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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
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CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES F 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"), by unanimous written consent
on September 6, 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. One Hundred Fourteen Thousand
Two Hundred Eight-Six (114,286) 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 F Convertible Preferred Stock (the
"Series F Preferred Stock").
2. Dividend Provisions. The holders of shares of Series F 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 F 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 F 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 F 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 of the Corporation, the
Series E Convertible Preferred Stock of the Corporation and any class or series
of capital stock of the Corporation hereafter
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created specifically ranking by its terms on parity with the Series F 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 F 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 $4.375 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 F Preferred
Stock and any Parity Securities shall be insufficient to permit payment in full
to the holders of the Series F 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 F 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 F 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 F Preferred Stock receive securities of
the surviving corporation having substantially similar rights as the Series F
Preferred Stock. Notwithstanding Paragraph 7 hereof, such provision may be
waived in writing by a majority of the holders of the then outstanding Series F
Preferred Stock.
5. Redemption. The Series F Preferred Stock is not redeemable.
6. Conversion. The holders of the Series F Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Voluntary Conversion. Each share of Series F 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 $4.375 divided by the
conversion price in effect at
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the time of conversion (the "Conversion Price"), determined as hereinafter
provided. The Conversion Price shall initially be $0.4375. The number of shares
of Common Stock into which each share of Series F 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 F 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
F 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 F 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 F Preferred Stock would then be converted at the then effective
Conversion Rate.
(c) Mechanics of Conversion. Before any holder of Series F
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 F 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 F 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 F 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 F 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 F 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
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or the effective date of any such other event shall be decreased (or
increased in the case of a reverse stock split) so that the holder of
each share of the Series F 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 F 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 F
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)(ii) the total number of shares of
Common Stock purchasable upon the conversion of each share of Series F
Preferred Stock shall be such number of shares (calculated to the
nearest whole share and pursuant to the terms of subparagraph 6(G)(ii);
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 F
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 F Preferred Stock
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is then convertible, provided, however, that any adjustments which are
not required 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 F 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 F 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 F 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)(ii) and subparagraph
6(d)(iii):
(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)(ii)(F) and
6(d)(ii)(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,
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without limitation, the passage of time, but without taking
into account potential 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)(ii)(F)
and 6(d)(ii)(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 F 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 F 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)(ii)(H)(1) and (2) shall be
appropriately adjusted to reflect any change, termination or
expiration of the type described in either subparagraph
6(d)(ii)(H)(3) or (4).
(6) Notwithstanding the provisions of
subparagraphs 6(d)(ii)(H)(1)-(5) above, in the event that on
or after the date hereof the
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Corporation issues any 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, 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)(ii):
(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 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 F Preferred Stock shall, after such event and
subject to the other rights of the Series F 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 F 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
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Common Stock the Corporation shall at all times reserve and keep available, out
of its 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 F Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all shares of the Series F
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 F 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 F 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 F
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
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appropriate in order to protect the conversion rights of the holders of the
Series F Preferred Stock against impairment.
(i) Reissuance. No shares of Series F 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 F Preferred Stock.
7. Voting Rights.
(a) In addition to any other rights provided for herein or by
law, the holders of Series F 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 F 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 F Preferred Stock is then convertible, calculated to the
nearest whole share.
(b) So long as any shares of the Series F Preferred Stock
remain outstanding, the consent of the holders of one-half of the then
outstanding Series F 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 F Preferred Stock.
(c) So long as any shares of the Series F Preferred Stock
remain outstanding, the consent of the holders of one-half of the then
outstanding Series F 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 F Preferred Stock so as to adversely affect the Series F Preferred Stock.
(d) Each share of the Series F Preferred Stock shall entitle
the holder thereof to one vote on all matters to be voted on by the holders of
the Series F Preferred Stock, as set forth above.
(e) In the event that the holders of the Series F 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 F 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 F Preferred Stock, such matter shall bind all holders of Series F
Preferred Stock.
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8. Miscellaneous.
(a) There is no sinking fund with respect to the Series F
Preferred Stock.
(b) The shares of the Series F 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 F Preferred Stock shall be
entitled to receive all communications sent by the Corporation to the holders of
the Common Stock.
IN WITNESS WHEREOF, iParty Corp. has caused this Designation to be
executed this 7th day of September 2000.
iPARTY CORP.
By: /s/ Sal Perisano
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Sal Perisano
Chief Executive Officer
Attest:
By: /s/ Daniel DeWolf
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Daniel DeWolf
Secretary
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