**Exhibit 3.4**

 

CERTIFICATE OF DESIGNATIONS, PREFERENCESAND RIGHTS OF A SERIES OFPREFERRED STOCKOFSEGUE SOFTWARE, INC.

 

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Segue Software, Inc., a corporation organized and existing under thelaws of the State of Delaware (the “Corporation”), does hereby certify that,pursuant to authority conferred upon the Board of Directors of the Corporationby the Restated Certificate of Incorporation of the Corporation (the“Certificate of Incorporation”), and pursuant to the provisions ofSection 151 of the Delaware General Corporation Law, as amended from timeto time, said Board of Directors duly adopted a resolution providing for thedesignations, preferences and relative, participating, optional or otherrights, and the qualifications, limitations or restrictions thereof, of aseries of preferred stock, which resolution is as follows:

 

RESOLVED, that pursuant to the authority vested in the Board ofDirectors of the Corporation in accordance with the provisions of theCertificate of Incorporation, a series of preferred stock of the Corporationknown as the Series C****PreferredStock be, and such series hereby is, created, classified, and authorized, andthe issuance thereof is provided for, and that the designation and number ofshares, and relative rights, preferences and limitations thereof, shall be asset forth in the form appended hereto as Exhibit A.

 

I, Joseph K. Krivickas, President and Chief Executive Officer of theCorporation, do make this Certificate, hereby declaring and certifying thatthis is my act and deed on behalf of the Corporation this 21st dayof October, 2003.

 

 
|   | By:    | /s/ Joseph K. Krivickas               |
|--------|--------|---------------------------------------|
|   |   | Joseph  K. Krivickas                  |
|   |   | President and Chief Executive Officer |

 

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EXHIBIT A

 

### 1.                                       Designation.  A total of 1,500,000 shares of theCorporation’s Preferred Stock shall be designated as a series known as Series CPreferred Stock, par value $0.01 per share (the “Series C Preferred Stock”).

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### 2.                                       Voting.

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(a)                                  Electionof Directors.  Except as otherwiseprovided in Section 2(a) of the certificate of designation of theCorporation’s Series B Preferred Stock, the holders of outstanding shares ofSeries C Preferred Stock shall be entitled to vote in the election of Directorsof the Corporation together with holders of all other shares of theCorporation’s outstanding capital stock entitled to vote thereon, voting as asingle class, with each outstanding share of Series C Preferred Stock entitledto the number of votes specified in Section 2(b) hereof.

 

(b)                                 VotingGenerally.  Each outstanding shareof Series C Preferred Stock shall be entitled to a number of votes equal to thenumber of shares of Common Stock into which such share of Series C PreferredStock is then convertible pursuant to Section 6 hereof as of the recorddate for the vote or written consent of stockholders, if applicable.  Each holder of outstanding shares of SeriesC Preferred Stock shall be entitled to notice of any stockholders’ meeting inaccordance with the by-laws of the Corporation and shall vote with holders ofthe Common Stock, voting together as a single class, upon all matters submittedto a vote of stockholders, excluding those matters required to be submitted toa class or series vote pursuant to the terms hereof (including, withoutlimitation, Section 8) or by law.

 

3.                                       Dividends.  The holders of shares of Series CPreferred Stock shall be entitled to receive dividends in accordance with thisSection 3.  Without any furtheraction by the Board of Directors, on each June 30 and December 31that shares of Series C Preferred Stock are outstanding, the holders ofSeries C Preferred Stock shall be entitled to receive for each share ofSeries C Preferred Stock outstanding on such date a number of additionalshares of Series C Preferred Stock equal to the product of (A) thequotient of (i) the number of days the shares were outstanding during thesemi-annual period ending June 30 or December 31, as applicable,divided by (ii) the number of days in such semi-annual period (such quotient,the “Proration Factor”) and (B) 0.06. Notwithstanding anything herein to the contrary, to the extent that thepayment of a dividend in kind pursuant to this Section 3 would cause anyholder of shares of Series C Preferred Stock to hold 20% or more of theCommon Stock or the voting power of the Corporation, as such holdings arecalculated for purposes of determining whether a “change of control” hasoccurred under the NASDAQ Marketplace Rules, such holder shall be entitled toreceive, in lieu of any dividend otherwise payable in kind pursuant to thisSection 3, a cash payment equal to the product of (x) the Proration Factorand (y) $0.18 (as adjusted appropriately for stock splits, stock dividends,combinations, recapitalizations and the like with respect to the Series CPreferred Stock) in respect of each share of Series C Preferred  Stock held by such holder on June 30 orDecember 31.

 

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Any shares of Series CPreferred Stock issued as a dividend with respect to the Series C PreferredStock will be duly authorized, validly issued, fully paid andnon-assessable.  No other dividendsshall be payable on or with respect to the Series C Preferred Stock.  The Corporation shall at all times reserveand keep available from its authorized shares of Series C Preferred Stock forthe sole purpose of payment of dividends pursuant to the terms hereof, suchnumber of shares of Series C Preferred Stock as shall from time to time besufficient for payment of dividends, and shall not issue any shares of Series CPreferred Stock for any other purpose. The Corporation shall increase the number of authorized shares of SeriesC Preferred Stock if required for the payment of dividends.

 

4.                                       LiquidationPreference.  The Series C PreferredStock shall rank on a *pari passu*basiswith the Corporation’s Series B Preferred Stock, par value $ .01 per share (the“Series B Preferred Stock”) for purposes of receiving assets of the Corporationin connection with a Liquidation Event (as defined below).  In the event of any voluntary or involuntaryliquidation, dissolution or winding up of the affairs of the Corporation or thesale, conveyance, exchange or transfer of all or substantially all of theproperty, assets or outstanding equity securities of the Corporation or amerger or consolidation of the Corporation with one or more corporations inwhich the owners of the voting stock of the Corporation own less than 50% ofthe voting stock of the surviving or resulting corporation immediately aftersuch merger or consolidation (any such event a “Liquidation Event”), theholders of the shares of Series C Preferred Stock shall be entitled to be paidout of the assets of the Corporation available for distribution to itsstockholders, prior and in preference to any distribution of any of the assetsof the Corporation to the holders of any common stock or any other class orseries of capital stock ranking junior to the Series C Preferred Stock, anamount in cash per outstanding share of the Series C Preferred Stock equal to$4.00 (as adjusted appropriately for stock splits, stock dividends,combinations, recapitalizations and the like with respect to the Series CPreferred Stock, the “Series C Liquidation Preference”).  If the assets of the Corporation are notsufficient to pay in full the Series C Liquidation Preference payable to theholders of outstanding shares of Series C Preferred Stock and the liquidationpreference of all other securities that rank pari passu with the Series CPreferred Stock, then the holders of all such shares shall share ratably insuch distribution of assets in proportion to the amount which would be payableon such distribution if the Series C Liquidation Preference to which theholders of outstanding shares of Series C Preferred Stock and the liquidationpreferences to which the holders of other securities that rank pari passu withthe Series C Preferred Stock are entitled were paid in full.  Upon any such Liquidation Event, after theholders of Series C Preferred Stock shall have been paid in full their Series CLiquidation Preference, the holders of such shares of Series C Preferred Stockshall not be entitled to share in any further distribution of assets.  For the purposes of this Section 4,written notice of any Liquidation Event stating the payment date and the placewhere the distributable amount shall be payable, shall be given by mail,postage prepaid, not less than 60 days prior to the payment date statedtherein, to the holders of record of the Series C Preferred Stock at theirrespective addresses as the same shall then appear on the books of theCorporation.

 

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5.                                       Redemption.

 

(a)                                  OptionalRedemption.  At any time on or afterOctober 31, 2005, the Corporation may elect to redeem all (but not lessthan all) of the outstanding shares of Series C Preferred Stock, out of fundslegally available therefor, for an amount equal to the aggregate Series CRedemption Price specified in Section 5(b).  The Corporation shall give the holders of Series C PreferredStock at least 60 days’ notice of such redemption and, before the date that is5 days prior to the redemption date stated in such notice (the “OptionalRedemption Date”), each holder of shares of Series C Preferred Stock shall havethe right to elect to give effect to the conversion rights contained inSection 6(a) with respect to the shares of Series C Preferred Stock heldby such holder.

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(b)                                 RedemptionPrice.  The price for each share ofSeries C Preferred Stock redeemed pursuant to this Section 5 (the “SeriesC Redemption Price”) shall be an amount per share equal to the Series CLiquidation Preference.  The aggregateSeries C Redemption Price shall be payable in cash in immediately availablefunds to the respective holders of the Series C Preferred Stock on the OptionalRedemption Date.

 

(c )                               Surrenderof Certificates.  Each holder ofshares of Series C Preferred Stock to be redeemed shall surrender thecertificate or certificates representing such shares to the Corporation, dulyassigned or endorsed for transfer to the Corporation (or accompanied by dulyexecuted stock powers relating thereto), or, in the event the certificate orcertificates are lost, stolen or missing, shall deliver an affidavit of loss,at the principal executive office of the Corporation or such other place as theCorporation may from time to time designate by notice to the holders of SeriesC Preferred Stock, and each surrendered certificate shall be canceled andretired and the Corporation shall thereafter make payment of the applicableSeries C Redemption Price by certified check or wire transfer.

 

6.                                       Conversion.  Shares of Series C Preferred Stock shall beconverted into Common Stock in accordance with the following:

 

(a)                                  Rightto Convert.  Upon the writtenelection of the holder thereof and without payment of any additionalconsideration, each outstanding share of Series C Preferred Stock held by suchholder shall be converted into such number of fully paid and nonassessableshares of Common Stock as is determined by dividing (A) $3.00 by (B) theConversion Price at the time in effect for such Series C Preferred Stock (suchquotient, the “Conversion Rate”).  Theinitial “Conversion Price” per share for shares of Series C Preferred Stockshall be $3.00, subject to adjustment as set forth in Section 7.  Any election by a holder of Series CPreferred Stock pursuant to this Section 6(a) shall be made by writtennotice to the Corporation, and such notice may be given at any time and fromtime to time through and including the day which is five (5) days prior to theOptional Redemption Date or the closing of any Liquidation Event.

 

(b)                                 Procedurefor Conversion.  Upon election toconvert pursuant to Section 6(a), the relevant holder or holders of SeriesC Preferred Stock shall surrender the certificate or certificates representingthe Series C Preferred Stock being converted to the

 

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Corporation, duly assigned orendorsed for transfer to the Corporation (or accompanied by duly executed stockpowers relating thereto) or shall deliver an affidavit of loss to theCorporation, at its principal executive office or such other place as theCorporation may from time to time designate by notice to the holders of theSeries C Preferred Stock.  Upon surrenderof such certificate(s) or delivery of an affidavit of loss, the Corporationshall issue and send by hand delivery, by courier or by first class mail(postage prepaid) to the holder thereof or to such holder’s designee, at theaddress designated by such holder, certificates for the number of shares ofCommon Stock to which such holder shall be entitled upon conversion.  The issuance of certificates for CommonStock upon conversion of Series C Preferred Stock shall be deemed effective asof the date of surrender of such Series C Preferred Stock certificates ordelivery of such affidavit of loss and will be made without charge to theholders of such shares for any issuance tax in respect thereof or other costsincurred by the Corporation in connection with such conversion and the relatedissuance of such stock. 

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(c )                               Reservationof Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of itsauthorized but unissued shares of Common Stock, solely for the purpose ofeffecting the conversion of the shares of Series C Preferred Stock, such numberof its shares of Common Stock as shall from time to time be sufficient toeffect the conversion of all outstanding shares of Series C Preferred Stock;and if at any time the number of authorized but unissued shares of Common Stockshall not be sufficient to effect the conversion of all outstanding shares ofSeries C Preferred Stock, the Corporation will take such corporate action asmay be necessary to increase the number of its authorized but unissued shares ofCommon Stock to such number of shares as shall be sufficient for such purpose,and to reserve the appropriate number of shares of Common Stock for issuanceupon such conversion.

 

7.                                       Adjustments.

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(a)                                  Adjustmentsto the Conversion Price.  Except asprovided in Section 7(c) and except in the case of an event described inSection 7(d), if and whenever after the date this  Certificate of Designations is first filedwith the Secretary of State of Delaware (the “Filing Date”) the Corporationshall issue or sell:

 

##### (i)                                     sharesof its Common Stock;

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##### (ii)                                  securitiesconvertible into shares of its Common Stock; or

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##### (iii)                               options or warrants topurchase shares of its Common Stock or securities convertible into shares ofits Common Stock

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(the shares described in (i), (ii) and (iii) above being referred to as“Additional Shares”), at a sale, conversion or exercise price per share (the“Issue Price”), which Issue Price shall be computed in accordance with the nextparagraph of this Section, as the case may be, less than the Conversion Pricethen in effect, the Conversion Price shall be reset to the greater of (A) theIssue Price or (B) the average of the closing bid prices of the Common

 

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Stock on the Nasdaq Smallcap Market for the five trading daysimmediately preceding the Filing Date.

 

The “IssuePrice” received by the Corporation for any issue or sale of Additional Sharesshall (A) to the extent it consists of cash, be computed at the gross amount ofcash received by the Corporation for Additional Shares and/or receivable by theCorporation upon exercise, conversion or exchange of Additional Shares intoCommon Stock before deduction of any underwriting or similar commissions,compensation or concessions paid or allowed by the Corporation in connectionwith such issue or sale and without deduction of any expenses payable by theCorporation; (B) to the extent it consists of property other than cash, becomputed at the fair value of that property determined in good faith by theCorporation’s Board of Directors; and (C) if convertible securities or rightsor options to purchase convertible securities are issued or sold together withother stock or securities or other assets of the Corporation for aconsideration that covers both, be computed as the portion of the considerationso received that may be reasonably determined in good faith by theCorporation’s Board of Directors to be allocable to such Additional Shares,convertible securities or rights or options.

 

(b)                                 OtherDividends and Distributions.  If theCorporation, at any time or from time to time after the Filing Date, shalldeclare or make, or fix a record date for the determination of holders ofCommon Stock entitled to receive, a dividend or other distribution payable insecurities or other property of the Corporation other than shares of CommonStock, then and in each such event provision shall be made so that the holdersof the outstanding shares of Series C Preferred Stock shall receive uponconversion thereof, in addition to the number of shares of Common Stockreceivable thereupon, the amount of such other securities of the Corporation orthe value of such other property that they would have received had the Series CPreferred Stock been converted into Common Stock on the date of such event andhad such holders thereafter, during the period from the date of such event toand including the conversion date, retained such securities or other propertyreceivable by them during such period, giving application to all adjustmentscalled for during such period under Section 7 with respect to the rightsof the holders of the outstanding shares of Series C Preferred Stock; and, provided,further, however, that no such provision shall be made if the holders ofSeries C Preferred Stock simultaneously receive a dividend or otherdistribution of such securities or other property in an amount equal to theamount of such securities or other property as they would have received if alloutstanding shares of Series C Preferred Stock had been converted into CommonStock on the date of such event.

 

(c )                               CertainIssues of Common Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation shallnot be required to make any adjustment of the Conversion Price in the case ofthe issuance from and after the Filing Date of (i) shares of Common Stockupon conversion of shares of the Corporation’s Series B Preferred Stock orSeries C Preferred Stock; or (ii) Additional Shares to directors, officers,employees or consultants of the Corporation in connection with their service asdirectors of the Corporation, their employment by the Corporation or theirretention as consultants by the Corporation, in each case authorized by theBoard of Directors and

 

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issued pursuant to equityincentive plans or agreements of the Corporation (collectively, “ExcludedShares”).

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(d)                                 Subdivisionor Combination of Common Stock.  Incase the Corporation shall at any time after the Filing Date subdivide itsoutstanding shares of Common Stock into a greater number of shares (by anystock split, stock dividend or otherwise), the Conversion Price in effectimmediately prior to such subdivision shall be proportionately reduced, and,conversely, in case the Corporation shall at any time after the Filing Datecombine its outstanding shares of Common Stock into a smaller number of shares(by any reverse stock split or otherwise), the Conversion Price in effect immediately prior to such combination shallbe proportionately increased.  In thecase of any such subdivision, no adjustment shall be made pursuant toSection 7(a) by reason thereof.

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(e)                                  Reorganizationor Reclassification.  If any capitalreorganization or reclassification of the capital stock of the Corporationshall be effected in such a way that holders of Common Stock shall be entitledto receive stock, securities or assets with respect to or in exchange forCommon Stock, then, as a condition of such reorganization or reclassification,lawful and adequate provisions shall be made whereby each holder of a share orshares of Series C Preferred Stock shall thereupon have the right to receive,upon the basis and upon the terms and conditions specified herein and in lieuof the shares of Common Stock immediately theretofore receivable upon theconversion of such share or shares of Series C Preferred Stock, as the case maybe, such shares of stock, securities or assets as may be issued or payable withrespect to or in exchange for a number of outstanding shares of such CommonStock equal to the number of shares of such Common Stock immediatelytheretofore receivable upon such conversion had such reorganization orreclassification not taken place, and in any such case appropriate provisionsshall be made with respect to the rights and interests of such holder to theend that the provisions hereof (including, without limitation, provisions foradjustments of the  Conversion Price)shall thereafter be applicable, as nearly as may be, in relation to any sharesof stock, securities or assets thereafter deliverable upon the exercise of suchconversion rights.

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(f)                                    Certificateas to Adjustments.  Upon theoccurrence of each adjustment or readjustment of the Conversion Price pursuantto this Section 7, the Corporation shall promptly compute such adjustmentor readjustment in accordance with the terms hereof and prepare and furnish toeach holder of Series C Preferred Stock a certificate setting forth suchadjustment or readjustment and showing in detail the facts upon which suchadjustment or readjustment is based. All calculations shall be made to the nearest cent or to the nearest onehundredth of a share, as the case may be.

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8.                                       Covenants.  The Corporation shall not, without firsthaving provided written notice of such proposed action to each holder ofoutstanding shares of Series C Preferred Stock and having obtained theaffirmative vote or written consent of the holders of a majority of theoutstanding shares of Series C Preferred Stock (a “Majority Interest”):

 

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(a)                                  declareor pay any dividends other than dividends on the Corporation’s Series BPreferred Stock or the Series C Preferred Stock as provided in Section 3or make any distributions of cash, property or securities of the Corporation inrespect of its capital stock, except for (i) the redemption of theCorporation’s Series B Preferred Stock or Series C Preferred Stock,(ii) the repurchase of Excluded Shares described in Section 7(c)above, or (iii) dividends or distributions payable solely in shares of CommonStock;

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(b)                                 reclassifyany capital stock in a manner that materially adversely affects thedesignations, preferences, powers and/or the relative, participating, optionalor other special rights, or the restrictions provided for the benefit of, theSeries C Preferred Stock;

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(c )                               authorizeor issue, or obligate itself to issue, any convertible debt or other debt withany equity participation, any securities convertible into or exercisable orexchangeable for any equity securities, or any other equity security, in anycase ranking senior to or on parity with the Series C Preferred Stock as toliquidation, redemption or dividend rights;

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(d)                                 amend,alter or repeal any provision of, or add any provision to, this Certificate ofDesignations; or

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(e)                                  incurany indebtedness for borrowed money (other than trade accounts payable in theordinary course) in excess of $1,000,000.

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9.                                       Notice;Adjustments; Waivers.

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(a)                                  Liquidation Events, Etc.  Inthe event (i) the Corporation establishes a record date to determine theholders of any class of securities who are entitled to receive any dividend orother distribution or who are entitled to vote at a meeting (or by writtenconsent) in connection with a Liquidation Event, or (ii) the occurrence of anyLiquidation Event, the Corporation shall mail or cause to be mailed by firstclass mail (postage prepaid) to each holder of Series C Preferred Stock atleast thirty (30) days prior to such record date specified therein or the expectedeffective date of any such transaction, whichever is earlier, a noticespecifying (A) the date of such record date for the purpose of such dividend ordistribution or meeting or consent and a description of such dividend ordistribution or the action to be taken at such meeting or by such consent, (B)the date on which any such Liquidation Event is expected to become effective,and (C) the date on which the books of the Corporation shall close or a recordshall be taken with respect to any such event.

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(b)                                 Waiverof Notice.  The holder or holders ofa Majority Interest may, at any time upon written notice to the Corporation,waive any notice or certificate delivery provisions specified herein for thebenefit of such holders, and any such waiver shall be binding upon all holdersof such securities.

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(c )                               OtherWaivers.  The holder or holders of aMajority Interest may, at any time upon written notice to the Corporation,waive compliance by the Corporation

 

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with any term or provisionherein, provided that any such waiver does not affect any holder of outstandingshares of Series C Preferred Stock in a manner materially different than anyother holder, and any such waiver shall be binding upon all holders of Series CPreferred Stock and their respective transferees.

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(d)                                 Statusof Converted Stock.  In the eventany shares of Series C Preferred Stock shall be converted pursuant to the termshereof or otherwise redeemed or repurchased by the Corporation, the shares soconverted, redeemed or repurchased shall be canceled and shall revert to thecategory of authorized but unissued shares of Preferred Stock by theCorporation.

 

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