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EXHIBIT 4.1
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CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES E CONVERTIBLE PREFERRED STOCK
(par value $.001 per share)
of
iPARTY CORP.
a Delaware Corporation
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors (the "Board of Directors") of iParty Corp., a
Delaware corporation (the "Corporation"), at a meeting held on July 28, 2000:
RESOLVED, that one series of the class of authorized preferred stock,
$.001 par value, per share of the Corporation is hereby created and that the
designations, powers, preferences and relative, participating, optional or other
special rights of the shares of such series, and qualifications, limitations or
restrictions thereof, are hereby fixed as follows (this instrument hereinafter
referred to as the "Designation"):
1. Number of Shares and Designations. Five Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (533,333) shares of the preferred stock, $.001 par
value, per share of the Corporation are hereby constituted as a series of
preferred stock of the Corporation designated as Series E Convertible Preferred
Stock (the "Series E Preferred Stock").
2. Dividend Provisions. The holders of shares of Series E Preferred Stock
shall be entitled to receive dividends, out of any assets legally available
therefor, ratably with any declaration or payment of any dividend with holders
of the Common Stock or other junior securities of this Corporation, when, as and
if declared by the Board of Directors.
3. Rank. The Series E Preferred Stock shall rank: (i) junior to any other
class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms senior to the Series E Preferred Stock (the
"Senior Securities"); (ii) prior to all of the Corporation's common stock, $.001
par value, per share (the "Common Stock"); (iii) prior to any class or series of
capital stock of the corporation hereafter created not specifically ranking by
its terms senior to or on parity with the Series E Preferred Stock
(collectively, with the Common Stock, "Junior Securities"); and (iv) on parity
with the Series A Preferred Stock of the Corporation, the Series B Preferred
Stock of the Corporation, the Series C Convertible Preferred Stock of the
Corporation, the Series D Convertible Preferred Stock, and any class or series
of capital stock of the Corporation hereafter created specifically ranking by
its terms on parity with the Series E
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Preferred Stock (the "Parity Securities"),
in each case as to the distribution of assets upon liquidation, dissolution or
winding up of the Corporation.
4. Liquidation Preference.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary ("Liquidation"), the holders of
record of the shares of the Series E Preferred Stock shall be entitled to
receive, immediately after any distributions to Senior Securities required by
the Corporation's Certificate of Incorporation and any certificate(s) of
designation, powers, preferences and rights, and before and in preference to any
distribution or payment of assets of the Corporation or the proceeds thereof may
be made or set apart for the holders of Junior Securities, an amount in cash
equal to $0.375 per share (subject to adjustment in the event of stock splits,
combinations or similar events). If, upon such Liquidation, the assets of the
Corporation available for distribution to the holders of Series E Preferred
Stock and any Parity Securities shall be insufficient to permit payment in full
to the holders of the Series E Preferred Stock and Parity Securities, then the
entire assets and funds of the Corporation legally available for distribution to
such holders and the holders of the Parity Securities then outstanding shall be
distributed ratably among the holders of the Series E Preferred Stock and Parity
Securities based upon the proportion the total amount distributable on each
share upon liquidation bears to the aggregate amount available for distribution
on all shares of the Series E Preferred Stock and of such Parity Securities, if
any.
(b) Upon the completion of the distributions required by
subparagraph (a) of this Paragraph 4, if assets remain in the Corporation, they
shall be distributed to holders of Junior Securities in accordance with the
Corporation's Certificate of Incorporation and any certificate(s) of
designation, powers, preferences and rights.
(c) For purposes of this Paragraph 4, a merger or consolidation or
a sale of all or substantially all of the assets of the Corporation shall be
considered a Liquidation except in the event that in such a transaction, the
holders of the Series E Preferred Stock receive securities of the surviving
corporation having substantially similar rights as the Series E Preferred Stock.
Notwithstanding Paragraph 7 hereof, such provision may be waived in writing by a
majority of the holders of the then outstanding Series E Preferred Stock.
5. Redemption. The Series E Preferred Stock is not redeemable.
6. Conversion. The holders of the Series E Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Voluntary Conversion. Each share of Series E Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
issuance at the office of the Corporation or any transfer agent for such stock,
or if there is none, then at the office of the transfer agent for the Common
Stock, or if there is no such transfer agent, at the principal executive office
of the Corporation, into that number of fully paid and non-assessable shares of
Common Stock of the Corporation equal to $3.75 divided by the conversion price
in effect at the time of conversion (the "Conversion Price"), determined as
hereinafter provided. The
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Conversion Price shall initially be $0.375. The number of shares of Common Stock
into which each share of Series E Preferred Stock is convertible is hereinafter
collectively referred to as the "Conversion Rate." For purposes of this
Paragraph 6(a), such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series E Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. Notwithstanding the above, no shares of Series E
Preferred Stock may be converted until the Corporation files an amendment to its
Certificate of Incorporation increasing the number of authorized shares of its
Common Stock.
(b) Automatic Conversion. In the event the daily closing price
(determined as provided in subparagraph (ii) of Paragraph 6(f)) of the Common
Stock is not less than $10.00 for any twenty (20) days in any thirty (30) day
period, each share of Series E Preferred Stock then outstanding shall, by virtue
of such conditions and without any action on the part of the holder thereof, be
deemed automatically converted into that number of shares of Common Stock into
which the Series E Preferred Stock would then be converted at the then effective
Conversion Rate.
(c) Mechanics of Conversion. Before any holder of Series E Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series E
Preferred Stock, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver to such holder of Series E Preferred Stock, or to
the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series E
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.
(d) Conversion Price Adjustments. The Conversion Price of the Series
E Preferred Stock shall be subject to adjustment from time to time as set forth
below.
(i) In the event the Corporation shall, prior to the
conversion of all the Series E Preferred Stock, (a) issue Common Stock as
a dividend or distribution on all shares of Common Stock of the
Corporation, (b) split or otherwise subdivide its outstanding Common
Stock, (c) combine the outstanding Common Stock into a smaller number of
shares, or (d) issue by reclassification of its Common Stock (except in
the case of a merger, consolidation or sale of all or substantially all of
the assets of the Corporation as set forth in subparagraph 6(d)(iii)
below) any shares of the capital stock of the Corporation, the Conversion
Price in effect on the record date for any stock dividend or the effective
date of any such other event shall be decreased (or increased in the case
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of a reverse stock split) so that the holder of each share of the Series E
Preferred Stock shall thereafter be entitled to receive, upon the
conversion of such share, the number of shares of Common Stock or other
capital stock which it would own or be entitled to receive immediately
after the happening of any of the events mentioned above had such share of
the Series E Preferred Stock been converted immediately prior to the close
of business on such record date or effective date. The adjustments herein
provided shall become effective immediately following the record date for
any such stock dividend or the effective date of any such other events.
There shall be no reduction in the Conversion Price in the event that the
Corporation pays a cash dividend.
(ii) A. In case the Corporation shall issue shares of Common Stock
or any securities convertible into or exchangeable for Common Stock, other
than "Excluded Securities" (as defined below), for a consideration per
share (the "Offering Price") less than the Conversion Price, the
Conversion Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of issuance by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate consideration
received for the issuance of such additional shares would purchase at the
Conversion Price in effect immediately prior to the date of such issuance,
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made.
The provisions of this subparagraph 6(d)(ii)(A) shall not apply
retroactively to any Series E Preferred Stock that has been converted
prior to the date of the adjustment.
B. Except as otherwise provided in subparagraph 6(d)(iii)
below, in no event shall the Conversion Price be increased above the
initial Conversion Price, as otherwise adjusted pursuant to this Section
6.
C. Upon each adjustment of the Conversion Price pursuant to
this subparagraph 6(d)(i) the total number of shares of Common Stock
purchasable upon the conversion of each share of Series E Preferred Stock
shall be such number of shares (calculated to the nearest whole share and
pursuant to the terms of subparagraph 6(G)(i); provided, however, that in
no event shall the Conversion Price increase as a result of such rounding
calculation) purchasable at the Conversion Price in effect immediately
prior to such adjustment multiplied by a fraction, the numerator of which
shall be the Conversion Price in effect immediately prior to such
adjustment and the denominator of which shall be the Conversion Price in
effect immediately after such adjustment.
D. No adjustment in the Conversion Price or the number of
shares of Common Stock into which a share of Series E Preferred Stock may
be converted shall be required unless such adjustment (plus any
adjustments not previously made by reason of this subparagraph (D) would
require an increase or decrease of at least 0.5% in the number of shares
of Common Stock into which each share of the Series E Preferred Stock is
then convertible, provided, however, that any adjustments which are not
required
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to be made by reason of this subparagraph (D) shall be carried forward and
taken into account in any subsequent adjustment. All calculations and
adjustments shall be made to the nearest cent or to the nearest whole
share, as the case may be.
E. After each adjustment of the Conversion Price the
Corporation shall promptly prepare a certificate signed by its Chief
Executive Officer or Chief Financial Officer and a Secretary or Assistant
Secretary setting forth the Conversion Price, as so adjusted; the number
of shares of Common Stock into which the Series E Preferred Stock may be
converted, and a statement of the facts upon which such adjustment is
based, and such certificate shall forthwith be filed with the transfer
agent, if any, for the Series E Preferred Stock, and the Corporation shall
cause such a copy of statement to be sent by ordinary first class mail to
each holder of Series E Preferred Stock.
F. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
G. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors.
H. In the case of the issuance after the Issuance Date of
options to purchase or rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subparagraph 6(d)(i) and subparagraph 6(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
(determined in the manner provided in subparagraphs 6(d)(i)(F) and
6(d)(i)(G)), if any, received by the Corporation upon the issuance
of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential
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antidilution adjustments) any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof, shall be deemed to have
been issued at the time such securities were issued or such options
or rights were issued and for a consideration equal to the
consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
Corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in subparagraphs
6(d)(i)(F) and 6(d)(i)(G)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to the
Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities (excluding a change resulting solely from the
antidilution provisions thereof if such change results from an event
which gives rise to an antidilution adjustment under this Paragraph
6(d)), the Conversion Price of the Series E Preferred Stock, to the
extent in any way affected by or computed using such options, rights
or securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common
Stock or any payment of such consideration upon the exercise of any
such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series E
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon
the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subparagraphs
6(d)(i)(H)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subparagraph 6(d)(i)(H)(3) or (4).
(6) Notwithstanding the provisions of subparagraphs
6(d)(i)(H)(1)-(5) above, in the event that on or after the date
hereof the Corporation issues any options to purchase or rights to
subscribe for Common
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Stock, securities by their terms convertible into or exchangeable
for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, if the conversion or
exercise price is not then determinable or is based on future
events, such shares of Common Stock shall not be deemed to be issued
until the price is determinable or such event has occurred and the
conversion or exercise price shall be subject to adjustment pursuant
to subparagraph 6(d)(i) above at the time of such determination or
the occurrence of such event even if the price is determined or such
event occurs after such date.
I. The following issuances of Common Stock ("Excluded
Securities") shall be excluded from the adjustments set forth in this
Paragraph 6(d):
(1) shares of capital stock issued pursuant to a stock
dividend or a stock split or other subdivision or recombination of
shares;
(2) securities issued by the Corporation in a public
offering pursuant to a firm commitment underwriting;
(3) securities issued to shareholders of any corporation
that merges into the Corporation in proportion to their stock
holdings of such corporation immediately prior to such merger, upon
such merger; and
(5) Common Stock or options or warrants to purchase
Common Stock issued to officers, directors or employees of or
consultants to the Corporation pursuant to any compensation
agreement, plan or arrangement or the issuance of Common Stock upon
the exercise of any such options or warrants, provided such
issuances do not exceed 25% of the Corporation's outstanding Common
Stock, on a fully-diluted basis, on the date of the last closing of
the Private Placement.
(iii) In case of any reclassification or similar change of
outstanding shares of Common Stock of the Corporation, or in case of the
consolidation or merger of the Corporation with another corporation, or
the conveyance of all or substantially all of the assets of the
Corporation in a transaction in which holders of the Common Stock receive
shares of stock or other property including cash, each share of the Series
E Preferred Stock shall, after such event and subject to the other rights
of the Series E Preferred Stock as set forth elsewhere herein, be
convertible only into the number of shares of stock or other securities or
property, including cash, to which a holder of the number of shares of
Common Stock of the Corporation deliverable upon conversion of such shares
of the Series E Preferred Stock would have been entitled upon such
reclassification, change, consolidation, merger or conveyance had such
share been converted immediately prior to the effective date of such
event.
(e) Reservation of Shares. Following the filing of an amendment to
the Corporation's Certificate of Incorporation increasing the number of
authorized shares of its Common Stock, the Corporation shall at all times
reserve and keep available, out of its
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authorized but unissued shares of Common Stock or out of shares of Common Stock
held in its treasury, solely for the purpose of effecting the conversion of the
shares of the Series E Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all shares of the Series E Preferred
Stock from time to time outstanding.
(f) Fractional Shares.
(i) No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of the Series E
Preferred Stock. In lieu of any fractional shares to which a holder would
otherwise be entitled, the Corporation shall pay cash, equal to such
fraction multiplied by the current market price per share (determined as
provided in subparagraph (ii) of this Paragraph 6(f) of the Common Stock
on the day of conversion).
(ii) For the purposes of any computation under subparagraph
6(f)(i), the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive business days prior to the day in question. The
closing price for each day shall be the last sales price or in the event
no sale takes place on such day, the average of the closing high bid and
low asked prices in either case (a) as officially quoted by the American
Stock Exchange ("AMEX") or such other market on which the Common Stock is
then listed for trading, or (b) if, in the reasonable judgment of the
Board of Directors of the Corporation, the AMEX is no longer the principal
United States market for the Common Stock, then as quoted on the principal
United States market for the Common Stock, as determined by the Board of
Directors of the Corporation, or (c) if, in the reasonable judgment of the
Board of Directors of the Corporation, there exists no principal United
States market for the Common Stock, then as reasonably determined by the
Board of Directors of the Corporation.
(g) Taxes, Etc. The Corporation will pay any taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of the Series E Preferred Stock. However, the Corporation
shall not be required to pay any tax which may be payable in respect to any
transfer involved in the issue and delivery of shares of Common Stock upon
conversion in a name other than that in which the shares of the Series E
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(h) Assurances. The Corporation will not, by amendment of its
Certificate of Incorporation, as amended, or through any reorganization,
recapitalization, 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 6 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 E Preferred Stock against
impairment.
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(i) Reissuance. No shares of Series E Preferred Stock that have been
converted to Common Stock shall be reissued by the Corporation; provided,
however, that any such share, upon being converted and canceled, shall be
restored to the status of an authorized but unissued share of preferred stock
without designation as to series, rights or preferences and may thereafter be
issued as a share of preferred stock not designated as Series E Preferred Stock.
7. Voting Rights.
(a) In addition to any other rights provided for herein or by law,
the holders of Series E Preferred Stock shall be entitled to vote, together with
the holders of Common Stock as one class, on all matters as to which holders of
Common Stock shall be entitled to vote, in the same manner and with the same
effect as such Common Stock holders. In any such vote each share of Series E
Preferred Stock shall entitle the holder thereof to the number of votes per
share that equals the number of whole shares of Common Stock into which each
such share of Series E Preferred Stock is then convertible, calculated to the
nearest whole share.
(b) So long as any shares of the Series E Preferred Stock remain
outstanding, the consent of the holders of one-half of the then outstanding
Series E Preferred Stock, voting as one class, either expressed in writing or at
a meeting called for that purpose, shall be necessary to permit, effect or
validate the creation and issuance of any series of preferred stock or other
security of the Corporation which is senior as to liquidation and/or dividend
rights to the Series E Preferred Stock.
(c) So long as any shares of the Series E Preferred Stock remain
outstanding, the consent of the holders of one-half of the then outstanding
Series E Preferred Stock, voting as one class, either expressed in writing or at
a meeting called for that purpose, shall be necessary to repeal, amend or
otherwise change this Designation or the Certificate of Incorporation of the
Corporation, as amended, in a manner which would alter or change the powers,
preferences, rights privileges, restrictions and conditions of the Series E
Preferred Stock so as to adversely affect the Series E Preferred Stock.
(d) Each share of the Series E Preferred Stock shall entitle the
holder thereof to one vote on all matters to be voted on by the holders of the
Series E Preferred Stock, as set forth above.
(e) In the event that the holders of the Series E Preferred Stock
are required to vote as a class on any other matter, the affirmative vote of
holders of not less than fifty percent (50%) of the outstanding shares of Series
E Preferred Stock shall be required to approve each such matter to be voted upon
and if any matter is approved by such requisite percentage of holders of Series
E Preferred Stock, such matter shall bind all holders of Series E Preferred
Stock.
8. Miscellaneous.
(a) There is no sinking fund with respect to the Series E Preferred
Stock.
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(b) The shares of the Series E Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Designation and in the
Certificate of Incorporation of the Corporation, as amended.
(c) The holders of the Series E Preferred Stock shall be entitled to
receive all communications sent by the Corporation to the holders of the Common
Stock.
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IN WITNESS WHEREOF, iParty Corp. has caused this Designation to be
executed this ___th day of August 2000.
iPARTY CORP.
By:/s/ Sal Perisano
---------------------------------
Sal Perisano
Chief Executive Officer
Attest:
By:/s/ Daniel DeWolf
---------------------------
Daniel DeWolf
Secretary
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