<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-15946
DELPHI INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0021975
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3501 ALGONQUIN ROAD
ROLLING MEADOWS, IL 60008
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-506-3100
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes x No (2) Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date. 7,395,449 SHARES
AS OF AUGUST 7, 1998.
<PAGE>
DELPHI INFORMATION SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED June 30, 1998
INDEX
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PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1998
(unaudited) and March 31, 1998............................. 2
Consolidated Statements of Operations for the Three
Months Ended June 30, 1998 and 1997 (unaudited)............ 3
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1998 and 1997 (unaudited)................... 4
Notes to Consolidated Financial Statements (unaudited)........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ......................................... 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 11
SIGNATURE.......................................................... 11
</TABLE>
1
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DELPHI INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share amounts)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, MARCH 31,
1998 1998
-----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,011 $ 872
Accounts receivable, net 3,995 4,807
Inventories 18 12
Prepaid expenses and other current assets 234 151
------- -------
TOTAL CURRENT ASSETS 5,258 5,842
Property and equipment, net 1,911 2,084
Capitalized and purchased software, net 6,720 6,554
Other assets 314 302
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TOTAL ASSETS $14,203 $14,782
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,408 $ 1,923
Accounts payable and accrued liabilities 1,720 2,078
Accrued payroll and related benefits 144 419
Deferred revenue 3,451 4,381
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TOTAL CURRENT LIABILITIES 7,723 8,801
Notes payable-long term 209 210
Other liabilities 180 180
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TOTAL LIABILITIES 8,112 9,191
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Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 2,000,000 shares
authorized:
Series D, 221 shares issued and outstanding 49 49
Common stock, $.10 par value:
Non-designated, 20,000,000 shares authorized,
7,395,449 issued and outstanding 740 740
Additional paid-in capital 48,717 48,717
Accumulated deficit (43,515) (44,017)
Cumulative foreign currency translation adjustment 100 102
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TOTAL STOCKHOLDERS' EQUITY 6,091 5,591
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,203 $14,782
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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DELPHI INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1998 1997
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<S> <C> <C>
REVENUES:
Systems $1,304 $ 982
Services 4,863 4,584
------ ------
TOTAL REVENUES 6,167 5,566
COSTS OF REVENUES:
Systems 726 714
Services 1,942 2,136
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TOTAL COST OF REVENUES 2,668 2,850
------ ------
GROSS MARGIN 3,499 2,716
OPERATING EXPENSES:
Product development 747 1,074
Sales and marketing 650 705
General and administrative 1,335 742
Amortization of goodwill, customer lists and
noncompete agreements - - 132
------ ------
TOTAL OPERATING EXPENSES 2,732 2,653
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OPERATING INCOME 767 63
Minority interest 155 29
Interest income - - (54)
Interest expense 104 66
------ ------
Income before income taxes 508 22
Income tax provision 6 1
------ ------
Net income $ 502 $ 21
------ ------
------ ------
Basic income per common share $ 0.07 $ 0.00
------ ------
------ ------
Diluted income per common share $ 0.07 $ 0.00
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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DELPHI INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
1998 1997
---- ----
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 502 $ 21
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization 272 291
Amortization of capitalized and purchased software 434 513
Amortization of goodwill, customer lists and noncompete agreements - - 132
Foreign currency translation adjustment (2) 3
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable, net 812 1,430
Inventories (6) 2
Prepaid expenses and other assets (95) (14)
Accounts payable and accrued liabilities (358) (1,490)
Accrued payroll and related benefits (275) (307)
Other liabilities and deferred revenue (930) (1,490)
---------------------
Net cash provided by (used in) operating activities 354 (909)
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (99) (160)
Expenditures for capitalized and purchased software (600) (206)
---------------------
Net cash used in investing activities (699) (366)
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 484 - -
Proceeds from exercise of stock options and
employee stock purchase plan - - 292
---------------------
Net cash provided by financing activities 484 292
---------------------
Net increase (decrease) in cash 139 (983)
Cash at the beginning of the year 872 6,596
---------------------
Cash at the end of the year $1,011 $5,613
---------------------
---------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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DELPHI INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. BASIS OF PRESENTATION
These financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the results of the
interim periods.
These financial statements should be read in conjunction with the financial
statements, and accompanying notes thereto, included in the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended March 31,
1998.
The results of operations for current interim periods are not necessarily
indicative of results to be expected for the entire current year.
Certain prior period amounts have been reclassified to conform to the
current presentation. These changes had no impact on previously reported
earnings or stockholder's equity.
Note 2. REVERSE STOCK SPLIT
As previously reported, on May 6, 1998 the Company's shareholders approved
a proposal to amend the Company's Certificate of Incorporation to effect a
one-for-five reverse stock split of the Company's outstanding $.10 par
value Common Stock and to reduce the number of authorized shares from
75,000,000 to 20,000,000 effective May 8, 1998. All share and per share
information in these financial statements has been adjusted accordingly.
5
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Note 3. EARNINGS (LOSS) PER SHARE
In February, 1997 the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share", which modifies the standards for computing
earnings per share. As required, the Company adopted SFAS No. 128 as of
December 15, 1997. SFAS No. 128 replaces the presentation of primary and
(where applicable) fully diluted earnings per share ("EPS") with basic and
(where applicable) diluted EPS.
Basic EPS is equal to net income divided by the weighted average number of
shares of common stock outstanding for the period. Diluted EPS recognizes
the dilutive effect of common stock equivalents and is equal to net income
divided by the sum of the weighted average number of shares of common stock
outstanding and common stock equivalents. Consistent with previous
standards, SFAS No. 128 prohibits inclusion of the impact of common stock
equivalents in the calculation of EPS when inclusion results in
antidilution.
For the three months ended June 30, 1997, primary and fully diluted EPS, as
previously reported, are equal to basic and diluted EPS, respectively.
The computation of earnings per share (in thousands except per share data)
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1998 1997
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<S> <C> <C>
Net income (loss) $ 502 $ 21
Common stock-weighted
average number of shares
outstanding 7,395 7,411
------ ------
Common stock equivalents:
stock options 71 44
warrants 0 0
preferred stock 10 10
------ ------
Total equivalents 81 54
------ ------
Total shares common stock
and equivalents (for diluted
EPS) 7,476 7,465
------ ------
Basic EPS $ 0.07 $ 0.00
------ ------
Diluted EPS $ 0.07 $ 0.00
------ ------
</TABLE>
6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
financial statements and the notes thereto included in Item 1 of this
Quarterly Report and the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended March 31, 1998.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended June 30, 1998 operating activities provided
cash of $354,000. This was primarily due to net income of $502,000, non-cash
expenses for depreciation and amortization of $706,000, and a decrease in
accounts receivable of $812,000 partially offset by decreases in accounts
payable and accrued expenses of $358,000, a decrease in accrued payroll and
related benefits of $275,000, a decrease in deferred revenue of $930,000 and
an increase in prepaids and other assets of $101,000. During the three month
period cash flows from investing activities resulted in a use of cash of
$699,000 due to expenditures of $600,000 for capitalized and purchased
software and other capital expenditures of $99,000. Cashflows from investing
activities for the same period provided $484,000 resulting from bank
borrowings.
The Company's sources of liquidity on both a short and long-term basis
include cash on hand, the proceeds from the Company's line of credit
agreement, and operating activity. Sources of liquidity on a long-term basis
may also include the proceeds from the exercise of outstanding stock options
and warrants. Management believes that the Company's sources of liquidity in
the short and long-term will be sufficient to meet the Company's
operating cash obligations and provide for the completion and market
introduction of products currently under development.
BANK LINE-OF-CREDIT - As previously reported, effective January 1997, the
Company established a $4,000,000 line of credit agreement with a bank,
maturing in January 2001, subject to certain conditions. In accordance with
the agreement, as amended, prior to June 30, 1998 the Company could borrow up
to two and one-half times average monthly collections (as defined ); from
July 1998 through September 1998, two times monthly collections; from October
1998 through December 1998, one and one-half times collections; from January
1999 through March 1999, one times monthly collections and subsequently up to
seventy-five percent of eligible receivables. As of June 30, 1998,
borrowings under the line of credit totaled $2,087,000, and $1,673,000
remained available for borrowing.
REVERSE STOCK SPLIT - As previously reported, on May 6, 1998, the Company's
stockholders approved a proposal to amend the Company's Certificate of
Incorporation to effect a one-for-five reverse stock split of the Company's
outstanding $.10 par value Common Stock and to reduce the number of
authorized shares from 75,000,000 to 20,000,000 effective May 8, 1998.
The principal reason for the reverse stock split was to increase the trading
price per share of the Common Stock in order to comply with the revised
standards for continued listing on the Nasdaq SmallCap Market, which went
into effect on February 23, 1998. The new Nasdaq listing requirements
instituted, among other things, a $1.00 minimum per share bid price for
listed companies. There is no assurance, however, that the reverse stock
split will enable the
7
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Company's common stock to trade above the $1.00 minimum bid price
or that the Company will otherwise be able to maintain its listing on the
Nasdaq SmallCap Market.
NEW ACCOUNTING STANDARDS - As previously reported, in October 1997, the AICPA
issued Statement of Position (SOP) 97-2, "Software Revenue Recognition",
which supersedes SOP 91-1. The Company adopted, as required, SOP 97-2 for
software transactions entered into beginning April 1, 1998. Retroactive
application to years prior to adoption is prohibited. SOP 97-2 generally
requires revenue earned on software arrangements involving multiple elements
(i.e., software products, upgrades/enhancements, postcontract customer
support, installation, training, etc.) to be allocated to each element based
on relative fair values of the elements. The fair value of an element must be
based on evidence, which is specific to the vendor. The revenue allocated to
software products (including specified upgrades/enhancements) generally is
recognized upon delivery of the products. The revenue allocated to
postcontract customer support generally is recognized ratably over the term
of the support and revenue allocated to service elements (such as training
and installation) generally is recognized as the services are performed. If a
vendor does not have evidence of the fair value of all elements in a
multiple-element arrangement, all revenue from the arrangement is deferred
until such evidence exists or all elements are delivered. Management
anticipates that the adoption of SOP 97-2 will not have a material impact on
the Company's operations.
YEAR 2000 COMPLIANCE - The Year 2000 issue is the result of computer programs
being written using two digits rather than four digits to define the
applicable year. Any of the Company's internal use computer programs and its
software products that are date sensitive may recognize a date using "00" as
the year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including,
among other things, the inability to process transactions or engage in normal
business activities.
Based on a preliminary assessment, the Company has determined that it will be
required to modify or replace some of its internal use software and modify
certain existing products so that the software will function properly with
respect to dates in the Year 2000 and thereafter. The Company presently
believes that with modifications to these certain products and conversions to
new internal use software, the Year 2000 issue will not pose significant
operational problems for the Company or its customers. However, if such
modifications and conversions are not made, or not completed timely, the Year
2000 issue could have a material effect on the Company and customers
utilizing certain products. The Company has warranted that certain products
are Year 2000 compliant and that certain products will be made Year 2000
compliant. The Company has been and is currently providing customers upgrade
alternatives to Year 2000 compliant versions of the Company's products.
The Company is currently working on a comprehensive plan to address the Year
2000 issue and potential business impact. The Plan includes formal
communication with its vendors to determine the extent to which the Company's
software products are vulnerable to those third parties' failure to correct
their own Year 2000 issues. Generally, software provided by third parties
and included in the Company's systems is developed by leading software
suppliers with Year 2000 programs in process. There can be no guarantee that
the software of other companies, on which the Company's systems rely, will be
timely or properly converted.
8
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The Company will utilize both internal and external resources to reprogram,
or replace and test its software products for Year 2000 modifications. The
Company anticipates completing the Year 2000 project as soon as practical but
prior to any anticipated impact. The total cost of the Year 2000 project has
not yet been determined, but will be funded through existing cash resources
and future operating cash flows. The requirements and timetable for the
correction of Year 2000 issues are based on management's best estimates which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those
anticipated. Specific factors that may cause material differences include,
but are not limited to, the availability of trained personnel, the ability to
locate and collect all relevant computer codes, and similar uncertainties.
RESULTS OF OPERATIONS
The Company's business plan includes a product strategy centered on a new
generation of products, collectively referred to as "Common Delphi", or
"cd.solutions" and currently comprised of "cd.one", "cd.connect", and
"cd.global", each of which are Delphi trademarks. The current legacy products
will be maintained and supported as long as there is adequate economic and
strategic justification. As new products are introduced to the market,
existing customers utilizing legacy products will be encouraged to migrate to
the Company's new generation of products.
THREE MONTH PERIOD ENDED JUNE 30, 1998 AND 1997
The Company's revenues are derived from the licensing and sale of systems
comprised of third party and internally developed software ("Systems") and
from professional services, maintenance services, and support services
("Services"). Professional services include consulting, implementation,
training, project management, and custom software development provided to the
Company's customers with installed systems and those in the process of
installing systems. Total revenues, consisting of Systems revenue and
Services revenue, for the quarter ended June 30, 1998 were $6,167,000,
representing an 11% increase compared to the same quarter of the prior year.
Systems revenues of $1,304,000 for the quarter reflect an increase of
$322,000 compared to the same quarter of the prior year. The increase is
primarily attributable to an increase in revenues from the sale of
cd.solutions products, partially offset by declining hardware revenues and
legacy product sales.
Service revenues for the quarter were $4,863,000 in the current year versus
$4,584,000 in the prior year, an increase of 6%. The increase is comprised
of an increase in service revenue related to cd.solutions products partially
offset by a decrease in service revenues associated with legacy products.
9
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Costs of systems revenues as a percentage of systems revenues were 56% in the
quarter ended June 30, 1998 compared to 73% in the same quarter of the prior
year. Exclusive of amortization of capitalized and purchased software
expense, costs of systems revenues were 22% of systems revenues in the
current quarter as compared to 20% for the same period last year.
Costs of service revenues as a percentage of total service revenues decreased
to 40% in the first quarter of the current year, compared to 47% in the first
quarter of the prior fiscal year primarily due to decreased payroll costs and
decreased use of outside consultants in the current year.
Product development expenses for the quarter ended June 30, 1998 were
$747,000, a decrease of $327,000, compared to the same quarter of the prior
year. Total product development expenditures for the three months ended June
30, 1998 were $1,347,000, consisting of capitalized purchased software and
software development costs of $600,000 and product development expense of
$747,000. Total product development expenditures for the three months ended
June 30, 1997 were $1,280,000, consisting of capitalized purchased software
and software development costs of $206,000 and product development expense of
$1,074,000.
Sales and marketing expenses for the quarter ended June 30, 1998 were
$650,000, representing a decrease of $55,000 or 8%, from the comparable
quarter in the prior year. The decrease is primarily attributable to a
reduction in payroll expenses.
General and administrative expenses for the quarter ended June 30, 1998 were
$1,335,000, versus $742,000 in the comparable quarter in the prior year. The
increase is primarily due to an increase in payroll and legal expenses.
There was no amortization of goodwill, customer lists and noncompete
agreements for the quarter ended June 30, 1998 compared to $132,000 for the
same quarter of the prior year. The elimination of amortization expense is
the result of the write-off of remaining goodwill and customer lists in the
second quarter of fiscal year ended March 31, 1998 due to impaired
recoverability.
Interest expense net of interest income for the quarter ended June 30, 1998
was $104,000, an increase of $92,000 compared to the same quarter of the
prior year. The increase is due to increased borrowings, interest, and fees
related to the line of credit facility.
This Quarterly Report on Form 10-Q contains various forward-looking
statements and information that are based on management's beliefs as well as
assumptions made by and information currently available to management,
including statements regarding future economic performance and financial
condition, liquidity and capital resources, acceptance of the Company's
products by the market and management's plans and objectives. Such
statements are subject to various risks and uncertainties which could cause
actual results to vary materially from those stated. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, expected or projected. Such risks and uncertainties include the
Company's ability to overcome its recent history of operating losses and
declining revenues, the risks associated with future acquisitions, the
willingness of independent insurance agencies to outsource their computer and
other processing needs to third parties, the Company's ability to continue to
develop new products to effectively address market needs in an industry
characterized by rapid technological change, the Company's dependence on the
insurance industry (and in particular independent agents), the highly
competitive and rapidly changing automation systems market, the Company's
ability to effectively protect its applications software and other
proprietary information, the Company's ability to attract and retain quality
management, and software, technical sales and other personnel. Certain of
these as well as other risks and uncertainties are described in more detail
in the Company's Registration statement on Form S-3 filed under the
10
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Securities Act of 1933, Registration No. 333-12781, and the Company's
periodic filings pursuant to the Securities Exchange Act of 1934. The
Company undertakes no obligation to update any such factors or to publicly
announce the results of any of the forward-looking statements contained
herein to reflect future events or developments.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
Part II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. On May 6, 1998, the
Company's shareholders approved a proposal to amend the Company's Certificate
of Incorporation (the "Charter Amendment Proposal") to effect a 1-for-5
reverse stock split of the Company's outstanding common stock $.10 par value
per share ("Common Stock") and to reduce the authorized shares of Common
Stock from 75,000,000 to 20,000,000 which became effective May 8, 1998.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company
held a special meeting of stockholders on May 6, 1998 to consider and vote
upon the Charter Amendment Proposal. Holders of 29,094,039 shares of Common
Stock voted in favor of the Charter Amendment Proposal. 1,297,318 shares of
Common Stock against the Charter Amendment Proposal. 26,204 shares of Common
Stock abstained from voting.
Item 5. OTHER INFORMATION. Proxies solicited with respect to the Company's
1999 annual meeting of stockholders may confer discretionary authority to
vote on various matters including any matter with respect to which the
Company has not received notice by July 28, 1999. This date may change in
the event that the Company significantly changes the date of its annual
stockholders meeting in connection with the anticipated change in its fiscal
year to December 31.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See exhibit index.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DELPHI INFORMATION SYSTEMS, INC.
Date: August 12, 1998 By /s/ Reid E. Simpson
-------------------------------------
Reid E. Simpson
Chief Financial Officer and
Duly authorized officer
11
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
3 Certificate of Incorporation as Amended
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
</TABLE>
12
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
DELPHI INFORMATION SYSTEMS, INC.
I
The name of this Corporation shall be:
DELPHI INFORMATION SYSTEMS, INC.
II
The address of the registered office of the Corporation in the State of
Delaware is 100 West Tenth Street in the City of Wilmington, County of New
Castle, and the name of its registered agent at that address is The Corporation
Trust Company.
III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
IV
The Corporation is authorized to issue two classes of stock designated
"Preferred Stock" and "Common Stock," respectively. The total number of shares
of Preferred Stock authorized to be issued is two million (2,000,000) and each
such share shall have a par value of ten cents ($.10). The total number of
shares of common stock authorized to be issued is twelve million (12,000,000)
and each such share shall have a par value of ten cents ($.10).
The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof,
including but not limited to the fixing or alteration of the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares of Preferred
Stock, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of the shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease
shall resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
<PAGE>
Subject to conversion or exchange as provided below, ten million
(10,000,000) shares of the common stock authorized above are designated "Common
Stock," two hundred twenty thousand (220,000) shares of the common stock
authorized above are designated "Series A Common Stock" and one million seven
hundred eighty thousand (1,780,000) shares of the common stock authorized above
are designated "Series B Common Stock."
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series A Common Stock or the holders
thereof are as follows:
1. DIVIDENDS.
When and as dividends or distributions are declared on the Common
Stock of the Corporation, whether payable in cash, in property or in securities
of the Corporation, or in subscription or other rights to acquire securities of
the Corporation, the holders of the Series A Common Stock shall be entitled to
and shall receive equally, share for share, such dividends or distributions.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, the holders of the Series A
Common Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, an amount equal to $11.00
for each share of Series A Common Stock then held by them plus any declared
and unpaid dividends, and no more. If upon the occurrence of such event the
assets and funds thus distributed among the holders of the Series A Common
Stock and those distributed to holders of shares of any class or series of
stock of the Corporation which ranks equal to the Series A Common Stock in
liquidation preference ("Parity Stock") shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount and the
payment of the preferential amount of Parity Stock, then the entire assets of
the Corporation legally available for distribution shall be distributed among
the holders of the Series A Common Stock and the holders of the Parity Stock
in proportion to the shares of all such stock then held by them.
(b) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Corporation, shall not be deemed to be liquidation, dissolution or
winding up within the meaning of this Section 2.
3. VOTING RIGHTS.
Each holder of the Series A Common Stock shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
Series A Common Stock could be converted and shall have voting rights and powers
equal to the voting rights and powers of the Common Stock. Except as provided
in the last sentence of this Section 3, the holders of the Series A Common Stock
and the Common Stock shall vote together and
<PAGE>
not as separate classes. The holders of the Series A Common Stock shall be
entitled to notice of any shareholders' meeting in accordance with law.
Fractional voting shall not, however, be permitted and any fractional voting
rights resulting from the above formula shall be rounded to the nearest whole
number (with one-half being rounded upward). The Corporation shall not amend
its Certificate of Incorporation without the approval, by vote or written
consent, of the holders of at least one-half (1/2) of the outstanding shares
of Series A Common Stock if such amendment would change any of the rights,
preferences, powers, qualifications, limitations or restrictions provided for
herein for the benefit of any of the shares of Series A Common Stock.
4. CONVERSION.
The holders of the Series A Common Stock shall have conversion rights
as follows (the "Conversion Rights")
(a) RIGHT TO CONVERT.
(i) Each share of Series A Common Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of such
share, at the headquarters office of the Corporation or any transfer agent for
the Series A Common Stock, into fully paid and nonassessable shares of Common
Stock at the Conversion Rate (as hereinafter defined) in effect at the time of
conversion as provided herein.
(ii) The Series A Common Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Rate immediately
upon any of the following events:
(A) The effectiveness of a registration statement under
the Securities Act of 1933, as amended,covering the offer and sale of any of
the Corporation's securities (as that term is defined under the Securities
Act of 1933, as then in effect);
(B) The affirmative vote or written consent of the holders
of at least two-thirds (2/3) of the outstanding shares of Series A Common Stock
in favor of such an automatic conversion; and
(C) The affirmative vote of a majority of the members of
the Board of Directors that the Corporation agree to consolidate or merge
with or into another named corporation or corporations in a third-party
arm's-length transaction; or sell all or substantially all of the assets of
the Corporation to a named corporation or corporations in a third-party
arm's-length transaction; provided, however, that if such consolidation,
merger or sale is not consummated within 180 days of such affirmative vote,
the conversion of the Series A Common Stock shall be null and void and the
shares of Common Stock into which the Series A Common Stock had been
converted shall automatically be reconverted into shares of Series A Common
Stock on the 181st day after such affirmative vote.
<PAGE>
(iii) The automatic conversion of Series A Common Stock into
shares of Common Stock pursuant to Section 4(a)(ii) shall be effected by the
surrender of the certificates representing the shares to be converted at the
headquarters office of the Corporation or any transfer agent for the Series A
Common Stock, in such form and accompanied by such notice, affidavits, and
other documents, if any, as may be necessary to comply with the laws of the
State of Delaware and any other applicable law, and upon such surrender the
record holder of such shares, or such other person as the record holder shall
name, shall be entitled to become, and shall be registered in the original
stock ledger of the Corporation as, the record holder of the number of shares
of Common Stock issuable upon such conversion, and the Series A Common Stock
shall be converted into fully paid and nonassessable Common Stock at the
Conversion Rate in effect at the time of conversion as provided herein, and
thereupon there shall be issued and delivered to such record holder or other
named person, as the case may be, promptly at such office or designated
place, a certificate or certificates for such number of shares of Common
Stock.
(iv) No fractional shares of Common Stock shall be issued upon
conversion of Series A Common 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 fair market value for one share of the
Corporation's Common Stock on the date of conversion, as determined in good
faith by the Board of Directors of the Corporation.
(b) MECHANICS OF CONVERSION. Before any holder of Series A Common
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 A
Common Stock, and shall give written notice to the Corporation at such office of
the election to convert the same, and stating therein the name or names in which
the holder wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Common Stock or to such
holder's nominee or nominees a certificate or certificates for the number of
shares of Common Stock to which the 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 A Common 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 on such date.
(c) CONVERSION RATE AND PRICE. The Series A Common Stock shall be
convertible into the number of shares of Common Stock (the "Conversion Rate")
which results from dividing the Conversion Price per share in effect at the time
of conversion into $11.00 for each share of Series A Common Stock being
converted; the initial Conversion Price per share for the Series A Common Stock
shall be $11.00. The Conversion Price shall be subject to adjustment as
hereinafter provided.
(d) ADJUSTMENT FOR COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.
In the event the Corporation, at any time or from time to time after the
original issue date of the Series A Common Stock (hereinafter referred to as the
"Original
<PAGE>
Issue Date"), effects a subdivision or combination of its outstanding Common
Stock into a greater or lesser number of shares, then and in each such event
the Conversion Price shall be decreased or increased, respectively,
proportionately.
(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 maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent adjustment to such number)
of Common Stock issuable in payment of such dividend or distribution shall be
deemed to be issued and outstanding 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 Conversion Price by a fraction,
(i) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding or deemed to be issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date; and
(ii) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding or deemed to be 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 Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Price shall be adjusted pursuant to this Section
4(e) as of the time of actual payment of such dividends or distributions.
(f) ADJUSTMENTS FOR RECLASSIFICATIONS AND FOR OTHER DIVIDENDS AND
DISTRIBUTIONS. In the event the Corporation at any time or from time to time
after the Original Issue Date shall effect a reclassification of its Common
Stock (other than one resulting in the issue of additional shares of Common
Stock) or 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 to
its stockholders 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 Common Stock shall receive, upon conversion thereof, the
securities of the Corporation which they would have received had their Series A
Common Stock been converted into Common Stock on the date of such event.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and shall prepare and furnish
to each holder of Series A Common 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 holders of at least two-thirds (2/3) of the outstanding
<PAGE>
shares of Series A Common Stock, furnish or cause to be furnished to all holder
of Series A Common Stock a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Rate at the time in effect, and (iii) 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 Common Stock.
(h) NOTICES OF RECORD DATE. In the event of any setting by the
Corporation of a record date for determining the holders of any class of
securities who are entitled to receive any dividend (other than a cash dividend)
or other distribution or any right to subscribe for, purchase or acquire any
shares of stock or other securities of the Corporation, the Corporation shall
mail to each holder of Series A Common Stock at least twenty (20) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution or right.
(i) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Common Stock pursuant hereto.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series A Common Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the Conversion of all
outstanding shares of the Series A Common Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A Common
Stock, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
(k) NOTICES. Any notice required by the provisions of this Section 4
to be given to the holders of shares of the Series A Common Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
The shares of Series B Common Stock may be issued from time to time in one
or more subseries. The Board of Directors is hereby authorized, by filing a
certificate or certificates pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such subseries and to fix the powers, preferences and rights of the shares
of each subseries of Series B Common Stock and the qualifications, limitations
or restrictions thereof, including but not limited to the fixing or alteration
of the dividend rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption (including sinking fund provisions), the redemption
price or prices, and the liquidation preferences of each subseries of Series B
Common Stock.
<PAGE>
V
The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of Directors
shall be fixed by, or in the manner provided in, the Bylaws of the Corporation.
VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the Bylaws of the Corporation.
VII
Election of directors at an annual or special meeting of shareholders need
not be by written ballot.
VIII
Special meetings of the shareholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors or by a committee
of the Board of Directors which has been duly designated by the Board of
Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in the Bylaws of the Corporation, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons; provided, however, that if and to the extent that any special
meeting of stockholders may be called by any other person or persons specified
in any provisions of the Certificate of Incorporation or any amendment thereto
or any certificate filed under Section 151(g) of the General Corporation Law of
Delaware (or its successor statute as in effect from time to time hereunder),
then such special meeting may also be called by the person or persons, in the
manner, at the times and for the purposes so specified.
IX
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 all rights conferred on stockholders herein
are granted subject to this reservation.
<PAGE>
X
The name and mailing address of the incorporator of the Corporation is:
Mr. Richard R. Janssen
c/o Alan J. Barton, Esq.
Paul, Hastings, Janofsky & Walker
1299 Ocean Avenue, Fifth Floor
Santa Monica, California 90401
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation to do business both within and without the State of
Delaware and in pursuance of the General Corporation Law of Delaware, does make
and file this Certificate, hereby declaring and certifying that it is his act
and deed and that the facts herein stated are true, and accordingly has hereunto
set his hand this 17th day of August, 1983.
/s/ Richard R. Janssen
--------------------------------
Richard R. Janssen, Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
DELPHI INFORMATION SYSTEMS, INC.
DELPHI INFORMATION SYSTEMS, 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 Board of Directors of said Corporation, at a meeting
duly held on June 30, 1986, adopted resolutions proposing and declaring
advisable the following amendment to the Certificate of Incorporation of said
Corporation as follows:
RESOLVED, that, subject to stockholder approval at the Annual Meeting, the
Certificate of Incorporation of this Corporation be amended by adding an Article
XI thereto which shall be and read as follows:
ARTICLE XI
A director shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary
duty as a director; provided that this sentence shall not
eliminate or limit the liability of a director (i) for any breach
of his duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law, or (iv) for any
transaction from which the director derives an improper personal
benefit. This Article XI shall not eliminate or limit the
liability of a director for any act or omission occurring prior
to the date when this Article XI becomes effective."
SECOND: That the aforementioned amendment was duly adopted by the vote of a
majority of the outstanding stock of the Corporation entitled to vote thereon in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said DELPHI INFORMATION SYSTEMS, INC. has caused its
corporate seal to be hereunto affixed and this Certificate to be signed by
Walter F.
<PAGE>
Bauer, its Chairman of the Board, and Michael E. McConnell, its Secretary, on
this 24th day of October, 1986.
DELPHI INFORMATION SYSTEMS, INC.
By /s/ Walter F. Bauer
-------------------------------
Walter F. Bauer,
Chairman of the Board
ATTEST:
/s/ Michael E. McConnell
-------------------------------
Michael E. McConnell, Secretary
(Corporate Seal)
<PAGE>
CERTIFICATE OF OWNERSHIP
MERGING
DELPHI SYSTEMS, INC.
and
DELPHI PERSONNEL SERVICES, INC.
into
DELPHI INFORMATION SYSTEMS, INC.
(Pursuant to Section 253 of the
General Corporation Law of Delaware)
Delphi Information Systems, Inc., a corporation incorporated on the 22nd
day of August, 1983, pursuant to the provisions of the General Corporation
Law of the State of Delaware, does hereby certify that this corporation owns
all the capital stock of Delphi Systems, Inc., a corporation incorporated
under the laws of the State of California, and Delphi Personnel Services,
Inc., a corporation incorporated under the laws of the State of California,
and that this corporation, by a resolution of its board of directors duly
adopted by unanimous written consent effective as of April 23, 1987,
determined to and did merge into itself said Delphi Systems, Inc. and Delphi
Personnel Services, Inc., which resolution is in the following words, to wit:
WHEREAS this corporation lawfully owns all the outstanding stock of
Delphi Systems, Inc., a corporation organized and existing under the laws of
California, and Delphi Personnel Services, Inc., a corporation organized and
existing under the laws of California, and
WHEREAS this corporation desires to merge into itself the said Delphi
Systems, Inc. and Delphi Personnel Services, Inc. and to be possessed of all the
estate, property, rights, privileges and franchises of said corporations.
NOW, THEREFORE, BE IT RESOLVED, that this corporation merge into
itself, and it does hereby merge into itself said Delphi Systems, Inc. and
Delphi Personnel Services, Inc. and assumes all of their liabilities and
obligations; and
FURTHER RESOLVED, that the Chairman of the Board or the President or a
Vice President, and the Secretary or Treasurer of this corporation be and they
hereby are directed to make and execute, under the corporate seal of this
corporation, a certificate of ownership setting forth a copy of the resolution,
to merge said Delphi Systems, Inc. and Delphi Personnel Services, Inc. and
assume their liabilities and obligations, and the date of adoption thereof, and
to file the same in the office of the Secretary of the State of Delaware, and a
certified copy thereof in the office of the Recorder of Deeds of New Castle
County; and
<PAGE>
FURTHER RESOLVED, that the officers of this corporation be and they
hereby are authorized and directed to do all acts and things whatsoever, whether
within or without the State of Delaware, which may be in anywise necessary or
proper to effect said merger.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its Chairman of the Board and attested by its secretary, and its
corporate seal to be affixed, the 30th day of April, 1987.
DELPHI INFORMATION SYSTEMS, INC.
By:/s/ Walter F. Bauer
------------------------------
Walter F. Bauer, Chairman
ATTEST:
/s/ M.E. McConnell
--------------------------------
Secretary
(Seal)
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
DELPHI INFORMATION SYSTEMS, 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 at a meeting of the board of directors of DELPHI INFORMATION
SYSTEMS, INC., resolutions were duly adopted setting forth a proposed amendment
to the certificate of incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
Resolved, that Article IV of the Certificate of Incorporation of this
corporation be amended in its entirety to read as follows:
The Corporation is authorized to issue two classes of stock
designated "Preferred Stock" and "Common Stock,"
respectively. The total number of shares of Preferred Stock
authorized to be issued is two million (2,000,000) and each
such share shall have a par value of ten cents ($.10). The
total number of shares of Common Stock authorized to be
issued is twelve million (12,000,000) and each such share
shall have a par value of ten cents ($.10). The shares of
Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized,
by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications,
limitations or restrictions thereof, including but not
limited to the fixing or alteration of the dividend rights,
dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences
of any wholly unissued series of shares of Preferred Stock,
or any of them; and to increase or decrease the number of
shares of any series subsequent to the issue of the shares
of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of
any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the
number of shares of such series.
Second: That thereafter, pursuant to resolution of its board of directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in
<PAGE>
accordance with Section 222 of the General Corporation Law of the state of
Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the state of
Delaware.
Fourth: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
In witness whereof, said Corporation has caused this certificate to be
signed by Walter F. Bauer, its Chairman of the Board, and M.E. McConnell, its
secretary, this 28th day of May, 1987.
DELPHI INFORMATION SYSTEMS, INC.
By:/s/ Walter F. Bauer
---------------------------------
Walter F. Bauer Chairman
ATTEST:
By:/s/ M.E. McConnell
-------------------------------
M.E. McConnell
Secretary
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DELPHI INFORMATION SYSTEMS, INC.
Delphi Information Systems, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "DGCL") does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Certificate of
Incorporation of the Corporation (the "Amendment"), declaring the Amendment to
be advisable and calling for the submission of the proposed Amendment to the
stockholders of the Corporation for consideration thereof. The resolution
setting forth the proposed Amendment is as follows:
RESOLVED, that, subject to Stockholder approval at the Special Meeting, the
Article IV Certificate of Incorporation of this Corporation be amended and
restated to read in its entirety as follows:
Effective immediately upon the filing of this Amendment to the
Certificate of Incorporation in the office of the Secretary of State of the
State of Delaware, the outstanding shares of Common Stock shall be and
hereby are combined and reclassified as follows: each share of Common Stock
shall be reclassified as and converted into one-fifth of a share of Common
Stock; provided, however, that fractional shares of Common Stock will not
be issued in connection with such combination and reclassification, and
each holder of a fractional share of Common Stock shall receive in lieu
thereof a cash payment from the Corporation determined by multiplying such
fractional share of Common Stock by five times the arithmetic mean average
closing price per share of Common Stock on the Nasdaq SmallCap Market for
the five trading days immediately preceding the effective date of this
Amendment, such payment to be made upon such other terms and conditions as
the officers of the Corporation, in their judgment, determine to be
advisable and in the best interests of the Corporation.
Certificates representing shares combined and reclassified as provided
in this Amendment are hereby canceled, and, upon presentation of the
canceled certificates to the Corporation, the holders thereof shall be
entitled to receive new certificates representing the shares resulting from
such combination and reclassification.
The Corporation is authorized to issue two classes of stock designated
"Preferred Stock" and "Common Stock," respectively. The total number of
shares of Preferred Stock authorized to be issued is 2,000,000 and each of
such share shall have a par value of ten cents ($.10). The total number of
shares of Common Stock authorized to be issued is 20,000,000 and each such
share shall have a par value of ten cents ($.10).
<PAGE>
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is hereby authorized, by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof, including but not limited to the fixing or alteration
of the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series or shares of Preferred Stock, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issue of the shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
SECOND: That thereafter, pursuant to a resolution of the Board of
Directors, a special meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the DGCL, at
which meeting the necessary number of shares as required by statute were voted
in favor of the Amendment.
THIRD: That the Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Max Seybold, its President, this 30th day of March 1998.
DELPHI INFORMATION SYSTEMS, INC.
By: /s/ Max Seybold
-----------------------------------------
Name: Max Seybold
Title: CEO/President
---------------------------------------
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES C PREFERRED STOCK
of
DELPHI INFORMATION SYSTEMS, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Delphi Information Systems, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Corporation"), DOES HEREBY CERTIFY:
That, pursuant to authority vested in the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151 of the General Corporation Law, the Board of Directors of the
Corporation on December 1, 1993 adopted the following resolution providing for
the issuance of a series of Preferred Stock:
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation (hereinafter called the "Board of Directors"
or the "Board") by the Certificate of Incorporation of the Corporation, a
series of Preferred Stock, par value $.10 per share (the "Preferred Stock"),
of the Corporation be, and it hereby is, created, and that the designation
and amount thereof and the powers, designations, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
1. DESIGNATION AND AMOUNT.
The shares of such series shall he designated as "Series C Preferred
Stock" (the "Series C Preferred Stock") and the number of shares constituting
the Series C Preferred Stock shall be 75,000.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any capital
stock of the Corporation ranking senior to the Series C Preferred Stock, the
holders of the Series C Preferred Stock shall be entitled to receive dividends
only when, as, and if declared by the Board of Directors and such dividends
shall be non-cumulative. No dividends (other than those payable solely in the
Common Stock of the Corporation) shall be paid on any Common Stock or Series A
or Series D Preferred Stock of the Corporation during any fiscal year of the
Corporation unless a dividend (including the amount of any dividends paid
pursuant to
<PAGE>
the above provisions of this Section 2) is paid with respect to all
outstanding shares of Series C Preferred Stock in an amount for each such
share of Series C Preferred Stock equal to or greater than the dividends paid
on each share of Series A and Series D Preferred Stock and Common Stock. The
equivalency of dividends on the Series A, Series C and Series D Preferred
Stock shall be determined by dividing the dividends paid on one share of each
series by the number of shares of Common Stock into which such share could
then be converted and comparing the quotients, and the equivalency of
dividends on the Series C Preferred Stock and the Common Stock shall be
determined by dividing the dividends paid on one share of Series C Preferred
Stock by the number of shares of Common Stock into which such share could
then be converted and comparing the quotient with the dividends paid on one
share of Common Stock.
(b) In the event the Corporation shall declare a distribution (other
than any distribution described in Section 3) payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights to purchase any such
securities or evidences of indebtedness, then, in each such case the holders of
the Series C Preferred Stock shall be entitled to a proportionate share of any
such distribution as though the holders of the Series C Preferred Stock were the
holders of the number of shares of Common Stock of the Corporation into which
their respective shares of Series C Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and subject to the prior
preferences and other rights of any capital stock of the Corporation ranking
senior to the Series C Preferred Stock, the holders of the Series C Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, the amount of $100.00 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such shares) plus all declared but unpaid dividends on such share for each
share of Series C Preferred Stock then held by them. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A, B, C and D Preferred Stock shall be insufficient to permit the payment
to such holders of each such series the full preferential amount to which they
are respectively entitled, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A, B, C, and D Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of the Series C Preferred Stock of
the amounts set forth in Section 3(a) above, and subject to the prior
preferences and other rights of any capital stock of the Corporation ranking
senior to the Series C Preferred Stock, the entire remaining assets and funds of
the Corporation legally available for distribution, if any, shall be distributed
among the holders of the Common Stock and the holders of Series A, C and D
Preferred Stock in proportion to the shares of Common Stock then held by them
and
<PAGE>
the shares of Common Stock which they have the right to acquire upon
conversion of the shares of Series A, C and D Preferred Stock then held by
them.
(c) For purposes of this Section 3, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the Corporation, shall be treated
as a liquidation, dissolution or winding up of the Corporation and shall entitle
the holders of Series A, C and D Preferred Stock and Common Stock to receive at
the closing in cash, securities or other property (valued as provided in Section
3(d) below) amounts as specified in Sections 3(a) and 3(b) above.
(d) Whenever the distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
4. VOTING RIGHTS.
(a) Each holder of shares of the Series C Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such shares of Series C Preferred Stock could be converted and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting 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 C Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
5. CONVERSION.
The holders of the Series C Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series C Preferred Stock shall be
convertible, 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 such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $100.00 by the Conversion Price
applicable to such share, determined as hereinafter provided, in effect on the
date the certificate is surrendered for conversion. The price at which shares
of Common Stock shall be deliverable upon conversion of shares of the Series C
Preferred Stock (the "Series C Conversion Price") shall initially be an amount
which is equal to 60% of the average of the closing prices of the Common
Stock in the NASDAQ National Market System, as reported by THE WALL STREET
JOURNAL, for those trading days which occur within a period of 120 calendar days
ending on the date preceding the date
<PAGE>
of the first issuance of Series C Preferred Stock. Such initial Series C
Conversion Price shall be adjusted as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share or Series C Preferred Stock
shall automatically be converted into shares of Common Stock at the
then-effective Series C Conversion Price, upon the earlier of (i) the date
specified by vote or written consent or agreement of holders of at least
two-thirds (2/3) of the shares of such series then outstanding, or (ii) the date
all of the shares of Common Stock into which the Series C Preferred may be
converted are registered with the United States Securities and Exchange
Commission.
(c) MECHANICS OF CONVERSION.
(i) Before any holder of Series C Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that he elects to convert the same and
shall state therein the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series C Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he 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 surrender of the shares of Series C 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 on such date.
(d) ADJUSTMENTS TO SERIES C CONVERSION PRICE FOR CERTAIN DILUTING
ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section 5(d), the
following definitions apply:
(1) "OPTIONS" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities (defined below).
(2) "ORIGINAL ISSUE DATE" shall mean the date on which a
share of Series C Preferred Stock was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than Common Stock and Series A, B, C or D Preferred
Stock) or other securities convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 5(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
<PAGE>
(A) upon conversion of shares of Series A, B, C or D
Preferred Stock;
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to stock option or stock purchase plans
or agreements on terms approved by the Board of Directors;
(C) as a dividend or distribution on Series C
Preferred Stock;
(D) for which adjustment of the Series C Conversion
Price is made pursuant to Section 5(e);
(E) upon exercise of warrants to purchase 250,000
shares of Common Stock issued to The Insurance Company of North America; or
(F) upon exercise of warrants to purchase 75,000
shares of Common Stock issued to Silicon Valley flank.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision herein to
the contrary notwithstanding, no adjustment in the Conversion Price for Series C
Preferred Stock shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share (determined pursuant to Section
5(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be
issued by the Corporation is less than the Series C Conversion Price in effect
on the date of, and immediately prior to, such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the
event the Corporation at any time or from time to time after the original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock 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 or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Series C Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the
<PAGE>
consideration payable to the Corporation, or decrease or increase in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Series C 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 increase
or decrease 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 (provided, however, that no such
adjustment of the Series C Conversion Price shall affect Common Stock
previously issued upon conversion of the Series C Preferred Stock);
(3) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series C 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 such expiration, be recomputed
as if:
(A) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor or was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation upon such exercise,
or for the issue 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
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue 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 of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 5(d)(v)) upon the issue of the Convertible Securities with
respect to which such options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3) above
shall have the effect of increasing the Series C Conversion Price to an amount
which exceeds the lower of (a) the Series C Conversion Price on the original
adjustment date (prior to adjustment), or (b) the Series C Conversion Price that
would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date; and
(5) in the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Series C 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 (3) above.
<PAGE>
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event the Corporation, at any time after the
Original Issue Date, shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
5(d)(iii)) without consideration or for a consideration per share less than the
Series C Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, the Conversion Price for such Series C Preferred
Stock shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) at which such Additional Shares were sold or at which
Additional Shares are issuable.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section C.4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration 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, as
determined in good faith by the Board; 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, the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for additional shares of Common Stock
deemed to have been issued pursuant to Section 5(d)(iii), relating to Options
and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise 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
(B) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
<PAGE>
(e) ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Series C Conversion Price in effect immediately
prior to such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that the
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(f) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of the Series C Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 5(e) above or a merger or other reorganization referred to in Section
3(c) above), the Series C Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted so that the Series C Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series C Preferred Stock immediately before that change.
(g) 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 5 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 C Preferred Stock against impairment.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series C Preferred Stock a certificate executed by the Corporation's
President or Chief Financial Officer setting forth such adjustment or
readjustment and showing in detail the facts upon
<PAGE>
which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of the holder of Series C Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the Series C Conversion
Price in effect, and (iii) 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 the Series C Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus (ii)
to offer for subscription pro rata to the holders of the class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series C Preferred Stock:
(i) at least twenty (20) days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (iii) and (iv) above; and
(ii) in the case of the matters referred to in (iii) and (iv)
above, at least twenty (20) days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
(j) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series C Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer request by any holder in connection
with any such conversion.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including,
<PAGE>
without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate.
(l) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Series C Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series C Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined by
reference to the stock price quoted in THE WALL STREET JOURNAL or as reported on
NASDAQ for the day immediately prior to such conversion).
(m) NOTICES. Any notice required by the provisions of this Section 5
to be given to the holders of shares of Series C Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
6. RESTRICTIONS AND LIMITATIONS.
(a) So long as any shares of Series C Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of at least sixty-six and two-thirds (66-2/3) of the then
outstanding shares of the Series C Preferred Stock, voting as a single class:
(i) Redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose) any share or shares of Series
C Preferred Stock otherwise than by conversion in accordance with Section 5
hereof;
(ii) Redeem, purchase or otherwise acquire (or pay into or set
aside for sinking fund for such purpose) any of the Common Stock; provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary pursuant to agreements
under which the Company has the option to repurchase such shares at cost or at
cost plus interest at a rate not to exceed nine percent (19%) per annum upon the
occurrence of certain events, such as the termination of employment, provided
further, however, that the total amount applied to the repurchase of shares of
Common Stock shall not exceed $100,000 during any twelve (12) month period;
(iii) Authorize or issue, or obligate itself to issue, any
other equity security (including any security convertible into or exercisable
for any equity security) senior to or on a parity with the Series C Preferred
Stock as to voting rights, conversion rights (including antidilution), dividend
rights, redemption rights, or liquidation preferences; provided however, that
this restriction shall not apply to equity securities issued in connection with
the company's acquisition of eighty percent (88%) or more of the shares or
<PAGE>
assets of another corporation and which have been approved by the Company's
Board of Directors.
(iv) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the Corporation or
any of its subsidiaries, or any reclassification or other change of any stock,
or any recapitalization of the Corporation if such action is substantially
prejudicial to the holders of Series C Preferred Stock;
(b) The Corporation shall not amend its Certificate of Incorporation
or Bylaws without the approval, by vote or written consent, by the holders of
66-2/3% of the Series C Preferred Stock if such amendment would change any
of the rights, preferences or privileges provided for herein for the benefit of
any shares of Series C Preferred Stock. Without limiting the generality of the
preceding sentence, the Corporation will not amend its Certificate of
Incorporation or Bylaws without the approval of the holders of 66-2/3% of
the Series C Preferred Stock if such amendment would:
(i) Reduce the dividend rates on the Series C Preferred Stock
provided for herein, or if cumulative, make such dividends noncumulative, or
defer the date from which dividends will accrue, or cancel accrued and unpaid
dividends, or change the relative seniority rights of the holders of the Series
C Preferred Stock as to the payment of dividends in relation to the holders of
any other capital stock of the Corporation;
(ii) Reduce the amount payable to the holders of the Series C
Preferred Stock upon the voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, or change the relative seniority of the
liquidation preferences of the holders of the Series C Preferred Stock to the
rights upon liquidation of the holders of any other capital stock of the
Corporation;
(iii) Make the Series C Preferred Stock redeemable at the
option of the Corporation; or
(iv) Cancel or modify the Conversion Rights of the Series C
Preferred Stock provided for in Section 5 hereof.
7. NO REISSUANCE OF SERIES C PREFERRED STOCK.
No share or shares of Series C Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its President and attested by its Secretary as of this
13th day of December, 1993.
<PAGE>
/s/ David J. Torrence
----------------------------
David J. Torrence
President
Attest:
/s/ Daniel F. Dunne
--------------------------------
Daniel F. Dunne
Secretary
<PAGE>
AMENDED CERTIFICATE OF DESIGNATIONS
of
SERIES D PREFERRED STOCK
of
DELPHI INFORMATION SYSTEMS, INC.
(pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Delphi Information Systems, Inc. a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), DOES HEREBY CERTIFY:
That, no shares of the Corporation's Series D Preferred Stock, par
value $.10 per share (the "Series D Preferred Stock"), have been issued; and
That, pursuant to authority vested in the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to the provisions
of Section 151 of the General Corporation Law, the Board of Directors of the
Corporation on May __, 1994 adopted the following resolution providing for the
Amended Certificate of Designations of Series D Preferred Stock:
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation (hereinafter called the "Board of Directors" or
the "Board") by the Certificate of Incorporation of the Corporation, the
Corporation's Certificate of Designations of Series D Preferred Stock, par value
$.10 per share (the "Series D Preferred Stock"), of the Corporation be, and it
hereby is, amended and restated to read as follows:
1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as Series D
Preferred Stock (the "Series D Preferred Stock") and the number of shares
constituting the Series D Preferred Stock shall be 16,577.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
capital stock of the Corporation ranking senior to the Series D Preferred Stock,
the holders of the Series D Preferred Stock shall be entitled to receive
dividends only when, as, and if declared by the Board of Directors and such
dividends shall be noncumulative. No dividends (other than those payable solely
in the Common Stock of the Corporation) shall be paid on any Common Stock of the
Corporation during any fiscal year of the Corporation unless a
<PAGE>
dividend (including the amount of any dividends paid pursuant to the above
provisions of this Section 2) is paid with respect to all outstanding shares
of Series D Preferred Stock in an amount for each such share of Series D
Preferred Stock equal to or greater than the aggregate amount of such
dividends for all shares of Common Stock into which each such share of Series
D Preferred Stock could then be converted.
(b) In the event the Corporation shall declare a distribution
(other than any distribution described in Section 3) payable in securities of
other persons, evidences of indebtedness issued by the Corporation or other
persons, assets (excluding cash dividends) or options or rights to purchase any
such securities or evidences of Indebtedness, then, in each such case the
holders of the Series D Preferred Stock shall be entitled to a proportionate
share of any such distribution as though the holders of the Series D Preferred
Stock were the holders of the number of shares of Common Stock of the
Corporation into which their respective shares of Series D Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, and subject to the prior
preferences and other rights of any senior class of preferred stock of the
Corporation which the Board of Directors may designate or authorize from time to
time ("Senior Preferred Stock"), if any, (i) the holders of the Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of any junior class of preferred stock which the Board may designate or
authorize from time to time that is to be junior in liquidation to any of the
Series D Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, any Senior Preferred Stock or any Parity Preferred Stock (as defined
below) ("Junior Preferred Stock"), if any, or to holders of Common Stock, by
reason of their ownership thereof, the amount of $226.20 per share (as adjusted
for any stock dividends, combinations or splits with respect to such shares)
plus all declared but unpaid dividends on such share for each share of Series D
Preferred Stock then held by them; (ii) the holders of the Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to holders of Junior
Preferred Stock, if any, or to holders of Common Stock, by reason of their
ownership thereof, the amount of $84.745 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus all declared
but unpaid dividends on such share for each share of Series B Preferred Stock
then held by them; (iii) the holders of the Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to holders of Junior Preferred Stock,
if any, or to holders of Common Stock, by reason of their ownership thereof, the
amount of $100.00 per share (as adjusted for any stock dividends, combinations
or splits with respect to such shares) plus all declared but unpaid dividends on
such share for each share of Series C Preferred Stock then held by them; and
(iv) the holders of any other class or series of preferred stock which the Board
may designate or authorize from time to time that is to rank on parity in
liquidation with the Series D Preferred Stock, the Series B Preferred Stock or
the Series C Preferred Stock ("Parity Preferred Stock"), if
<PAGE>
any, shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to
holders of Junior Preferred Stock, if any, or to holders of Common Stock, by
reason of their ownership thereof, the amount per share specified in the
certificate of designations of such Parity Preferred Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares) plus
all declared but unpaid dividends on such share for each share of Parity
Preferred Stock then held by them. If upon the occurrence of such event and
after distributions to holders of Senior Preferred Stock, if any, in
accordance with the terms set forth in the instrument or instruments
designating or authorizing Senior Preferred Stock, if any, the assets and
funds thus distributed among the holders of the Series B, C and D Preferred
Stock and Parity Preferred Stock, if any, shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series B, C and D
Preferred Stock and Parity Preferred Stock, if any, in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of Series B, C and D Preferred Stock
and Parity Preferred Stock, if any, of the amounts set forth in Section 3(a)
above, holders of Junior Preferred Stock, if any, shall receive such amounts as
they are entitled to receive as set forth in the instrument or instruments
designating such Junior Preferred Stock.
(c) After payment to the holders of Senior Preferred Stock, if any,
and Series B, C and D Preferred Stock and Parity Preferred Stock, if any, and
the holders of Junior Preferred Stock of the amounts set forth in Section 3(a)
and (b) above, the entire remaining assets and funds of the Corporation legally
available for distribution, if any, shall be distributed among the holders of
the Senior Preferred Stock, if any, (if so provided in the instrument or
instruments designating or authorizing such Senior Preferred Stock), the holders
of Series C and D Preferred Stock and Parity Preferred Stock, if any, (if so
provided in the instrument or instruments designating such Parity Preferred
Stock) in proportion to the shares of Common Stock which they have the right to
acquire upon conversion of the shares of Series C and D Preferred Stock and
Parity Preferred Stock, if any, then held by them, holders of Junior Preferred
Stock, if any, (if so provided in the instrument or instruments designating such
Junior Preferred Stock) and the holders of Common Stock in proportion to the
shares of Common Stock then held by such holders.
(d) For purposes of this Section 3, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the Corporation, shall be treated
as a liquidation, dissolution or winding up of the Corporation and shall entitle
holders of Senior Preferred Stock, if any, holders of Series B, C and D
Preferred Stock and Parity Preferred Stock, if any, holders of Junior Preferred
Stock, (if so provided in the instrument or instruments designating such Parity
Preferred Stock) and holders of Common Stock to receive at the closing in cash,
securities or other property (valued as provided in Section 3(e) below) amounts
as specified in Sections 3(a) and 3(b) above.
<PAGE>
(e) Whenever the distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
4. VOTING RIGHTS.
Each holder of shares of the Series D Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such shares of Series D Preferred Stock could be converted and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting 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 D Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
5. CONVERSION.
The holders of the Series D Preferred Stock shall have conversion
rights as follows (the "Conversion Rights");
(a) RIGHT TO CONVERT. Each share of Series D Preferred Stock shall
be convertible, 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 such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $226.20 by the Conversion Price
applicable to such share, determined as hereinafter provided, in effect on the
date the certificate is surrendered for conversion. The price at which shares
of Common Stock shall be deliverable upon conversion of shares of the Series D
Preferred Stock (the "Series D Conversion Price") shall initially be $2.00 per
share of Common Stock. Such initial Series D Conversion Price shall be adjusted
as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series D Preferred stock
shall automatically be converted into shares of Common Stock at the then
effective Series D Conversion Price, upon the earlier of (i) the date specified
by vote or written consent or agreement of holders of at least two-thirds (2/3)
of the shares of such series then outstanding, or (ii) the date all of the
shares of Common Stock into which the Series D Preferred may be converted are
registered with the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(c) MECHANICS OF CONVERSION. Before any holder of Series D Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for such stock, and shall
give written notice to the Corporation at such office that he elects to convert
the same and shall state therein the name
<PAGE>
or names in which he wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series D
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which he 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 surrender of the shares of Series D 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 on such date.
(d) ADJUSTMENTS TO SERIES D CONVERSION PRICE FOR CERTAIN DILUTING
ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this section 5(d), the
following definitions apply:
(1) "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
securities (defined below).
(2) "ORIGINAL ISSUE DATE" shall mean the date on which a
share of Series D Preferred Stock was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than Common Stock and Series D Preferred Stock) or
other securities convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 5(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable;
(A) upon conversion of shares of Series A, B, C or D
Preferred Stock or shares of Senior Preferred Stock, Parity Preferred Stock or
Junior Preferred Stock, if any;
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to stock option or stock purchase plans
or agreements on terms approved by the Board of Directors;
(C) as a dividend or distribution on Series D
Preferred Stock;
(D) for which adjustment of the Series D Conversion
Price is made pursuant to Section 5(e);
<PAGE>
(E) upon exercise of warrants to purchase 250,000
shares of Common Stock issued to The Insurance Company of North America; or
(F) upon exercise of warrants to purchase 75,000
shares of Common Stock issued to Silicon Valley Bank.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision herein to
the contrary notwithstanding, no adjustment in the Conversion Price for Series D
Preferred Stock shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share (determined pursuant to section
5(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be
issued by the Corporation is less than the Conversion Price for such series of
Preferred Stock in effect on the date of, and immediately prior to, such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein designed to protect against dilution) of
Common Stock 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 or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that in
any such case in which Additional Shares of Common Stock are deemed to be
issued:
(1) no further adjustments in the Series D Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number or shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series D 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
increase or decrease 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 (provided, however, that no such
adjustment of the Series D Conversion Price shall affect Common Stock previously
issued upon conversion of the Series D Preferred Stock);
(3) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series D conversion Price computed upon the original issue
thereof (or upon
<PAGE>
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue for 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
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue 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 of such options, whether or not exercised, plus the consideration
deemed to have been received by the Corporation (determined pursuant to Section
5(d)(v) upon the issue of the Convertible Securities with respect to which such
options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3) above shall
have the affect of increasing the Series D Conversion Price to an amount which
exceeds the lower of (a) the Series D Conversion Price on the original
adjustment date (prior to adjustment), or (b) the Series D Conversion Price that
would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
(5) in the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of the Series D
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 (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation, at any time
after the Original Issue Date, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 5(d)(iii)) without consideration or for a consideration per share less
than the Conversion Price with respect to the Series D Preferred Stock in effect
on the date of and immediately prior to such issue, then and in such event, the
Conversion Price for such Series D Preferred Stock shall be reduced,
concurrently with such issuer to a price (calculated to the nearest cent) at
which such Additional Shares were sold or at which Additional Shares are
issuable.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section C.4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
<PAGE>
(1) CASH AND PROPERTY. Such consideration 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, as
determined in good faith by the Board; 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, the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for additional shares of Common Stock
deemed to have been issued pursuant to Section 5(d)(iii), relating to Options
and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise 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
(B) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against the dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
(e) ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR
COMBINATION OR SUBDIVISION OF COMMON STOCK. In the event that this Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Price for the Series D Preferred
Stock in effect immediately prior to such event shall, concurrently with the
<PAGE>
effectiveness of such event, be proportionately decreased or increased, as
appropriate. In the event that this corporation shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock.
(f) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of the Series D Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 5(e) above or a merger or other reorganization referred to in Section
B(c) above), the Series D Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted so that the Series D Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, and number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock, that would have been subject to receipt by the holders upon
conversion of the Series D Preferred Stock immediately before that change.
(g) 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 5 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 D Preferred Stock against impairment.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series D Preferred Stock a certificate executed by the Corporation's
President or Chief Financial Officer 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 the holder of Series D Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for the Series D Preferred Stock at the
time in affect, and (iii) 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 the Series D Preferred Stock.
(i) NOTICES OF RECORD, ETC. In the event that the Corporation
shall propose at any time: (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular
<PAGE>
cash dividend and whether or not out of earnings or earned surplus (ii) to
offer for subscription pro rata to the holders of the class or series of its
stock any additional shares of stock or any class or series or other rights
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all
or substantially all of its assets, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Series D Preferred Stock;
(1) at least twenty (20) days prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and
(iv) above, at least twenty (20) days prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
(j) ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series A Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer request by any holder in
connection with any such conversion.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of affecting the
conversion of the shares of the Series D Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series D Preferred Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series D Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to this
certificate.
(l) FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Series D Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Series D Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
<PAGE>
market value of such fraction on the date of conversion (as determined by
reference to the stock price quoted in THE WALL STREET JOURNAL or as reported on
NASDAQ for the day immediately prior to such conversion).
(m) NOTICES. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of Series D Preferred Stock shall
be deemed given it deposited, in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
6. RESTRICTIONS AND LIMITATIONS.
(a) So long as any shares of Series D Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of at least sixty-six and two-thirds (66-2/3) of the then
outstanding shares of the Series D Preferred Stock, voting as a single class:
(i) Redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any share or shares of
Series D Preferred Stock otherwise than by conversion in accordance with
Section 5 hereof;
(ii) Redeem, purchase or otherwise acquire (or pay into or
set aside for sinking fund for such purpose) any of the Common Stock;
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock from employees, officers, directors, consultants or
other persons performing services for the Corporation or any subsidiary
pursuant to agreements under which the Corporation has the option to
repurchase such shares at cost or at cost plus interest at a rate not to
exceed nine percent (9%) per annum upon the occurrence of certain events,
such as the termination of employment, provided further, however, that the
total amount applied to the repurchase of shares of Common Stock shall not
exceed $100,000 during any twelve (12) month period;
(iii) Authorize or issue, or obligate itself to issue, any
other equity security (including any security convertible into or exercisable
for any equity security) senior to or on a parity with the Series D Preferred
Stock (including any Senior Preferred Stock or Parity Preferred Stock) as to
voting rights, conversion rights (including antidilution), dividend rights,
redemption rights, or liquidation preferences; provided however, that this
restriction shall not apply to equity securities issued in connection with
the Corporation's acquisition of eighty percent (80%) or more of the shares
or assets of another corporation and which have been approved by the
Corporation's Board of Directors; or
(iv) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or
any of its subsidiaries, or any consolidation or merger involving the
Corporation or any of its subsidiaries, or any reclassification or other
change of any stock, or any recapitalization of the Corporation if such
action is substantially prejudicial to the holders of Series D Preferred
Stock.
<PAGE>
(b) The Corporation shall not amend its Certificate of Incorporation
or Bylaws without the approval, by vote or written consent, by the holders of
66-2/3 of the Series D Preferred Stock if such amendment would change any of the
rights, preferences or privileges provided for herein for the benefit of any
shares of Series D Preferred Stock. Without limiting the generality of the
preceding sentence, the Corporation will not amend its Certificate of
Incorporation or Bylaws without the approval of the holders of 66-2/3 of the
Series D Preferred Stock if such amendment would;
(i) Reduce the dividend rates on the Series D Preferred
Stock provided for herein, or if cumulative, make such dividends
noncumulative, or defer the date from which dividends will accrue, or cancel
accrued and unpaid dividends, or change the relative seniority rights of the
holders of the Series D Preferred Stock as to the payment of dividends in
relation to the holders of any other capital stock of the Corporation;
(ii) Reduce the amount payable to the holders of the Series D
Preferred Stock upon the voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, or change the relative seniority of the
liquidation preferences of the holders of the Series D Preferred Stock to the
rights upon liquidation of the holders of any other capital stock of the
Corporation;
(iii) Make the Series A Preferred Stock redeemable at the
option of the Corporation; or
(iv) Cancel or modify the Conversion Rights of the Series D
Preferred Stock provided for in Section 3 hereof.
7. NO REISSUANCE OF SERIES D PREFERRED STOCK.
No share or shares of Series D Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares will be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue.
IN WITNESS WHEREOF, this Amended Certificate of Designation is executed on
behalf of the Corporation by its President and attested by its Secretary as of
this 20th day of May, 1994.
/s/ David J. Torrence
----------------------------------
David J. Torrence
President
Attest:
<PAGE>
/s/ Daniel F. Dunne
-------------------------------------
Daniel F. Dunne
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
DELPHI INFORMATION SYSTEMS, 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, at a meeting of the board of directors of DELPHI INFORMATION
SYSTEMS, INC., resolutions were duly adopted setting forth a proposed amendment
to the certificate of incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
Resolved, that Article IV of the Certificate of Incorporation of this
corporation be amended in its entirety to read as follows:
The Corporation is authorized to issue two classes
of stock designated "Preferred Stock" and "Common
Stock" respectively. The total number of shares of
Preferred Stock authorized to be issued is two million
(2,000,000) and each such share shall have a par value
of ten cents ($.10). The total number of shares of
Common Stock authorized to be issued is fifty million
(50,000,000) and each such share shall have a par value
of ten cents ($.10).
The shares of Preferred Stock may be issued
from time to time in one or more series. The Board of
Directors is hereby authorized, by filing a certificate
pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the
shares of each such series and the qualifications,
limitations or restrictions thereof, including but not
limited to the fixing or alteration of the dividend
rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly
unissued series of shares of Preferred Stock, or any of
them; and to increase or decrease the number of shares
of any series subsequent to the issue of the shares of
that series, but not below the number of shares of such
series then outstanding. In case the number of shares
of any series shall be so decreased, the shares
constituting such decrease shall
<PAGE>
resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of
such series.
Second: That thereafter, pursuant to resolution of its board of directors,
a special meeting of the stockholders of said corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Fourth: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
In witness whereof, said corporation has caused this certificate to be
signed by M. Denis Connaghan, its President and Chief Executive Officer, and
John R. Sprieser, its Senior Vice President-Finance and Secretary, this 17th day
of March 1995.
DELPHI INFORMATION SYSTEMS, INC.
By: /s/ M. Denis Connaghan
----------------------------------------
M. Denis Connaghan
President and Chief
Executive Officer
ATTEST:
By: /s/ John R. Sprieser
- --------------------------------------
John R. Sprieser
Senior Vice President-Finance
and Secretary
<PAGE>
CERTIFICATE OF
OWNERSHIP AND MERGER
MERGING
COMPUSULT, INC.
CONTINENTAL SYSTEMS, INC.
DELPHI ACQUISITION CORPORATION
INSURNET, INCORPORATED
MS INTERNATIONAL ACQUISITION CORPORATION
REDSHAW, INC.
AND
SPECIALTY PROGRAM SERVICES, INC.
INTO
DELPHI INFORMATION SYSTEMS, INC.
Pursuant to Section 253 of the Delaware General Corporation Law, Delphi
Information Systems, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Corporation was incorporated on August 22, 1983, pursuant
to the laws of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of the
stock of Compusult, Inc., a corporation incorporated on October 26, 1989,
pursuant to the laws of the State of Arizona; Continental Systems, Inc., a
corporation incorporated on October 22,1980, pursuant to the laws of the State
of Michigan; Delphi Acquisition Corporation, a corporation incorporated on July
30, 1985, pursuant to the laws of the State of California; Insurnet,
Incorporated, a corporation incorporated on October 1, 1980, pursuant to the
laws of the State of Delaware; MS International Acquisition Corporation, a
corporation incorporated on November 15, 1993, pursuant to the laws of the State
of Delaware; Redshaw, Inc., a corporation incorporated on November 12, 1963,
pursuant to the laws of the Commonwealth of Pennsylvania; and Specialty Program
Services, Inc., a corporation incorporated on October 4, 1984, pursuant to the
laws of the State of Michigan (collectively, the "Subsidiaries").
THIRD: That, pursuant to the following resolution, which was duly adopted
by the Board of Directors of the Corporation in accordance with the By-laws of
the Corporation and the laws of the State of Delaware on June 12, 1995, the
Corporation determined to merge into itself, and did so merge into itself, the
Subsidiaries:
BE IT HEREBY RESOLVED by the Board of Directors of Delphi
Information Systems, Inc., a Delaware corporation (the
<PAGE>
'Corporation'), that Compusult, Inc., an Arizona
corporation; Continental Systems, Inc., a Michigan
corporation; Delphi Acquisition Corporation, a California
corporation; Insurnet, Incorporated, a Delaware corporation;
MS International Acquisition Corporation, a Delaware
corporation; Redshaw, Inc., a Pennsylvania corporation; and
Specialty Program Services, Inc., a Michigan corporation, be
merged with and into the Corporation pursuant to the
following Plan of Merger, which is hereby adopted by the
Board of Directors of the Corporation:
'1. This Plan of Merger provides for the merger (the
Merger) of the following wholly- owned subsidiaries (the
Subsidiaries) of Delphi Information Systems, Inc., a
Delaware corporation (the Corporation), with and into the
Corporation, which shall be the surviving corporation of the
Merger:
Compusult, Inc., an Arizona corporation Continental
Systems, Inc., a Michigan corporation Delphi Acquisition
Corporation, a California corporation Insurnet,
Incorporated, a Delaware corporation MS International
Acquisition Corporation, a Delaware corporation Redshaw,
Inc., a Pennsylvania corporation Specialty Program
Services, Inc., a Michigan corporation
2. The outstanding capital stock of each of the
Subsidiaries is as follows:
COMPUSULT, INC. The outstanding capital stock of Compusult,
Inc. consists of 3,000 shares of common stock, all of which
are owned by the Corporation.
CONTINENTAL SYSTEMS, INC. The outstanding capital stock of
Continental Systems, Inc. consists of 250 shares of common
stock, all of which are owned by the Corporation.
DELPHI ACQUISITION CORPORATION. The outstanding capital
stock of Delphi Acquisition Corporation consists of 1,000
shares of common stock, all of which are owned by the
Corporation.
INSURNET, INCORPORATED. The outstanding capital stock of
Insurnet, Incorporated consists of 8,000 shares of common
stock and 8,000 shares of preferred stock, all of which are
owned by the Corporation.
<PAGE>
MS INTERNATIONAL ACQUISITION CORPORATION. The outstanding
capital stock of MS International Acquisition Corporation
consists of 1,000 shares of common stock, all of which are
owned by the Corporation.
REDSHAW, INC. The outstanding capital stock of Redshaw,
Inc. consists of 1,000 shares of common stock, all of which
are owned by the Corporation.
SPECIALTY PROGRAM SERVICES, INC. The outstanding capital
stock of Specialty Program Services, Inc. consists of 1,000
shares of common stock, all of which are owned by the
Corporation.
3. Pursuant to the Merger, all of the outstanding
shares of capital stock and other securities of each of the
Subsidiaries, all of which are owned by the Corporation,
shall be extinguished and each of the Subsidiaries shall
cease to exist.
4. The Certificate of Incorporation and By-laws of
the Corporation (as in effect immediately prior to the date
specified in paragraph 6 hereof), and the directors and
officers of the Corporation immediately prior to the date
specified in paragraph 6 hereof, shall be unchanged by the
Merger.
5. This Plan of Merger may be amended or abandoned by
the Board of Directors of the Corporation at any time prior
to the filing of Articles of Merger with the Corporation
Commission of the State of Arizona, a Certificate of
Ownership and Merger with the Secretary of State of the
State of California, a Certificate of Ownership and Merger
with the Secretary of State of the State of Delaware, a
Certificate of Merger with the Department of Commerce of the
State of Michigan, or Articles of Merger with the Department
of State of the Commonwealth of Pennsylvania.
6. The Merger shall become effective on June 30,
1995.'
FOURTH: The Merger shall become effective on the date specified in
paragraph 6 of the Plan of Merger set forth above.
FIFTH: Anything herein or elsewhere to the contrary notwithstanding, the
Plan of Merger may be amended or terminated and abandoned by the Board of
Directors of the Corporation at any time prior to the date of filing of this
Certificate of Ownership and Merger with the Secretary of State.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Ownership and Merger to be signed by M. Denis Connaghan, its President and Chief
Executive Officer, and attested by John R. Sprieser, its Secretary, this 12th
day of June 1995.
DELPHI INFORMATION SYSTEMS, INC.
By: /s/ M. Denis Connaghan
--------------------------------------------
M. Denis Connaghan
President and Chief Executive
Officer
ATTEST:
By: /s/ John R. Sprieser
- ---------------------------------------
John R. Sprieser
Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES E PREFERRED STOCK
of
DELPHI INFORMATION SYSTEMS, INC
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Delphi Information Systems, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter
called the "Corporation"),
DOES HEREBY CERTIFY: That, pursuant to authority vested in the Board of
Directors of the Corporation by its Certificate of Incorporation, and
pursuant to the provisions of Section 151 of the General Corporation Law, the
Board of Directors of the Corporation on December 29, 1993 adopted the
following resolution providing for the issuance of a series of preferred
Stock:
RESOLVED, that pursuant to the authority expressly
vested in the Board of Directors of the Corporation
(hereinafter called the "Board of Directors" or the "Board")
by the Certificate of Incorporation of the Corporation, a
series of Preferred Stock, par value $.10 per share (the
"Preferred Stock"), of the Corporation be, and it hereby is,
created, and that the designation and amount thereof and the
powers, designations, preferences and relative,
participating, optional and other special rights of the
shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series E Preferred Stock"
(the "Series E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be 67,851. The Series E Preferred Stock shall be
junior to the Corporation's Series A Preferred Stock (the "Series A Preferred
Stock"), the Corporation's Series B Preferred Stock (the "Series B Preferred
Stock"), the Corporation's Series C Preferred Stock (the "Series C Preferred
Stock") and the Corporation's Series D Preferred Stock (the "Series D Preferred
Stock") in all respects.
<PAGE>
2. DIVIDENDS.
(a) In the event of the exercise of the Conversion Rights (as defined in
Section 5 below), or any liquidation, dissolution or winding up of the
Corporation (within the meaning of Section 3 below), or redemption of the
Series E Preferred Stock pursuant to Section 6 (each a "Dividend Event"),
subject to the prior preferences and other rights of any capital stock of the
Corporation ranking senior to the Series E Preferred Stock with respect to
dividends, the holders of the Series E Preferred Stock shall he entitled to
receive an annual dividend, in an amount per share (as adjusted
proportionately for stock dividends, stock splits, combinations and similar
corporate events) equal to $5.085 (the "Annual Dividend Amount'), on a
cumulative basis for the period from the original issuance of the Series E
Preferred Stock to the Dividend Event (pro rated for any partial year),
payable in shares of Common Stock, par value $.10 (the "Common Stock") of the
Corporation.
Such dividends on the Series E Preferred Stock shall be cumulative and
shall rank prior to the Common Stock and any other shares of the capital stock
of the Corporation that are junior to the Series E Preferred Stock so that if
such dividends in respect of any previous or current annual dividend period
shall not have been paid or declared and a sum sufficient for the payment
thereof set apart, the deficiency shall first be fully paid before any dividend
or other distribution shall be paid or declared and set apart for the Common
Stock. The number of shares of Common Stock payable shall be determined by
dividing the aggregate accrued but unpaid Annual Dividend Amounts by the average
of the daily closing price per share of Common Stock, as reported on the NASDAQ
National Market system, for the 30 trading days immediately prior to the
Dividend Event and then multiplying that quotient by the number of shares of
Series E Preferred Stock outstanding as of the date of the Dividend Event. If
the total number of shares of Common Stock payable as a dividend to any holder
of Series E Preferred Stock shall include a fraction, such number shall be
rounded downward to the nearest whole share and the fraction shall be settled in
cash. In the event that a dividend is paid at any time on the Common Stock, a
like dividend shall be accrued on the shares of Common Stock that, upon the
occurrence of a Dividend Event, shall be or become payable as a dividend
pursuant to this Section 2(a), which amount shall be paid when such Common Stock
is or becomes payable as a dividend.
(b) No dividends (other than those payable solely in the Common Stock
of the Corporation) shall be paid on any Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
any other capital stock of the Corporation during any fiscal year of the
Corporation unless a dividend (including the amount of any dividends paid
currently pursuant to the provisions of Section 2(a)) is paid with respect to
all outstanding shares of Series E Preferred Stock in an amount for each such
share of Series E Preferred Stock equal to or greater than the aggregate amount
of such dividends for all shares of Common Stock into which each such share of
Series E Preferred Stock could then be converted (or, if such payment date is
prior to June 30, 1996 for all shares of Common Stock into which each share of
Series E Preferred Stock would be convertible on such later date).
<PAGE>
(c) In the event the Corporation shall declare a distribution (other
than any distribution described in Section 3) payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights to purchase any such
securities or evidences of indebtedness, then, in each such case the holders of
the Series E Preferred Stock shall be entitled to a proportionate share of any
such distribution as though the holders of the Series E Preferred Stock were the
holders of the number of shares of Common Stock of the Corporation into which
their respective shares of Series E Preferred Stock are convertible (inclusive
of Common Stock payable as a dividend) as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution (or, if such record date is prior to June 30, 1996,
for all shares of Common Stock into which each share of Series E Preferred Stock
would be convertible on such later date).
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, and subject to the prior
preferences and other rights of any capital stock of the Corporation ranking
senior to the Series E Preferred Stock, the holders of the Series E Preferred
Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or funds of the Corporation to the holders
of the Common Stock or any other Series or class of stock which is junior to
the Series E Preferred Stock by reason of their ownership thereof, the amount
of $84.745 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares), plus (i) the Annual Dividend Amounts
then accrued (payable in shares of Common Stock pursuant to Section 2(a)
hereof), and (ii) any other declared but unpaid dividends on such shares for
each share of Series E Preferred Stock then held by them. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock shall be insufficient to permit the payment to such holders
of Series A Preferred Stock, the Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock of the preferential amount due to them and
to such holders of Series E Preferred Stock of the full aforesaid
preferential amount due to them, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled
to receive; after payment to the holders of the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock of the preferential amount due to them, then the entire
remaining assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series E
Preferred Stock.
(b) After payment to the holders of the Series E Preferred Stock
of the amounts set forth in Section 3(a) above, and subject to the prior
preferences and other rights of any capital stock of the Corporation ranking
senior to the Series E Preferred Stock, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall he
distributed among the holders of (i) the Common Stock, (ii)
<PAGE>
any other Series or class of stock which is junior to the Series E Preferred
Stock, and (iii) the Series A Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock in accordance with the respective terms and
provisions thereof.
(c) For purposes of this Section 3, (i) any acquisition of
the Corporation by means of merger or consolidation with or into another
corporation or other form of corporate reorganization in which outstanding
shares of the Corporation are exchanged for cash, securities or other
consideration issued, or caused to be issued, by the acquiring corporation or
its parent or subsidiary and (ii) any sale of all or substantially all of the
assets of the Corporation, shall, at the option of the holders of the Series E
Preferred Stock, be treated as a liquidation, dissolution or winding up of the
Corporation and each holder of Series E Preferred Stock shall have the right to
exercise the Conversion Rights prior to any such event as provided in Section
5(a);
(d) Whenever the distribution provided for in this Section 3 shall
be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other
property as determined in good faith by the Board of Directors.
4. VOTING RIGHTS: RESTRICTIONS AND LIMITATIONS.
(a) The holders of Series E Preferred Stock shall have no voting
rights, except for those matters on which a vote of the holders of Series E
Preferred Stock is required by law and except as set out below.
(b) Without limiting the rights of the holders of Series E Preferred
Stock to vote as a class, as required by law, the Corporation shall not, without
first obtaining the approval of holders of greater than sixty-six and two-thirds
percent (66 2/3%) of such shares of Series E Preferred Stock outstanding:
(i) amend or repeal any provision of, add any provision to, or take
any corporation action otherwise altering the Corporation's Certificate of
Incorporation or Bylaws which would alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the
benefit of, the holders of Series E Preferred Stock so as to affect such
holders adversely;
(ii) reclassify any Common Stock or any other Series or class of
stock which is junior to the Series E Preferred Stock into shares having
any preference or priority as to dividends or assets superior to or on a
parity with the Series E Preferred Stock;
(iii) apply any of its assets to the redemption, retirement, purchase
or other acquisition directly or indirectly, through subsidiaries or
otherwise, of any shares of Common Stock or any other Series or class of
stock which is junior to the Series E Preferred Stock, except upon
conversion of any convertible security in accordance with its terms or
repurchases from employees of the Corporation upon termination of
employment or pursuant to the Corporation's rights of first refusal; or
<PAGE>
(iv) increase the number of shares of Series E Preferred Stock beyond
those authorized by this Certificate of Designations or issue any shares of
Series E Preferred Stock to any person other than pursuant to the Agreement
for Purchase and Sale of Stock dated as of December 30, 1993 among the
Corporation, The Continental Corporation, Pacific Insurance Company and
Instrument, Incorporated (a copy of which is on file at the offices of the
Corporation); or
(v) issue any shares of any capital stock having any preference or
priority as to dividends or assets superior to or on a parity with the
Series E Preferred Stock (other than the issuance of up to 16,577 shares of
Series D Preferred Stock in exchange, on a share for share basis, for the
outstanding Series A Preferred Stock, which shares of Series A Preferred
Stock will then be canceled, retired and eliminated from the shares which
the Corporation shall be authorized to issue and other than up to 75,000
shares of Series C Preferred Stock) or amend the existing terms of any
outstanding preferred stock so as to add any terms having such a preference
or priority.
5. CONVERSION.
The holders of the Series E Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series E Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after June 30,
1996, or at any time upon any liquidation, dissolution or winding up of the
Corporation within the meaning of Section 3 above, or upon the occurrence of any
of the events specified in Section 3(c) above, at the office of the Corporation
or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (L) $84.745,
plus (1) an amount equal to the Annual Dividend Amounts then accrued and unpaid
thereon which are payable in shares of Common Stock pursuant to Section 2(a)
hereof, and (2) any other declared but unpaid dividends on such shares by (M)
the Series E Conversion Price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered for
conversion pursuant to this Section 5(a) or automatically converted pursuant to
Section 5(b), as the case may be.The price at which shares of Common Stock shall
be deliverable upon conversion of shares of the Series E Preferred Stock (the
"Series E Conversion Price") shall be based upon the average of the daily
closing price per share, as reported on the NASDAQ National Market System, for
the thirty (30) trading days immediately prior to the date the certificate is
surrendered for conversion; PROVIDED, HOWEVER, the maximum number of shares of
Common Stock into which each share of Series E Preferred Stock may be converted
at any time (the "Maximum Conversion Rate") is (P) $84.745 plus (1) an amount
equal to the Annual Dividend Amounts then accrued and unpaid thereon which are
payable in shares of Common Stock pursuant to Section 2(a) hereof, and (2) any
other declared but unpaid dividends on such shares divided by (Q) the Maximum
Conversion Rate Trigger Price, determined as hereinafter provided, on the date
the certificate is surrendered for conversion pursuant to this Section 5(a) or
automatically converted pursuant to Section 5(b), as the case may be; FURTHER
PROVIDED, that the
<PAGE>
minimum number of shares of Common Stock into which each share of Series E
Preferred Stock may be converted at any time (the "Minimum Conversion Rate")
is (s) $84.745 plus (1) an amount equal to the Annual Dividend Amounts then
accrued and unpaid thereon which are payable in shares of Common Stock
pursuant to Section 2(a) hereof, and (2) any other declared but unpaid
dividends on such shares divided by (r) the Minimum Conversion Rate Trigger
Price, as determined as hereinafter provided, on the date the certificate is
surrendered for conversion pursuant to this Section 5(a) or automatically
converted pursuant to Section 5(b), as the case may be. The "Maximum
Conversion Rate Trigger Price," as used herein, shall initially be $4.00, and
shall be subject to adjustment as hereinafter provided. The "Minimum
Conversion Rate Trigger Price," as used herein, shall initially be $8.00, and
shall be subject to adjustment as hereinafter provided.
(b) AUTOMATIC CONVERSION.Each share of Series E Preferred Stock, if
not theretofore converted, shall automatically be converted on December 30, 1998
(the "Automatic Conversion Date") into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (X) $84.745
plus (1) an amount equal to the Annual Dividend Amounts then accrued and unpaid
thereon which are payable in shares of Common Stock pursuant to Section 2(a)
hereof, and (2) any other declared but unpaid dividends on such shares by (Y)
the average of the daily closing price per share, as reported on the NASDAQ
National Market System, for the thirty (30) trading days immediately prior to
the Automatic Conversion Date, but not in excess of the Maximum Conversion Rate
and not below the Minimum Conversion Rate.
(c) MECHANICS OF CONVERSION. In the case of any conversion pursuant
to Section 5(a) hereof, before any holder of Series E Preferred Stock shall he
entitled to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that he elects to convert the same and
shall state therein the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. In the case of a
conversion Pursuant to Section 5(b) hereof, the certificate for the shares of
Common Stock to be issued shall be registered in the name of the holder or in
such other name or names as the holder otherwise notifies the Corporation.The
Corporation shall, as soon as practicable after any conversion, issue and
deliver at such office to such holder of Series E Preferred Stock, a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and in payment of any dividends payable in Common Stock,
together with any other dividends to which such holder shall be entitled.Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series E Preferred Stock to
be converted, in the case of a conversion pursuant to Section 5(a) hereof, and
on the Automatic Conversion Date, in the case of a conversion pursuant to
Section 5(b) hereof, and the person or persons entitled to receive the shares of
Common Stock issuable upon any such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(d) ADJUSTMENTS TO TRIGGER PRICES FOR STOCK DIVIDENDS: COMBINATIONS
OR SUBDIVISIONS OR COMMON STOCK. In the event that the Corporation at any time
or from time to time after the date on which the Series E Preferred
<PAGE>
Stock is first issued shall declare or pay any dividend on the Common Stock
(or on any other series or class of stock which is junior to the Series E
Preferred Stock) payable in Common Stock or in any right to acquire Common
Stock for no consideration, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock (by
stock split, reclassification or otherwise than by payment of a dividend in
Common Stock or in any right to acquire Common Stock), or in the event the
outstanding shares of Common Stock shalt be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, then the Series E Conversion Price, the Maximum Conversion Rate
Trigger Price and the Minimum Conversion Rate Trigger Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.In the
event that the Corporation shall declare or pay any dividend on the Common
Stock (or on any other series or class of stock which is junior to the Series
E Preferred Stock) payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a dividend
payable in Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common Stock.
In the event the Corporation makes any adjustment to the number of
shares issuable upon conversion of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock
and is not otherwise required by the preceding terms of this Section 5(d) to
make corresponding adjustments to the Series E Conversion Price, the Maximum
Conversion Rate Trigger Price and the Minimum Conversion Rate Trigger Price,
then the Series E Conversion Price, the Maximum Conversion Rate Trigger Price
and the Minimum Conversion Rate Trigger Price in effect immediately prior to
such adjustment shall, concurrently with the effectiveness of such
adjustment, be proportionately decreased or increased, as appropriate;
provided. however that no such adjustment pursuant to the terms of this
sentence shall reduce the Maximum Conversion Rate Trigger Price to an amount
less than $3.50 and provided further that no such adjustment shall be
required as a result of the issuance of the shares of Series C Preferred
Stock and Series D Preferred Stock permitted by Section 4(b)(v).
(e) 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 5 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.
(f) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series E Conversion Price, the Trigger Price
(and Maximum Conversion Rate and Minimum Conversion Rate) pursuant to this
Section 5, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series E Preferred Stock a certificate executed by the
Corporation's President or Chief Financial Officer setting forth such adjustment
or readjustment and showing in detail the facts upon
<PAGE>
which such adjustment or readjustment is based.The Corporation shall, upon
the written request at any time of a holder of Series E Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the Series E Conversion
Price, the Maximum Conversion Rate Trigger Price, the Minimum Conversion Rate
Trigger Price and Maximum Conversion Rate and Minimum Conversion Rate for the
Series E Preferred Stock at the time in effect, and (iii) 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 the Series E Preferred Stock.
6. REDEMPTION
(a) All, or any part, of the Series E Preferred Stock may be redeemed
at any time after the day on which such shares are first issued, by payment in
cash of $84.745 per share plus (1) an amount equal to the Annual Dividend
Amounts then accrued and unpaid thereon and (2) any other declared but unpaid
dividends on such shares.
(b) The Corporation shall, not less than 30 nor more than 60 days
prior to the date for the redemption of the Series E Preferred Stock (the
"Redemption Date"), give written notice (the "Redemption Notice") to each holder
of record of Series E Preferred Stock. The Redemption Notice shall state:
(i) The total number of shares of Series E Preferred Stock being
redeemed;
(ii) The number of shares of Series E Preferred Stock held by the
holder which the Corporation intends to redeem;
(iii) The Redemption Date and the amount payable pursuant to Section
6(a) (the "Applicable Redemption Price"); and
(iv) The time and manner in, and place at which, the holder is to
surrender to the Corporation its certificate or certificates representing
the shares of Series E Preferred Stock to be redeemed.
(c) On or before the Redemption Date, each holder of Series E
Preferred Stock to he redeemed, unless the holder has exercised its right to
convert the shares to be redeemed as provided in Section 5 prior to the giving
of the Redemption Notice, shall surrender the certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Applicable Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired.
(d) If the Redemption Notice is duly given, and if on the Redemption
Date the Applicable Redemption Price is paid or made available for payment,
then, notwithstanding that the certificates evidencing any of the shares of
Series E Preferred Stock have not been surrendered, the dividends with respect
to such shares shall cease to accrue
<PAGE>
after the Redemption Date and all rights with respect to such shares shall
forthwith after the Redemption Date cease and terminate, except only for the
right of the holders to receive the Applicable Redemption Price without
interest upon surrender of their certificates therefor as aforesaid.
(e) If less than all outstanding shares of Series E Preferred Stock
are to be redeemed, the number or shares redeemed from each holder shall be pro
rated based on the number of shares held by such holder and the number of shares
then outstanding.
7. MISCELLANEOUS.
(a) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series E Preferred Stock or on payment of any
dividend payable in shares of Common Stock pursuant hereto; provided, however,
that the Corporation shall not be obligated to pay any transfer taxes resulting
from any transfer request by any holder in connection with any conversion or
income taxes or taxes measured by income of a holder of Series E Preferred
Stock.
(b) RESERVATION OF STOCK. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares of the Series E
Preferred Stock and to pay any dividend payable in shares of Common Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series E Preferred Stock
and to pay any dividend payable in shares of Common Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
E Preferred Stock and to pay any dividend payable in shares of Common Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate.
(c) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Series E Preferred Stock or payment of any
dividend payable in shares of Common Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series E Preferred Stock by a holder thereof or payable as a dividend to a
holder of more than one share of Series E Preferred Stock shall be aggregated
for purposes of determining whether the conversion or payment would result in
the issuance of any fractional share.If, after the aforementioned aggregation,
the conversion or payment would result in the issuance of a fraction of a share
of Common Stock, the Corporation shall, in lieu of issuing any fractional share,
pay the holder otherwise entitled to such fraction a sum in cash equal to the
fair market value of such fraction on the date of conversion or payment (as
determined by reference to the average of
<PAGE>
the high and low stock price quoted in THE WALL STREET JOURNAL or as reported
on NASDAQ for the day immediately prior to such conversion or payment).
(d) PARTIAL CONVERSION OR REDEMPTION.In the event some but not all of
a holder's shares represented by any certificate for Series E Preferred Stock
are converted or redeemed, the Corporation shall execute and deliver to such
holder a certificate or certificates registered in such holder's name or such
name or names as such holder directs, for the number of shares of Series E
Preferred Stock which was not converted or redeemed.
(e) NOTICES.Any notice required by the provisions of this Certificate
of Designations to be given to the holders of shares of Series E Preferred Stock
shall be deemed given if deposited in the United States Certified first class or
express mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Corporation.
(f) NOTICES OF RECORD DATE.In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series E Preferred Stock:
(1) at least twenty (20) days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to
vote, if any, in respect of the matters referred to in (iii) and (iv)
above; and
(2) in the case of the matters referred to in (iii) and (iv)
above, at least twenty (20) days' prior written notice of the date
when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon the occurrence
of such event).
8. NO REISSUANCE OF PREFERRED STOCK.
No share or shares of Series E Preferred Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its President and attested by its Secretary as of July 24,
1995.
/s/ M. Denis Connaghan
------------------------------------
President
Attest:
/s/ John R. Sprieser
- -------------------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
DELPHI INFORMATION SYSTEMS, 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, at a meeting of the board of directors of DELPHI INFORMATION
SYSTEMS, INC., resolutions were duly adopted setting forth a proposed amendment
to the certificate of incorporation of said corporation and declaring said
amendment to be advisable, subject to approval by the stockholders of said
corporation at the 1996 annual meeting thereof. The resolution setting forth the
proposed amendment is as follows:
Resolved, that the first paragraph of Article IV of the Certificate of
Incorporation of this corporation be amended to read in its entirety as follows:
The Corporation is authorized to issue two classes of stock designated
"Preferred Stock" and "Common Stock," respectively. The total number of shares
of Preferred Stock authorized to be issued is two million (2,000,000) and each
such share shall have a par value of ten cents ($.10). The total number of
shares of Common Stock authorized to be issued is seventy-five million
(75,000,000) and each such share shall have a par value of ten cents ($.10).
Second: That thereafter, pursuant to resolution of its board of directors,
the 1996 annual meeting of the stockholders of said corporation was duly called
and held upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of said amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Fourth: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
<PAGE>
In witness whereof, said corporation has caused this certificate to be
signed by Joseph Oddo, the Chairman of the Executive Committee of its Board of
Directors, and James A. Harsch, its Senior Vice President-Finance and Secretary,
this 5th day of December 1996.
DELPHI INFORMATION SYSTEMS, INC.
By: /s/ Joseph Oddo
------------------------------------
Joseph Oddo
Chairman of Executive
Committee of Board of Directors
ATTEST:
By: /s/ James A. Harsch
--------------------------------------
James A. Harsch
Senior Vice President-Finance
and Secretary
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