AMENDMENT TO
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES D CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
I-STORM, INC.
I-STORM, INC. (the "Company"), a corporation organized and existing
under the laws of the State of Nevada, does hereby certify that:
Pursuant to authority vested in the Board of Directors by Article V of
the Articles of Incorporation of the Company and the provisions of the Nevada
Revised Statutes, the Board of Directors has duly adopted the following recitals
and resolutions:
WHEREAS, the Board of Directors is authorized by the Articles of
Incorporation to issue and to determine and fix the rights, preferences,
privileges and restrictions of one or more series of Preferred Stock, and the
Board of Directors has determined to establish the number of shares constituting
such series and to designate such series;
WHEREAS, the Articles of Incorporation presently authorize the Company
to issue up to 4,000,000 shares of Preferred Stock in any class or series and
the Company has designated 600,000 of such shares of Preferred Stock to be
Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock"),
735,000 of such shares of Preferred Stock to be Series B Cumulative Convertible
Preferred Stock ("Series B Preferred Stock") and 1,225,000 of such shares of
Preferred Stock to be Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock"); and 500,000 such shares of Preferred Stock to be Series D
Cumulative Convertible Preferred Stock;
WHEREAS, the Company had previously filed on January 12, 2000 a
Certificate of Designation, Preferences and Rights of Series D Cumulative
Convertible Preferred Stock, and the Board now wishes to amend such Certificate
of Designation to increase the authorized number of shares of such class of
Series D Cumulative Convertible Preferred Stock and to amend certain references
to registration rights for such class of stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
further amends Article V of the Articles of Incorporation and fixes and
determines the designation of the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to a new series of preferred
stock, as follows:
1. DESIGNATION. The series of preferred stock provided for by this
resolution shall be designated "Series D Cumulative Convertible Preferred Stock"
(hereinafter referred to as the "Series D Preferred Stock").
2. AUTHORIZATION. The number of shares constituting the Series D
Preferred Stock shall be 800,000 shares having a par value of $0.01 per share.
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3. DIVIDENDS. (a) The holders of the Series D Preferred Stock shall be
entitled to cumulative dividends at an annual rate of nine percent (9%) of the
offering price of $12.25 per share, when and as declared by the Board of
Directors, payable on a quarterly basis on November 15, February 15, May 15 and
August 15 (each a "Dividend Payment Date"), in cash, or at the option of the
Company, in additional shares of Series D Preferred Stock. Each such quarterly
dividend accrual shall be fully cumulative and shall accrue (whether or not
declared) on a daily basis from the first day of the quarterly period in which
such dividend may be accruable as provided herein; provided, however, that with
respect to the first Dividend Payment Date following the issuance of shares of
Series D Preferred Stock, such dividend shall accrue from the issuance date.
(b) All dividends paid with respect to the Series D Preferred Stock
shall be paid pro rata to the holders entitled thereto. All dividends paid in
shares of Series D Preferred Stock shall be deemed issued on the applicable
Dividend Payment Date and will thereupon be duly authorized, validly issued
fully paid and nonassessable and free and clear of all liens and charges.
(c) Unpaid dividends will accumulate and be payable prior to the
payment of dividends on the Common Stock, but not before the payment of
dividends on Series A Preferred Stock and Series B Preferred Stock and will be
payable PARI PASSU with respect to the Series C Preferred Stock
4. CONVERSION RIGHTS.
(a) Subject to the antidilution provisions set forth in Section 5, each
share of Series D Preferred Stock may be converted, (a) at the option of the
holder at any time or (b) at the option of the Company at any time after four
years after the Closing (as defined in the Stock Purchase Agreement between the
Company and CA) relating to such Series D Preferred Stock, into such number of
shares of the Company's Common Stock as shall equal $12.25 divided by the lower
of (i) $3.50 and (ii) the closing bid price for the Company's Common Stock for
any five (5) consecutive trading days during the period commencing 11 months
after the Initial Closing (as defined in the Stock Purchase Agreement between
Computer Associates International, Inc. and the Company) and ending one month
thereafter (it being understood that the holder need not convert the Series D
Preferred Stock during such one month period) (the "Conversion Price");
provided, however, that in no event shall the Conversion Price be reduced below
$2.80; provided, further, that any unpaid dividends accumulated on the Series D
Preferred Stock, as set forth in Section 3, shall be paid to the holders of the
Series D Preferred Stock on the date of conversion, either in cash, or at the
option of the Company, in additional shares of Common Stock at the then
applicable Conversion Price.
(b) Promptly after the surrender of Series D Preferred Stock by the
converting Holder and receipt thereof by the Company, the Company shall issue
and deliver, or cause to be issued and delivered, to the holder a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such Series D Preferred Stock. The date of the issuance of such
Common Stock shall be the "Conversion Date." No fractional shares shall be
issued upon conversion of the Series D Preferred Stock into shares of Common
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Stock; the number of shares of Common Stock issued upon conversion of the Series
D Preferred Stock shall be rounded to the nearest whole number of shares. To the
extent permitted by law, the conversion shall be deemed to have been effected as
of the close of business on the Conversion Date (or on the next preceding
business day if the Conversion Date is not a business day) and at that time the
rights of the holder of Series D Preferred Stock, as such holder, shall cease,
and the holder of the Series D Preferred Stock shall become the holder of record
of shares of Common Stock and shall solely be entitled to the rights and
preferences of the holders of shares of Common Stock.
(c) Notwithstanding anything herein to the contrary, on any liquidation
of the Company, the right of conversion of the Series D Preferred Stock shall
terminate at the close of business on the last full business day before the date
fixed for payment of the amount distributable on the Series D Preferred Stock.
5. ANTIDILUTION RIGHTS. The Conversion Price and the number of shares
issuable upon conversion shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend on its Common
Stock payable in shares of its Common Stock, (ii) subdivide its outstanding
shares of Common Stock, into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, and in each
case, the Conversion Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder of any
shares of the Series D Preferred Stock surrendered for conversion after such
time shall be entitled to receive the kind and amount of shares such holder
would have owned or have been entitled to receive had such shares of the Series
D Preferred Stock been converted immediately prior to the time of such dividend,
subdivision, combination, or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case of any capital reorganization or reclassification of the
capital stock of the Company, or a consolidation or merger of the Company with
or into any other corporation (other than a consolidation or merger in which the
Company is the surviving or continuing corporation), or in case of any sale or
transfer of all or substantially all of the assets of the Company, the holder of
each share of the Series D Preferred Stock, shall have after such
reorganization, reclassification, consolidation, merger, sale or transfer, the
right to convert such share of the Series D Preferred Stock solely into the kind
and amount of shares of stock and other securities and property (including cash)
which such holder would have been entitled to receive had such share of Series D
Preferred Stock been converted immediately prior to such consolidation, merger,
sale or transfer.
(c) In case the Company shall declare a cash dividend upon its Common
Stock payable otherwise then out of retained earnings or shall distribute to
holders of its Common Stock shares of its capital stock (other than Common
Stock), stock or other securities of other persons, evidences of indebtedness
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issued by the corporation or other persons, assets (excluding cash dividends) or
options or rights (excluding options to purchase and rights to subscribe for
Common Stock or other securities of the corporation convertible into or
exchangeable for Common Stock), then, in each such case, the holders of the
Series D Preferred Stock shall, concurrent with the distributions of holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which such Series D Preferred Stock is then convertible.
(d) Whenever there is an adjustment in the Conversion Price and/or the
number or kind of securities issuable upon conversion of the Series D Preferred
Stock, as provided herein, the Company shall promptly file in the custody of its
Secretary, a certificate signed by an officer of the Company, showing in detail
the facts requiring such adjustment, the number and kind of securities issuable
upon conversion of Series D Preferred Stock upon such adjustment, and the
Conversion Price; and notice of such adjustment along with a duplicate officer's
certificate shall be sent by registered mail, postage paid, to the holder at its
address as it shall appear in the Company's Stock Register.
(e) The corporation will not through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or modify or seek to
avoid or modify 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 Agreement 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 Series D Preferred Stock against
impairment.
6. SHARES RESERVED FOR ISSUANCE. The Company shall at all times reserve
and keep available and free of preemptive rights out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of the
Series D Preferred Shares, such number of shares of Common Stock (or such other
shares or securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series D Preferred
Shares, and if at any time the number of authorized but unissued shares of
Common Stock (or any such other shares or other securities) shall not be
sufficient to effect the conversion of all then outstanding Series D Preferred
Stock, the Company shall take such action as may be necessary to increase the
authorized but unissued shares of Common Stock (or other shares or other
securities) to such number of shares as shall be sufficient for such purposes.
7. NO VOTING RIGHTS.
(a) Except as otherwise required by law or as set forth in this Section
7, the holders of Series D Preferred Stock shall not have any voting rights.
(b) So long as any shares of Series D Preferred Stock are outstanding,
in addition to any other vote or consent of shareholders required in the
Articles of Incorporation or the Bylaws of the Company, the consent of the
holders of at least sixty-six and two-thirds percent (66 2/3 %) of Series D
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Preferred Stock at the time outstanding, such consent given in person or by
proxy, either in writing without a meeting, or by vote at any meeting called for
the purpose of obtaining such consent, shall be necessary for effecting or
validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation, or of the Bylaws
of the Company, which affects adversely the voting powers,
rights or preferences of the holders of Series D Preferred
Stock; provided, however that the amendment of the provisions
of the Articles of Incorporation so as to authorize or create
or to increase the authorized amount of any junior stock shall
not be deemed to affect adversely the voting powers, rights or
preferences of the holders of Series D Preferred Stock;
(ii) The authorization of or creation of any stock of
any class or any security convertible into stock of any class,
ranking in parity with or prior to Series D Preferred Stock in
the distribution of assets on any liquidation, dissolution, or
winding up of the Company or in the payment of dividends;
(iii) The merger or consolidation of the Company with
or into any other corporation, unless after such merger or
consolidation, if the Company should be the surviving
corporation, there shall be no class of stock and no other
securities either authorized or outstanding, ranking prior to
the Series D Preferred Stock, except for the Series A
Preferred Stock and the Series B Preferred Stock, in the
distribution of assets on any liquidation, dissolution or
winding up of the Company, or in the payment of dividends.
(iv) The purchase or redemption of any shares of any
series of stock which ranks in parity with or junior to the
Series D Preferred Stock (whether pursuant to mandatory
redemption or sinking fund provisions, optional redemption
provisions or otherwise) unless the full dividend on all
shares of Series D Preferred Stock then outstanding shall have
been paid or declared, and a sum sufficient, or shares
sufficient, for the payment of such dividends shall have been
set apart by the Company.
8. REGISTRATION RIGHTS. With respect to any Series D Preferred Stock
held by Computer Associates International, Inc. or its permissible designees,
such Series D Preferred Stock shall have registration rights as set forth in the
Registration Rights Agreement dated as of January 12, 2000 between Computer
Associates International, Inc. and the Company. . With respect to any Series D
Preferred Stock held by PurchasePro.com, Inc. or its permissible designees, such
Series D Preferred Stock shall have registration rights as set forth in the
Registration Rights Agreement dated as of June 30, 2000 between PurchasePro.com,
Inc. and the Company.
9. RANKING. With respect to the payment of dividends and upon
liquidation, the shares of the Series D Preferred Stock shall rank senior to the
shares of Common Stock of the Company, on parity with the Series C Preferred
Stock and junior to the shares of Series A Preferred Stock and Series B
Preferred Stock.
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10. REDEMPTION RIGHTS. Neither the Company nor the holders of Series D
Preferred Stock shall have any redemption rights with respect to the Series D
Preferred Stock.
11. LIQUIDATION, DISSOLUTION AND WINDING UP. (a) In the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, each holder of Series D Preferred Stock shall have the right to a
distribution of assets of the Company equal to $12.25 per share from any of the
Company's assets then available for distribution (i) after the satisfaction of
the liquidation, dissolution and winding up preferences of the holders of Series
A Preferred Stock and Series B Preferred Stock, (ii) pari passu with the holders
of the Series C Preferred Stock and (iii) before the satisfaction of the
liquidation, dissolution and winding up preferences of the holders of Common
Stock, all, in accordance with the Nevada Revised Statutes. If the assets of the
Company are not sufficient to pay in full the liquidation payments payable to
the holders of the Series D Preferred Stock and Series C Preferred Stock, then
the holders of such shares shall share ratably in such distribution of assets.
(b) Whenever the distribution provided for in this Section 11
shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as
determined in good faith by not less than a majority of the directors
then serving on the Board of Directors of the Company. A reorganization
of the Company, or a consolidation or merger of the Company with or
into another corporation or entity or a sale of or other disposition of
all or substantially all of the assets of the Company, shall not be
treated as a liquidation, dissolution or winding up of the Company
within the meaning of this Section 11.
The foregoing amendment was duly adopted by the Board of Directors
without the requirement of shareholder action by meeting held on _______________
pursuant to the Articles of Incorporation and the provisions of the Nevada
Revised Statutes.
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IN WITNESS WHEREOF, I-Storm, Inc. has caused this Certificate of
Designation, Preferences and Rights of Series D Cumulative Convertible Preferred
Stock to be executed by its President and attested to by its Secretary this ____
day of ________________, 2000.
ATTEST: I-STORM, INC.
By: /s/ Stephen Venuti By: /s/ Calbert Lai
--------------------------------- ---------------------------------
Stephen Venuti, Secretary Calbert Lai, President
STATE OF _________
: ss
COUNTY OF _________
On this ___ day of ___________, 2000, personally appeared before me,
the undersigned, a notary public, Calbert Lai and Stephen Venuti, who being by
me first duly sworn, declared that they are the President and Secretary,
respectively, of the above-named corporation, acknowledged that they signed the
foregoing Certificate of Designation, and verified that the statements contained
therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
----------------------------
, Notary Public
-----------
Residing in ___________County
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