
effective.
(2) COMBINATIONS OR CONSOLIDATION OF COMMON STOCK. In the
event the outstanding Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased, and such
adjustment shall become effective at the close of business on the date the
event becomes effective.
(vii) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that
the holders of Series A Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation that they would
have received had their Series A Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such
period giving application to all adjustments called for during such
period, under this paragraph with respect to the rights of the holders of
the Series A Preferred Stock.
(viii) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the
Series A Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for
below), then and in each such event the holder of each such share of
Series A Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into which such
shares of Series A Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
(ix) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In the event the Corporation, after the Original
Issue Date, (1) shall consolidate with or merge into any other corporation
or entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (2) shall
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permit any other corporation or entity to consolidate with or merge into
the Corporation and the Corporation shall be the continuing or surviving
corporation but, in connection with such consolidation or merger, the
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property, or (3)
shall transfer all or substantially all of its properties or assets to any
other corporation or entity, or (4) shall effect a capital reorganization
or reclassification of the Common Stock (other than a change from par to
no-par value stock or from no-par to par value stock, or a capital
reorganization or reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the Conversion Price is
provided in Section 3(e)(iv)), then, and in each such event, unless such
event is deemed to be a liquidation pursuant to Section 2, proper
provision shall be made so that, upon the basis and the terms and in the
manner provided in this Section 3(e)(viii), the holder of Series A
Preferred Stock, upon the conversion thereof at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive, in lieu of the shares of
Common Stock issuable upon such conversion prior to such consummation, the
stock and other securities, cash and property to which such holder would
have been entitled upon such consummation if such holder had converted
such Series A Preferred Stock immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the adjustments provided for in this Section 3.
Notwithstanding anything contained herein to the contrary, the Corporation
will not effect any of the transactions described in clauses (1) through
(4) above unless, prior to the consummation thereof, each corporation
(other than the Corporation) which may be required to deliver any stock,
securities, cash or property upon the conversion of Series A Preferred
Stock shall assume, by written instrument delivered to each holder of
Series A Preferred Stock, the obligation to deliver to such holder such
shares of stock, securities, cash or property as such holder may be
entitled to receive upon such conversion.
(f) NO IMPAIRMENT. The Corporation will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in
the carrying out of all the provisions of this Section 3 and in the taking
of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Series A Preferred Stock
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not permit the par value of any shares of stock at
the time receivable upon the conversion of the Series A Preferred Stock to
exceed the Conversion Price then in effect, (ii) will take all such action
as may be necessary or appropriate in order that the Corporation may
validly and legally issue fully paid nonassessable shares of stock on the
conversion of the Series A Preferred Stock, and (iii) will not take any
action which results in any adjustment of the Conversion Price if the
total number of shares of Common Stock issuable after the action upon the
conversion of all of the Series A Preferred Stock will exceed the total
number of shares of Common Stock then authorized by the Corporation's
Restated Certificate of Incorporation and available for the purpose of
issue upon such conversion.
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(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the applicable Conversion Price pursuant to
this Section 3, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of Series A Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to have been
issued, (ii) the number of shares of Common Stock outstanding or deemed to
be outstanding, and (iii) the Conversion Price in effect immediately prior
to such issue or sale and as adjusted and readjusted on account thereof.
The Corporation shall, upon the written request at any time of any holder
of Series A Preferred Stock furnish or cause to be furnished to such
holder a like certificate setting forth (i) the Conversion Price at the
time in effect, and showing how it was calculated, and (ii) the number of
shares of Common Stock and the amount, if any, of other property which at
the time would be received upon the conversion of Series A Preferred
Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
the Corporation shall mail to each holder of Series A Preferred Stock at
least ten (10) days prior to the date specified herein, a notice
specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution.
(i) COMMON STOCK RESERVED. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock
such number of shares of Common Stock as shall from time to time be
sufficient to effect conversion of the Series A Preferred Stock.
4. REDEMPTION. On January 21, 2003, the Corporation shall redeem for
cash out of any funds legally available therefor 33.4% of the Series A
Preferred Stock held by each holder of Series A Preferred Stock on that
date. On January 21, 2004, the Corporation shall redeem for cash out of
any funds legally available therefor 50.0% of the Series A Preferred Stock
held by each holder of Series A Preferred Stock on that date. On January
21, 2005, the Corporation shall redeem for cash out of any funds legally
available therefor all of the Series A Preferred Stock held by each holder
of Series A Preferred Stock on that date. Redemptions pursuant to this
Section 4 shall be made for a price of $4.160024 per share of Series A
Preferred Stock (as appropriately adjusted for any stock dividend, stock
split, recapitalization or consolidation) plus an amount equal to the
amount of all unpaid dividends payable in accordance with Section 1 hereof
on each share of Series A Preferred Stock to be redeemed. The Corporation
need not establish any sinking fund for the redemption of Series A
Preferred Stock.
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The Corporation shall give written notice at least 45 days prior to the
redemption dates provided above, and any rescheduled redemption dates as
provided below, of its intention to redeem Series A Preferred Stock as
provided herein, to each holder thereof, such notice to be addressed to
each holder at the address as it appears on the stock transfer books of
the Corporation and to specify the date of redemption and the number of
shares to be redeemed. On or after the date of redemption unless postponed
or waived as provided below, each holder of Series A Preferred Stock shall
surrender a certificate or certificates representing the number of shares
of Series A Preferred Stock to be redeemed as stated in the notice
provided by the Corporation. If less than all the shares represented by
such certificates are to be redeemed, the Corporation shall forthwith
issue a new certificate, of like tenor, for the unredeemed shares.
Notwithstanding the foregoing, the holders of at least a majority of
the Series A Preferred Stock shall have the right to postpone the
redemption dates or waive (on a pro rata basis) the obligation of the
Corporation to redeem all or part of the Series A Preferred Stock, by
written notice given to the Corporation at least ten (10) days prior to
the scheduled redemption date. The Corporation shall not redeem the Series
A Preferred Stock of any holder of Series A Preferred Stock until the
scheduled redemption date, if any.
The holders of Series A Preferred Stock shall have the right to
postpone or waive in the manner provided above the obligation of the
Corporation to redeem shares each time the Corporation gives notice of
redemption. In the event the holders of Series A Preferred Stock shall
postpone or waive the obligation of the Corporation to redeem their Series
A Preferred Stock in the manner provided above, the Corporation shall be
deemed to postpone or waive its right to redeem the Series A Preferred
Stock.
For the purpose of determining whether funds are legally available for
redemption of Series A Preferred Stock as provided herein, the Corporation
shall value its assets at the highest amount permissible under applicable
law. If on any redemption date funds of the Corporation legally available
therefor shall be insufficient to redeem all the Series A Preferred Stock
required to be redeemed as provided herein, those funds that are legally
available shall be used for such purpose and the Corporation shall effect
such redemption pro rata according to the number of shares held by each
holder of Series A Preferred Stock. At any time thereafter when additional
funds of the Corporation become legally available for the redemption of
Series A Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of the shares which the
Corporation was theretofore obligated to redeem, ratably on the basis set
forth in the preceding sentence.
Unless there shall have been a default in the making of a scheduled
redemption or a scheduled redemption is postponed or waived, no shares of
Series A Preferred Stock shall be entitled to any dividends declared after
the scheduled redemption date for such shares, and on such scheduled
redemption date all rights of the holder of such shares as a stockholder
of the Corporation by reason of the ownership of such shares will cease,
except the right to receive the redemption price of such shares, without
interest upon
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presentation and surrender of the certificate representing such shares,
and such shares will not from and after such redemption date be deemed to
be outstanding.
Any Series A Preferred Stock redeemed pursuant to this Section 4 will
be cancelled and will not under any circumstances be reissued, sold or
transferred and the corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized Series A
Preferred Stock accordingly.
5. VOTING RIGHTS. The holders of Series A Preferred Stock shall be
entitled, on all matters submitted for a vote of the holders of shares of
Common Stock, whether pursuant to law or otherwise (and whether at a
meeting of stockholders or by written action in lieu of meeting), to one
vote for each whole share of Common Stock issuable as of the record date
fixed for such vote, or if no record date was fixed, the date of such vote
upon the conversion of each share of Series A Preferred Stock held as of
such date, and on all such matters, except as provided by law, by the
provisions of this Section 5 below or by the provisions establishing any
other series of Preferred Stock, shall vote together as one class with the
holders of Common Stock and the holders of all other shares of stock
entitled to vote with the holders of Common Stock on such matters. In
addition, the holders of Series A Preferred Stock shall have the voting
powers provided for by law and shall have the further voting powers
provided for below:
So long as there shall be issued and outstanding a number of shares
of Series A Preferred Stock equal to at least 50% of the total number
of shares of Series A Preferred Stock ever issued by the Corporation
(subject to adjustment) the consent of the holders of at least a
majority of the outstanding Series A Preferred Stock, voting separately
as a single class (each share of Series A Preferred Stock having a vote
equal to the number of whole shares of Common Stock issuable as of the
date of such vote upon conversion of such share of Series A Preferred
Stock), in person or by proxy, either in writing without a meeting or
at a special or annual meeting of stockholders called for the purpose,
shall be necessary to:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's By-Laws if such action would alter or change the
preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of the Series A Preferred Stock or the
Restated Certificate of Incorporation;
(ii) reclassify any Common Stock into shares having any
preference or priority as to the payment of dividends or the
distribution of assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock; or
(iii) pay or declare any dividend or distribution on any shares
of Common Stock or any other security having any preference as priority
as to the payment of dividends or distributions junior to the Series A
Preferred Stock and except pursuant to the Corporation's rights of
first refusal contained in the Stockholders Agreement, dated of even
date with the first issuance of Series A Preferred Stock, as amended
from time to time; or
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(iv) authorize or issue any other class or classes of stock or
series of Preferred Stock or increase the number of authorized shares
of an existing class or series of Preferred Stock having any preference
or priority as to the payment of dividends or the distribution of
assets superior to or on a parity with the Series A Preferred Stock; or
(v) sell all or substantially all of the Corporation's assets or
effect a merger or consolidation or any other transaction resulting in
the acquisition of the Corporation by another corporation or entity
(except for a merger or consolidation after the consummation of which
the stockholders of this Corporation own in excess of a majority of the
voting securities of the surviving corporation or its parent
corporation).
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CORECHANGE, INC.
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
CORECHANGE, INC., (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
By action of the Board of Directors of the Corporation taken at a meeting, a
resolutions was duly adopted, pursuant to Section 242 of the General Corporation
Law of the State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent
will be given to all stockholders who have not consented in writing to said
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
-------- Corporation be and hereby is deleted in its entirety and that
Article FOURTH in the form attached hereto as EXHIBIT A be
inserted in lieu thereof.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
hereto and this Certificate of Amendment to be signed by its President this 18th
day of February, 2000.
CORECHANGE, INC.
By: /S/ ULF ARNETZ
----------------------------------------
President
Ulf Arnetz
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EXHIBIT A TO THE CERTIFICATE OF
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF CORECHANGE, INC.
Article Fourth of the Certificate of Incorporation is hereby amended
and restated in its entirety to read as follows:
ARTICLE FOURTH. The Corporation shall only be authorized to issue
15,000,000 shares of common stock, $.01 par value per share (including Common
Stock reserved for conversion of the Preferred Stock, and convertible
securities, options and warrants), and7,849,584 shares of Preferred Stock, $.01
par value per share consisting of: (a) 413,965 shares designated as Series I
Junior Convertible Preferred Stock, $.01 par value per share (the "SERIES I
PREFERRED"), (b) 336,021 shares designated as Series II Junior Convertible
Preferred Stock, $.01 par value per share (the "SERIES II PREFERRED"), (c)
215,000 shares designated as Series III Junior Convertible Preferred Stock, $.01
par value per share (the "SERIES III PREFERRED"), (d) 2,884,598 shares
designated as Series A Convertible Preferred Stock, $.01 par value per share
(the "SERIES A PREFERRED"), and (e) 4,000,000 shares designated as Series B
Convertible Preferred Stock, $.01 par value per share (the "SERIES B PREFERRED,"
and collectively with the Series I Preferred, Series II Preferred, Series III
Preferred and Series A Preferred the "PREFERRED STOCK"). The relative powers,
preferences, and rights of and the relative qualifications, limitations, and
restrictions on such common stock and the Preferred Stock shall be as follows:
Section 1. DEFINITIONS.
Capitalized terms used in this ARTICLE FOURTH and not otherwise defined
herein shall have the meanings set forth in SECTION 11 hereof.
Section 2. RELATIVE RIGHTS AND PRIVILEGES.
2A. COMMON STOCK. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by this Article IV fixing the
relative powers, preferences and rights and the qualifications, limitations or
restrictions of any series of Preferred Stock, the entire voting power of the
shares of the Corporation for the election of Directors and for all other
purposes, as well as all other rights appertaining to shares of the Corporation,
shall be vested exclusively in the Common Stock. Each share of Common Stock
shall have one vote upon all matters to be voted on by the holders of the Common
Stock at all meetings of stockholders (and written actions in lieu of meetings).
There shall be no cumulative voting. The number of authorized shares of Common
Stock may be increased or decreased (but not below the
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number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote
irrespective of the provisions of Section 242(b)(2) of the General Corporation
Law of Delaware.
Each share of Common Stock shall be entitled to participate equally in
all dividends payable with respect to the Common Stock and to share equally,
subject to the rights and preferences of any Preferred Stock, in all assets of
the Corporation, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the affairs of the Corporation, or
upon any distribution of the assets of the Corporation.
2B. PREFERRED STOCK. Preferred Stock may be issued from time to time in one
or more series, each of such series to have such terms as stated or expressed
herein and in the resolution or resolutions providing for the issue of such
series adopted by the Board of Directors of the Corporation as hereinafter
provided. Any shares of Preferred Stock which may be redeemed, purchased or
acquired by the Corporation may be reissued except as otherwise provided by law.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purposes of voting by classes unless
expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
or relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, all to the full extent now or hereafter permitted by the General
Corporation law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock or any other series to the extent permitted by law. Except as
otherwise provided in this Certificate of Incorporation, no vote of the holders
of the Preferred Stock or Common Stock shall be a prerequisite to the
designation or issuance of any shares of any series of the Preferred Stock
authorized by and complying with the conditions of this Certificate of
Incorporation, the right to have such vote being expressly waived by all present
and future holders of the capital stock of the Corporation.
Section 3. DIVIDENDS.
3A. ORDINARY DIVIDENDS. The Board of Directors of the Corporation may
determine the amount, timing and nature of any dividends or other distributions
to be declared and paid with respect to each share of Common Stock, provided
however, that the Corporation may not pay any such dividends nor make any such
distributions, whether in cash or in kind, with respect to any share of Common
Stock (other than dividends payable in shares of Common Stock or other
securities of the Corporation distributed in connection with repurchases of
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Common Stock held by employees, officers, directors, consultants and advisers of
the Corporation pursuant to the Company's stock restriction agreements), unless
the Corporation shall have also declared and paid to the holders of the
Preferred Stock at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock issuable upon conversion of the Preferred
Stock had all of the outstanding Preferred Stock been converted into Common
Stock immediately prior to the record date for such dividend, or if no record
date is fixed, the date as of which the record holders of Common Stock entitled
to such dividends are to be determined.
3B. PREFERENTIAL DIVIDENDS; GENERAL OBLIGATION . In addition to any
dividends under SECTION 3A, and to the extent permitted under the General
Corporation Law of Delaware, the Corporation shall pay preferential dividends in
cash to the holders of the Series B Preferred as provided in SECTIONS 3B, 3C AND
3D. Except as otherwise provided herein, dividends (the "8% Dividends") on each
share of the Series B Preferred (a "SERIES B SHARE") shall accrue on a daily
basis at the rate of 8% per annum on the Liquidation of each Series B Share from
and including the date of issuance of such Series B Share to and including the
first to occur of (i) the date on which the Liquidation Value of such Series B
Share (plus all accrued and unpaid dividends thereon) is paid to the holder
thereof in connection with the liquidation of the Corporation pursuant to
SECTION 4 or the redemption of such Series B Share by the Corporation pursuant
to SECTION 5, and (ii) the date on which such Series B Share is converted into
shares of Conversion Stock pursuant to SECTION 7. Such dividends shall accrue
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends, and such dividends shall be cumulative. The date on which the
Corporation initially issues any Series B Share shall be deemed to be its "date
of issuance" regardless of the number of times transfer of such Series B Share
is made on the stock records maintained by or for the Corporation and regardless
of the number of certificates which may be issued to evidence such Series B
Share.
3C. ACCUMULATION OF DIVIDENDS DIVIDEND PAYMENT REFERENCE DATES. All
preferential dividends which have accrued on each Series B Share under SECTION 3
shall be accumulated and shall remain accumulated dividends with respect to such
Series B Share until paid to the holder thereof.
3D. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS . Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series B Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the aggregate
accrued but unpaid dividends on the Series B Shares held by each such holder.
Section 4. LIQUIDATION.
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4A. PRIORITY OF SERIES B PREFERRED. Upon any liquidation, dissolution
or winding up of the Corporation (whether voluntary or involuntary), each holder
of Series B Preferred shall be entitled to be paid, after and subject to the
payment in full of all amounts required to be distributed to the holders of any
class or series of stock ranking in liquidation prior and in preference to the
Series B Preferred, but before any distribution or payment is made upon any
Junior Securities, an amount in cash equal to the greater of (i) the aggregate
Liquidation Value of all Series B Shares held by such holder (plus all accrued
and unpaid dividends thereon), and (ii) an amount in cash equal to the amount
such holder would have received had such holder's Series B Shares been converted
into Conversion Stock immediately prior to such liquidation, dissolution or
winding up. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the holders of the
Series B Preferred are insufficient to permit payment to such holders of the
aggregate amount that they are entitled to be paid under this Section 4, then
such assets shall be distributed pro rata among the holders of the Series B
Preferred and of any other class or series of stock ranking on liquidation on a
parity with the Series B Preferred based upon the aggregate amount each such
holder would otherwise be entitled to receive if all amounts payable on or with
respect to such shares were paid in full. For purposes of the foregoing
paragraph, the mere fact that an event may constitute a Change in Ownership or
Fundamental Change as defined hereinafter shall not by itself cause such event
to be construed as a liquidation, dissolution or winding up of the Corporation.
4B. PRIORITY OF SERIES A PREFERRED. Upon any liquidation, dissolution
or winding up of the Corporation (whether voluntary or involuntary), after and
subject to payment of all amounts due to the holders of Series B Shares as
provided above in Section 4A and any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to Series A
Preferred, each holder of Series A Preferred shall be entitled to be paid,
before any distribution or payment is made upon any Junior Securities and on a
parity with the Series I, II and III, an amount in cash equal to the aggregate
Liquidation Value of all Series A Preferred held by such holder (plus all
accrued and unpaid dividends thereon). If upon any such liquidation, dissolution
or winding up of the Corporation the Corporation's assets to be distributed
among the holders of the Series A Preferred and any other class or series of
stocks ranking on liquidation on a parity with such Series A Preferred (after
payment to the holders of the Series B Preferred and any other class or series
of stock of the Corporation ranking on liquidation prior and in preference to
the Series A Preferred) are insufficient to permit payment to such holders of
the aggregate amount that they are entitled to be paid upon such liquidation,
dissolution or winding up of the Corporation, then the entire assets available
to be distributed to the Corporation's stockholders, after payment of all
amounts due to the holders of Series B Shares as provided above in Section 4A
and any other class or series of stock of the Corporation ranking on liquidation
prior and in preference to the Series A Preferred, shall be distributed pro rata
among the holders of the Series A Preferred and any other class or series of
stock ranking on liquidation on a parity with the Series A Preferred Stock based
upon the amount each such holders would otherwise be entitled to receive if all
amounts payable in or with respect to such shares were paid
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in full. For purposes of the foregoing paragraph, the mere fact that an event
may constitute a Change in Ownership or Fundamental Change as defined
hereinafter shall not by itself cause such event to be construed as a
liquidation, dissolution or winding up of the Corporation.
4C. DISTRIBUTION TO HOLDERS OF COMMON STOCK. Upon any liquidation,
dissolution or winding up of the Corporation (whether voluntary or involuntary),
after and subject to payment of all amounts due to the holders of Preferred
Stock as provided above in SECTIONS 4A AND 4B in the Certificate of Designation
for the Series I Preferred, Series II Preferred and Series III Preferred,
respectively, any remaining assets or funds of the Corporation available for
distribution to the holders of capital stock of the Corporation shall be
distributed among the holders of Common Stock, pro rata, based on the number of
shares of Common Stock held by each stockholder.
4D. DECLARATION OF DIVIDENDS PRIOR TO LIQUIDATION. Prior to the
liquidation, dissolution or winding up of the Corporation, the Corporation shall
declare for payment all accrued and unpaid dividends with respect to the
Preferred Stock, but only to the extent of funds of the Corporation legally
available for the payment of dividends, giving preference first to those unpaid
dividends due to the holders of the Series B Preferred in the event that there
are not sufficient funds of the Corporation legally available for payment of all
such unpaid dividends.
4E. NOTICE. Not less than 10 days prior to the payment date stated
therein, the Corporation shall mail written notice of any such liquidation,
dissolution or winding up to each record holder of Preferred Stock, setting
forth in reasonable detail the amount of proceeds to be paid with respect to
each share of Preferred Stock and each share of Common Stock in connection with
such liquidation, dissolution or winding up.
Section 5. REDEMPTIONS.
5A. CHANGE IN OWNERSHIP.
i. If a Change in Ownership has occurred or the Corporation
obtains knowledge that a Change in Ownership is proposed to occur, the
Corporation shall give prompt written notice of such Change in Ownership or
proposed Change in Ownership describing in reasonable detail the material
terms and date of consummation thereof to each holder of Series A Preferred
and each holder of Series B Preferred, and the Corporation shall give each
such holder prompt written notice of any material change in the terms or
timing of such transaction to the extent it is aware of such information.
ii. In the event of a Change in Ownership, the holder or holders
of a majority of the Series B Preferred Shares then outstanding may require
the Corporation to redeem all of the Series B Preferred Shares at a
Redemption Price per Series B Preferred Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon) subject to
the payment in full of all amounts required to be distributed in the
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event of such Change in Ownership to the holders of any class or series of
stock ranking prior in preference to the Series B Preferred; provided that,
if the aggregate consideration paid to the Corporation or its stockholders
as a result of the Change in Ownership as determined by the Board of
Directors in their reasonable discretion equals at least $30 million, then
accrued and unpaid 8% Dividends shall not be included in the redemption
price and shall not be paid to the holders of Series B Preferred Shares in
connection with such redemption. The Redemption Price under this paragraph
may, in the Board's reasonable discretion, be paid with the same form of
consideration received by the selling shareholders for their controlling
interest in the Corporation, with the value of such consideration to be
determined by the Board in its reasonable discretion.
iii. In the event of a Change in Ownership, after and subject to
payment of all amounts to the holders of Series B Preferred Shares as
provided above in SECTION 5B(II), the holder or holders of a majority of
the Series A Preferred Shares then outstanding may require the Corporation
to redeem all of the Series A Preferred Shares for a Redemption Price equal
to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) subject to the payment in full of all amounts required to be
distributed in the event of such Change in Ownership to the holders of any
class or series of stock ranking prior in preference to the Series A
Preferred.
iv. The foregoing majority holder or holders may require
redemption as described above by giving written notice to the Corporation
of their respective elections prior to the later of (a) 21 days after
receipt of the Corporation's notice and (b) five days prior to the
consummation of the Change in Ownership (the "EXPIRATION DATE"). Upon the
later of (a) the occurrence of the Change in Ownership, and (b) five days
after the Corporation's receipt of such election(s), the Corporation shall
be obligated to redeem: FIRST, the Series B Preferred Shares in accordance
with SECTION 5A(II); and SECOND, after and subject to redemption of such
Series B Preferred Shares, the Series A Preferred Shares in accordance with
SECTION 5A(III).
v. If any proposed Change in Ownership does not occur, all
requests for redemption in connection therewith shall be automatically
rescinded.
vi. The term "CHANGE IN OWNERSHIP" means any sale, transfer or
issuance or series of sales, transfers and/or issuances of shares of the
Corporation's capital stock by the Corporation or any holders thereof which
results in any Person or group of Persons (as the term "group" is used
under the Securities Exchange Act of 1934), other than the holders of
capital stock as of the date of the Purchase Agreement, owning or otherwise
controlling more than 50% of the capital stock of the Corporation entitled
to vote in ordinary circumstances.
vii. Nothing herein shall be deemed to limit or restrict the
right of a holder of Preferred Stock to convert such Shares into Conversion
Stock in connection
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with a Change in Ownership.
5B. DEMAND AND AUTOMATIC REDEMPTIONS.
i. The holders of Series A Preferred and Series B Preferred shall
be entitled to demand redemption as provided below in Section 5C(ii) (a
"Demand Redemption") and automatic redemption as provided below in Section
5C(iii) of their Shares as further provided in this Section 5C.
ii. At any time on or after the fifth anniversary of the first
issuance of Series B Preferred, the holders of at least a majority of the
Series B Preferred then outstanding shall be entitled to require the
Corporation to redeem all of the Series B Shares by notifying the
Corporation in writing that such holders are requiring redemption (the
"Series B Demand Redemption Notice"). Within five (5) business days
following the Corporation's receipt of the Series B Demand Redemption
Notice, the Corporation shall deliver a copy of such written notice to all
other holders of Series B Preferred, and the Redemption shall be
consummated within sixty (60) business days following final determination
of the Redemption Price; provided, however, that if the Corporation
receives a Series B Demand Redemption Notice prior to redemption of the
Series A Preferred as provided below, then the Series B Preferred shall be
redeemed hereunder prior to and in preference of the Series A Preferred.
iii. At any time on or after the fifth anniversary of the first
issuance of Series B Preferred but subject to the further provisions of
this SECTION 5 (including SECTION 5C(II)), the holders of at least a
majority of the Series A Preferred then outstanding shall be entitled to
require the Corporation to redeem all of the Series A Shares by notifying
the Corporation in writing that such holders are requiring redemption (the
"SERIES A DEMAND REDEMPTION NOTICE"). Within five (5) business days
following the Corporation's receipt of the Series A Demand Redemption
Notice, the Corporation shall deliver a copy of such written notice to all
holders of Series B Preferred, and the Redemption shall be consummated
within sixty (60) business days following final determination of the
Redemption Price.
iv. The Corporation shall give written notice at least 45 days
prior to the redemption dates provided herein, and any rescheduled
redemption dates as provided below, of its intention to redeem Series A
Preferred as provided herein, to each holder of Series A Preferred and each
holder of Series B Preferred, such notice to be addressed to each holder at
the address as it appears on the stock transfer books of the Corporation
and to specify the date of redemption and the number of shares to be
redeemed. Notwithstanding the foregoing, the holders of at least a majority
of the Series A Preferred shall have the right to postpone the redemption
dates or waive (on a pro rata basis) the obligation of the Corporation to
redeem all or part of the Series A Preferred by written notice given to the
Corporation at least ten (10) days prior to the scheduled redemption
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date. The holders of Series A Preferred shall have the right to postpone or
waive in the manner provided above the obligation of the Corporation to
redeem Shares each time the Corporation gives notice of redemption. The
Corporation shall not redeem the Series A Preferred of any holder of Series
A Preferred until the scheduled redemption date, and then only if the
holders of a majority of the Series A Preferred have not exercised their
right to postpone or waive such redemption.
v. The "REDEMPTION PRICE" for purposes of this SECTION 5C shall
be equal, per Share, to: (A) in the case of Series A Preferred, the
Liquidation Value for such Share plus all accrued and unpaid dividends
thereon, or (B) in the case of Series B Preferred, the greater of (x) the
Liquidation Value for such Share plus all accrued and unpaid dividends
thereon and (y) the Market Price thereof.
vi. If the funds of the Corporation legally available for
redemption of the Preferred Stock subject to redemption as described above
are insufficient to redeem the Series B Shares, then the Corporation shall
redeem (a) first, the Series B pro rata among the holders of the Series B
Shares, and (b) second, the Series A Preferred Shares to the extent
required to be redeemed as set forth above in SECTION 5C(III), pro rata
among the holders thereof in accordance with their respective ownership
percentages of all issued and outstanding Series A Preferred. In such event
and in exchange for its ratable share of legally available funds, each
holder of such Preferred Stock shall be required to deliver to the
Corporation certificate(s), duly endorsed for transfer to the Corporation,
representing the number of its shares of such Preferred Stock calculated by
dividing its ratable share of legally available funds by the Redemption
Price. Fractional redemption of shares of Preferred Stock shall not,
however, be permitted, and any fractional Share resulting from the above
formula shall be retained by the holder thereof until subsequently redeemed
pursuant to this SECTION 5C. If the certificates delivered to the
Corporation by a holder represent(s) a number of shares of such Preferred
Stock in excess of the Shares resulting from the above formula, the
Corporation shall be obligated to issue to such holder a certificate
representing the excess number of shares of such Preferred Stock. If at any
time after the aforementioned redemption, additional funds of the
Corporation become legally available for payment to the remaining holders
of Series A Preferred or Series B Preferred, such funds will be used, at
the end of the next succeeding fiscal quarter and in accordance with the
procedure outlined above, to pay such holders ratably for additional Shares
until the Redemption Price for each such share of Preferred Stock is paid
in full.
5C. DIVIDENDS IN CONNECTION WITH REDEMPTION. Prior to any redemption
of Series A Preferred or Series B Preferred, the Corporation shall declare for
payment all accrued and unpaid dividends with respect to the Shares which are to
be redeemed, but only to the extent of funds of the Corporation legally
available for the payment of dividends, provided, however that in the event that
the Redemption Price is based upon the Market Price, no dividends shall be
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declared (and all rights to such dividends shall be deemed to have been forgiven
by such holder). No Share shall be entitled to any dividends accruing after the
date on which the Redemption Price of such Share (plus all accrued and unpaid
dividends thereon) is paid to the holder of such Share. On such date, all rights
of the holder of such Share shall cease, and such Share shall no longer be
deemed to be issued and outstanding.
5D. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and shall
not be reissued, sold or transferred, and the Corporation may from time to time
take such appropriate actions as may be necessary to reduce the authorized
Series B Preferred accordingly.
5E. NO OTHER REDEMPTION. The Corporation shall not have the rights to
redeem any shares of Preferred Stock unless the holders thereof require the
Corporation to redeem their shares of Preferred Stock as provided under this
SECTION 5.
Section 6. VOTING.
Except as otherwise required by law, with respect to all matters
submitted to a vote of holders of Common Stock generally, the holder of each
Share of Series A Preferred and each Share of Series B Preferred (i) shall be
entitled to the number of votes which is equal to the number of shares of
Conversion Stock into which such Share is then convertible; (ii) shall have
voting rights and powers equal to the voting rights and powers of any other
holder of a share of Common Stock and shall vote as a single class with the
holders of shares of Common Stock and the holders of all other shares of stock
entitled to vote with the holders of Common Stock; and (iii) shall be entitled
to notice of any meeting of the holders of Common Stock of the Corporation in
accordance with the bylaws of the Corporation. Fractional votes shall not,
however, be permitted and any fractional voting rights resulting from the above
formula (after aggregating all shares into which Shares of Series A Preferred
and Series B Preferred held by each holder could then be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
Section 7. CONVERSION.
7A. CONVERSION PROCEDURE.
i. At any time and from time to time, any holder of Series A
Preferred or Series B Preferred may convert all or any portion of the
Series A Preferred and Series B Preferred (including any fraction of a
Share) held by such holder into a number of shares of Conversion Stock
computed by multiplying the number of Shares of such Preferred Stock to be
converted, by the Liquidation Value for such Shares and dividing the result
by the Conversion Price for such Shares then in effect.
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ii. Except as otherwise provided herein, each conversion of such
Preferred Stock shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing
such Preferred Stock to be converted have been surrendered for conversion
at the principal office of the Corporation. At the time any such conversion
has been effected, the rights of the holder of the Shares converted as a
holder of such Shares shall cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Conversion Stock are
to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Conversion Stock represented thereby.
iii. The conversion rights of any Share subject to redemption
hereunder shall terminate 10 business days prior to the Redemption Date for
such Share unless the Corporation has failed to pay to the holder thereof
the full consideration therefor required hereunder.
iv. If conversion of the Series A Preferred or Series B Preferred
is to be made in connection with a Public Offering or other transaction
affecting the Corporation, the conversion of any Shares may, at the
election of the holder thereof, be conditioned upon the consummation of
such transaction (including, without limitation, a Change in Ownership,
Fundamental Change or Organic Change), in which case such conversion shall
not be deemed to be effective until such transaction has been consummated.
v. Notwithstanding any other provision hereof, all accrued and
unpaid dividends on the Shares so converted shall be canceled immediately
prior to such conversion, and the holder(s) of such Shares shall not
receive, nor shall they be entitled to, any payment in respect of such
dividends.
vi. As soon as possible after a conversion has been effected (but
in any event within five business days in the case of Section 7A(vi)(a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion
in such name or names and such denomination or denominations as
the converting holder has specified; and
(b) a certificate representing any Shares of Series A
Preferred or Series B Preferred, as applicable, that were
represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
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vii. The issuance of certificates for shares of Conversion Stock
upon conversion of such Preferred Stock shall be made without charge to the
holders of such Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion
and the related issuance of shares of Conversion Stock. Upon conversion of
each Share, the Corporation shall take all such actions as are necessary in
order to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the
issuance thereof.
viii. If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in a form reasonably satisfactory to the
Corporation, duly executed by the registered holder.
ix. The Corporation shall not close its books against the
transfer of such Preferred Stock or of Conversion Stock issued or issuable
upon conversion of such Preferred Stock in any manner that interferes with
the timely conversion of such Preferred Stock. The Corporation shall assist
and cooperate with any holder of Shares required to make any governmental
filings or obtain any governmental approval prior to or in connection with
any conversion of Shares hereunder (including, without limitation, making
any filings required to be made by the Corporation).
x. The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for
the purpose of issuance upon the conversion of such Preferred Stock, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Shares. All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation
shall take all such actions as may be necessary to assure that all such
shares of Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Conversion Stock may be
listed (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation
shall not take any action that would cause the number of authorized but
unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of
the Shares.
xi. If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subsection, be delivered upon any
conversion of such Preferred Stock, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof
equal to the Conversion Price of such fractional interest as of the date of
conversion.
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xii. If the shares of Conversion Stock issuable by reason of
conversion of such Preferred Stock are convertible into or exchangeable for
any other stock or securities of the Corporation, the Corporation shall, at
the converting holder's option, upon surrender of the Shares to be
converted by such holder as provided herein together with any notice,
statement or payment required to effect such conversion or exchange of
Conversion Stock, deliver to such holder or as otherwise specified by such
holder a certificate or certificates representing the stock or securities
into which the shares of Conversion Stock issuable by reason of such
conversion are so convertible or exchangeable, registered in such name or
names and in such denomination or denominations as such holder has
specified.
xiii. All shares of Series A Preferred and Series B Preferred
that have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such
shares, including the rights if any to receive notices and to vote, shall
immediately cease and terminate on the effective date of such conversion,
except only the right of the holders thereof to receive shares of
Conversion Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. Any shares of Series A Preferred and Series B
Preferred so converted shall be retired and cancelled and shall not be
reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized shares of Series A
Preferred or Series B Preferred, as applicable, accordingly.
7B. CONVERSION PRICE.
i. The initial Conversion Price shall be as follows: (1) for the
Series A Preferred, $4.160024 per Series A Preferred Share, and (2) for the
Series B Preferred $5.837 per Series B Preferred Share (the "Conversion
Price"). In order to prevent dilution of the conversion rights granted
under this Section 7, the respective Conversion Price for the Series A
Preferred and Series B Preferred shall be subject to adjustment from time
to time pursuant to this Section 7B.
ii. If and whenever on or after the original date of issuance of
the Series A Preferred or the original date of issuance of the Series B
Preferred, as applicable, the Corporation issues or sells, or in accordance
with Section 7C is deemed to have issued or sold, any shares of its Common
Stock for a consideration per share less than the Conversion Price for the
applicable Series A Preferred or Series B Preferred in effect immediately
prior to the time of such issue or sale, then immediately upon such
issuance or sale or deemed issuance or sale, such Conversion Price(s) shall
be reduced to the Conversion Price determined by dividing (a) the sum of
(1) the product derived by multiplying the Conversion Price in effect for
such Shares immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale,
plus (2) the consideration, if any, received by the
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Corporation upon such issue or sale, by (b) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale.
7C. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under SECTION 7B, the following shall
be applicable:
i. ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such
Options, is less than the Conversion Price in effect immediately prior to
the time of the granting or sale of such Options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the granting or sale of such Options for such
price per share. For purposes of this Section, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of the Conversion Price shall be made
when Convertible Securities are actually issued upon the exercise of such
Options or when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
ii. ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is
less than the Conversion Price in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional
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consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price shall be made
when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this SECTION 7, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
iii. CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. For purposes of
SECTION 7C, if the terms of any Option or Convertible Security which was
outstanding as of the original date of issuance of the Series A Preferred
or Series B Preferred, respectively, are changed in the manner described in
the immediately preceding sentence, then for purposes of the Conversion
Price applicable to such Series A Preferred or Series B Preferred, as
applicable, such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such change; provided that no such
change shall at any time cause the Conversion Price hereunder to be
increased.
iv. TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued. For purposes of SECTION 7C,
the expiration or termination of any Option or Convertible Security that
was outstanding as of the date of issuance of the Series A Preferred or
Series B Preferred, as applicable, shall not cause the Conversion Price for
such Series A Preferred or Series B Preferred, as applicable, to be
adjusted hereunder unless, and only to the extent that, a change in the
terms of such Option or Convertible Security caused it to be deemed to have
been issued after the date of issuance of the Series A Preferred or Series
B Preferred, as applicable.
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v. CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor. If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received
by the Corporation shall be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount
of consideration received by the Corporation shall be the Market Price
thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
Corporation, the amount of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any
consideration other than cash and securities shall be determined by the
Board of Directors in the exercise of its reasonable discretion.
vi. INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for a consideration of $.01.
vii. TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition
of any shares so owned or held shall be considered an issue or sale of
Common Stock.
viii. RECORD DATE. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
ix. CERTAIN ISSUANCES . Notwithstanding the foregoing, there
shall be no adjustment to the Conversion Price hereunder with respect to
(a) the issuance of any option, warrant, Common Stock or Equity Equivalent
to any employee, officer, director, consultant or advisor, in connection
with a stock incentive plan, stock option plan, stock purchase plan,
restricted stock plan, stock bonus arrangement or other similar stock plan
or agreement approved by the Company's Board of Directors to the extent
that the Common Stock issued or issuable with respect to all such plans,
agreements and
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arrangements does not exceed 20% of the Common Stock Deemed Outstanding,
(b) issuance of Common Stock upon the conversion of any Shares or upon the
conversion of any other presently outstanding convertible debt or other
convertible securities of the Corporation, (c) issuance of capital stock
upon the exercise of any presently outstanding warrants, (d) issuance of up
to 196,774 shares of Common Stock issuable to Cambridge Technology
Partners, (e) issuance of up to 38,382 shares of Common Stock to be issued
to Benjamin Weissberg and Jonathan Leitersdorf pursuant to the Agreement
dated June 30, 1997 between the Corporation and them, (f) issuance of up to
15,000 shares of Common Stock usable to Gustin Partners pursuant to an oral
agreement between Gustin Partners and the Corporation, (g) up to 15,000
shares of Common Stock issuable to strategic partners of the Company, (h)
issuance by way of a dividend or other distribution on shares of Preferred
Stock in accordance with the Certificate of Incorporation, as amended, or
(i) securities offered to the public pursuant to a registration statement
filed pursuant to the Securities Act.
7D. SUBDIVISION OR COMBINATION OF COMMON STOCK . If the Corporation 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 Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
7E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the 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 an "ORGANIC CHANGE". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions to insure that each of the holders of Shares shall thereafter have
the right to acquire and receive, in lieu of or in addition to (as the case may
be) the shares of Conversion Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series A Preferred and Series B
Preferred, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had converted its
Shares immediately prior to such Organic Change. The Corporation shall not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument, the obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions.
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7F. CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this SECTION 7 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Series A
Preferred and Series B Preferred; provided that no such adjustment shall
increase the Conversion Price as otherwise determined pursuant to this SECTION 7
or decrease the number of shares of Conversion Stock issuable upon conversion of
each Share.
7G. NOTICES.
i. Immediately upon any adjustment of the Conversion Price of
either the Series A Preferred or the Series B Preferred, the Corporation
shall give written notice thereof to all holders of such Preferred Stock ,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
ii. The Corporation shall give written notice to all holders of
Series A Preferred and Series B Preferred at least 20 days prior to the
date on which the Corporation closes its books or takes a record (a)with
respect to any dividend or distribution upon Common Stock, (b) with respect
to any pro rata subscription offer to holders of Common Stock or (c) for
determining rights to vote with respect to any Organic Change, dissolution
or liquidation.
iii. The Corporation shall also give written notice to the
holders of Series A Preferred and Series B Preferred at least 20 days prior
to the date on which any Organic Change shall take place.
7H. MANDATORY CONVERSION.
i. The Corporation may at any time require the conversion in
accordance with this Section 7 of all (but not less than all) of the
outstanding Series A Preferred and/or Series B Preferred (as applicable) if
the Corporation is at such time effecting a firm commitment underwritten
Public Offering of shares of its Common Stock in which: (i) in the case of
the Series A Preferred, (A) the aggregate price paid by the public for the
shares shall be at least $20,000,000, and (B) the price per share paid by
the public for such shares shall be at least two (2) times the Series A
Conversion Price; or (ii) in the case of Series B Preferred, (A) the
aggregate price paid by the public for the shares shall be at least
$30,000,000, and (B) the price per share paid by the public for such shares
shall be at least two and one-half (2 1/2) times the Series B Conversion
Price (a "Qualified Public Offering."). Any such mandatory conversion shall
only be effected at the time of and subject to the closing of the sale of
such shares pursuant to such Public Offering and upon written notice of
such mandatory conversion delivered to all holders of Series A Preferred
and Series B Preferred, as applicable, at least seven days prior to
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such closing, which notice shall contain a conversion date and place
designated for such conversion.
ii. The holders of 75% of Series B Preferred Shares may at any
time require the conversion in accordance with this Section 7 of all (but
not less than all) of the outstanding Series B Preferred. Any such
mandatory conversion shall be effected upon written notice of such
mandatory conversion delivered by such holders to the Corporation (upon
receipt of which the Corporation shall immediately provide written notice
thereof to all other holders of Series B Preferred).
Section 8. EVENTS OF NONCOMPLIANCE.
8A DEFINITION. An Event of Noncompliance shall have occurred if:
i. the Corporation fails to pay on any date on which such payment
is required pursuant to the terms hereof the full amount of dividends then
accrued on the Preferred Stock, whether or not such payment is legally
permissible or is prohibited by any agreement to which the Corporation is
subject;
ii. the Corporation fails to make any redemption payment with
respect to the Preferred Stock which it is required to make hereunder,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
iii. the Corporation breaches or otherwise fails to comply with
its obligations under the Purchase Agreement and such breach or failure
continues for thirty (30) days after written notice thereof to the
Corporation or is incapable of being cured;
iv. any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Series B Preferred
pursuant to the Purchase Agreement, is false or misleading in any material
respect on the date made or furnished;
v. the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or
any order for relief with respect to the Corporation or any Subsidiary is
entered under the Federal Bankruptcy Code; or the Corporation or any
Subsidiary petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Corporation or any
Subsidiary or of any substantial part of the assets of the Corporation or
any Subsidiary, or commences any proceeding (other than a proceeding for
the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any Subsidiary under any bankruptcy,
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reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction; or any such petition or application
is filed, or any such proceeding is commenced, against the Corporation or
any Subsidiary and either (a) the Corporation or any such Subsidiary by any
act indicates its approval thereof, consent thereto or acquiescence therein
or (b) such petition, application or proceeding is not dismissed within 90
days;
vi. a judgment in excess of $1,000,000 is rendered against the
Corporation or any Subsidiary and, within 90 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or
within 90 days after the expiration of any such stay, such judgment is not
discharged; or
vii. the Corporation or any Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is
to cause an amount exceeding $1,000,000 to become due prior to its stated
maturity or to permit the holder or holders of any obligation to cause an
amount exceeding $1,000,000 to become due prior to its stated maturity.
8B. CONSEQUENCES OF EVENTS OF NONCOMPLIANCE.
i. If an Event of Noncompliance of the type described in Section
8A(v) has occurred, or any Event of Noncompliance other than of the type
described in Section 8A(v) has occurred and continues to exist for 30 days,
then thereafter and during the continuation of such Event of Noncompliance,
the dividend rate payable on the Series B Preferred Shares as set forth in
Section 3B shall be increased to the annual rate determined by adding the
prime rate charged by Citibank in New York (as published in the Wall Street
Journal on the first business day after such default) plus 8%, with such
dividends to accrue on a daily basis.
ii. If any Event of Noncompliance exists, each holder of
Preferred Stock shall also have any other rights which such holder is
entitled to under any contract or agreement at any time and any other
rights which such holder may have pursuant to applicable law, and the
foregoing increased dividend rate shall not be construed to offset, reduce,
limit or liquidate damages arising from such Event of Noncompliance.
Section 9. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of Series A Preferred and Series B Preferred. Upon the surrender of
any certificate representing Preferred Stock at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares represented
by the surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such
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number of Shares as is requested by the holder of the surrendered certificate
and shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on such Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such
Preferred Stock represented by the surrendered certificate.
Section 10. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Shares
of Series A Preferred or Series B Preferred, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on such Preferred Stock represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 11. DEFINITIONS.
"COMMON STOCK" means, collectively, the Corporation's Common Stock and any
capital stock of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to SECTIONS 7C(I) and
7C(II) hereof whether or not the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock issuable upon
conversion of the Series A Preferred and Series B Preferred.
"CORPORATION" means Corechange, Inc., a Delaware Corporation.
"CONVERSION STOCK" means shares of Common Stock; provided that if there is
a change such that the securities issuable upon conversion of the Preferred
Stock are issued by an entity other than the Corporation or there is a change in
the type or class of securities so issuable, then the term "Conversion Stock"
shall mean one share of the security issuable upon conversion of the Preferred
Stock if such security is issuable in shares, or shall mean the smallest unit in
which such security is issuable if such security is not issuable in shares.
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"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"CONVERSION PRICE" means with the conversion price applicable to any
particular Share determined in accordance with SECTION 7.
"JUNIOR SECURITIES" means (i) relative to the Series A Preferred, Series I
Preferred, Series II Preferred, or Series III Preferred, the Common Stock and
any other equity securities of the Corporation ranking or liquidation junior to
the Series A, I, II and III Preferred, (ii) relative to the Series B Preferred,
the Common Stock, Series A Preferred, Series I Preferred, Series II Preferred,
Series III Preferred and any other equity securities of the Corporation ranking
upon liquidation junior for the Series B Preferred.
"LIQUIDATION VALUE" shall be equal to, as of any particular date (i) with
respect to any Series B Share $5.837, as proportionately adjusted to reflect any
stock split, stock dividend, recapitalization or similar event affecting the
Series B, and (ii) with respect to any Share of Series A Preferred as of January
21, 1998, $4.160024, as proportionately adjusted for dates thereafter to reflect
any stock split, stock dividend, recapitalization or similar event affecting the
Series A Preferred.
"MARKET PRICE" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 p.m., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board of
Directors in the exercise of their reasonable discretion.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a Corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means any offering by the Corporation of its capital
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of
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1933, as then in effect, or any comparable statement under any similar federal
statute then in force.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of February 18,
2000 by and among the Corporation and certain investors, as such agreement may
from time to time be amended in accordance with its terms.
"REGISTRATION AGREEMENT" means the Registration Agreement as defined in the
Purchase Agreement.
"REDEMPTION DATE" as to any Share means the date specified in the notice of
any redemption at the holder's option or the applicable date specified herein in
the case of any other redemption; provided that no such date shall be a
Redemption Date unless the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon and any required premium with respect thereto) is
actually paid in full on such date, and if not so paid in full, the Redemption
Date shall be the date on which such amount is fully paid.
"SHARE" means a share of either Series A Preferred or a share of Series B
Preferred, as applicable.
"SUBSIDIARY" means, with respect to any Person, any Corporation, limited
liability company, partnership, association or other business entity of which
(i) if a Corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership, membership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control a managing member, general partner or similar controlling
party of such limited liability company, partnership, association or other
business entity.
11A. OTHER DEFINITIONS.
<TABLE>
<S> <C>
Change in Ownership.................................6
Conversion Price...................................13
Corporation.........................................1
Demand Redemption...................................8
Expiration Date.....................................6
Fundamental Change..................................7
Organic Change.....................................17
Preferred Stock.....................................1
Qualified Public Offering..........................18
Redemption Price....................................9
Series A Demand Redemption Notice...................8
Series B Demand Redemption Notice...................8
</TABLE>
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<TABLE>
<S> <C>
Series A Preferred..................................1
Series B Preferred..................................1
Series I Preferred..................................1
Series II Preferred.................................1
Series III Preferred................................1
Series B Share......................................3
</TABLE>
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Section 12. AMENDMENT AND WAIVER.
Any provision of this Amendment to the Certificate of Incorporation may be
waived in writing by the holders of a majority of the shares of each adversely
affected class of capital stock. No amendment, modification or waiver of any of
the Articles of Incorporation shall be binding or effective with respect to any
provision of Section 1 through and including Section 13 hereof without the prior
written consent of the holders of a majority of the Series A Preferred and
holders of a majority of the Series B Preferred outstanding at the time such
action is taken, and no change in the terms hereof may be accomplished by merger
or consolidation of the Corporation with another Corporation or entity unless
the Corporation has obtained such prior written consent.
Section 13. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
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