Document:

Exhibit 4.1

 

	

  

  

 

CERTIFICATE

OF DESIGNATION

OF

SERIES C CONVERTIBLE PREFERRED STOCK

OF
24/7 REAL MEDIA, INC.

 

WHEREAS, the Amended and Restated Certificate of Incorporation of 24/7

Real Media, Inc., a Delaware corporation (the “CORPORATION”), as

amended to the date hereof (the “CERTIFICATE OF INCORPORATION”)

authorizes the Corporation to issue a total of 10,000,000 shares of preferred

stock, par value $0.01 per share (“PREFERRED STOCK”), which may be divided

into one or more classes and/or series as the Corporation’s Board of Directors

(the “BOARD”)

may determine;

 

WHEREAS, the Certificate of Incorporation expressly vests in the Board

of Directors the authority to fix the powers, designations, preferences, rights

and qualifications, limitations or restrictions, of the Preferred Stock; and

 

WHEREAS, the Board of Directors deems it advisable to designate a series

of the Preferred Stock consisting of Five Hundred Thousand (500,000) shares

designated as Series C Convertible Preferred Stock;

 

NOW, THEREFORE, IT IS HEREBY RESOLVED, that pursuant to Article Fourth

of the Certificate of Incorporation, there be and hereby is authorized and

created, pursuant to the terms of this designation statement (this “DESIGNATION

STATEMENT”) a series of Preferred Stock, which series shall have

the powers, designations, preferences, voting rights, relative and other

special rights, and the qualifications, limitations and restrictions set forth

below:

 

SERIES C CONVERTIBLE PREFERRED STOCK. Five Hundred Thousand (500,000) of

the authorized shares of Preferred Stock of the Corporation are hereby

designated “Series C Convertible Preferred Stock”, $0.01 par value per share

(the “SERIES

C PREFERRED STOCK”). The powers, designations, preferences,

relative and other special rights, and the qualifications, limitations and

restrictions and other matters relating to the Series C Preferred Stock are as

follows:

 

1.                  DEFINITIONS. For purposes of this

Designation Statement, the following definitions apply:

 

1. DEFINITIONS. For purposes of

this Designation Statement, the following definitions apply:

 

1.1 “ACQUIRING STOCKHOLDER”

shall mean, with respect to a Combination Transaction, a stockholder or

stockholders of the Corporation that (i) merges or combines with the

Corporation in such Combination Transaction or (ii) owns or controls a majority

of another corporation that merges or combines with the Corporation in such

Combination Transaction.

 

1.2 “CLOSING DISCOUNTED COMMON STOCK PRICE”

shall mean a price per share of $0.24158.

 

1.3 “COMBINATION TRANSACTION”

shall mean a reorganization, consolidation, merger or similar transaction or

series of related transactions.

 

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1.4 “COMMON STOCK” shall

mean the Common Stock, par value $0.01 per share, of the Corporation.

 

1.5 “COMMON STOCK DIVIDEND”

shall mean a stock dividend declared and paid on the Common Stock that is

payable in shares of Common Stock.

 

1.6 “COMMON STOCK EVENT”

shall mean, at any time or from time to time after the Original Issue Date, (i)

the issue by the Corporation of additional shares of Common Stock in connection

with a Common Stock Dividend or other distribution on outstanding Common Stock,

(ii) a subdivision of the outstanding shares of Common Stock into a greater

number of shares of Common Stock, or (iii) a combination of the outstanding

shares of Common Stock into a smaller number of shares of Common Stock.

 

1.7 “DISTRIBUTION” shall

mean the transfer of cash or property by the Corporation to one or more of its

stockholders without consideration, whether by dividend or otherwise (except a

dividend in shares of Corporation’s stock). A Permitted Repurchase (defined

below) is not a Distribution.

 

1.8 “DIVIDEND ACCRUAL DATE”

shall mean the first day of each calendar month.

 

1.9 “DIVIDEND RATE” shall

mean a dollar amount per share equal to six percent (6%) of the Original Issue

Price for the Series C Preferred Stock, per annum, for the Series C Preferred

Stock (as adjusted for any stock splits, stock dividends, recapitalizations or

the like, with respect to the Series C Preferred Stock).

 

1.10 “ORIGINAL ISSUE DATE”

shall mean the date on which the first share of Series C Preferred Stock is

issued by the Corporation.

 

1.11 “ORIGINAL ISSUE PRICE”

shall mean $10.00 per share for the Series C Preferred Stock (as adjusted for

any stock splits, stock dividends, recapitalizations or the like, with respect

to such series of Preferred Stock).

 

1.12 “PERMITTED REPURCHASES”

shall mean the repurchase by the Corporation of shares of Common Stock held by

employees, officers, directors, consultants, independent contractors, advisors,

or other persons performing services for the Corporation or a Subsidiary that

are subject to restricted stock purchase agreements, stock option exercise

agreements or similar agreements under which the Corporation has the option to

repurchase such shares.

 

1.13 “SERIES A DESIGNATION”

shall mean the resolutions adopted by the Board authorizing the Series A

Preferred Stock, as filed with the Delaware Secretary of State.

 

1.14 “SERIES A PREFERRED STOCK”

shall mean the Series A Preferred Stock, par value $0.01, of the Corporation.

 

1.13 “SERIES B DESIGNATION”

shall mean the resolutions adopted by the Board authorizing the Series B

Preferred Stock, as filed with the Delaware Secretary of State.

 

1.14 “SERIES B PREFERRED STOCK”

shall mean the Series B Preferred Stock, par value $0.01, of the Corporation.

 

1.15 “SUBSIDIARY” shall mean

any corporation of which at least fifty percent (50%) of the outstanding

 

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voting stock is at the time

owned directly or indirectly by the Corporation or by one or more of such

subsidiary corporations.

 

2.                 DIVIDEND

RIGHTS.

 

2.1 CUMULATIVE DIVIDEND

PREFERENCE. The holders of the then outstanding Series C Preferred Stock shall

be entitled to receive, when, as and if declared by the Board, out of any funds

and assets of the Corporation legally available therefor, cumulative dividends

at the annual Dividend Rate for the Series C Preferred Stock, prior and in

preference to the payment of any dividend or other Distribution on the Common

Stock (other than a Common Stock Dividend). Such dividends shall begin accruing

on each share of Series C Preferred Stock on the first Dividend Accrual Date

occurring after the date on which such share of Series C Preferred Stock is

issued by the Corporation, and shall accrue on each subsequent Dividend Accrual

Date thereafter until paid, whether or not earned or declared. No accumulation

of dividends on the Series C Preferred Stock shall compound or bear any

interest. Unless the full amount of any accrued and unpaid dividends accrued on

the Series C Preferred Stock shall have been paid or declared in full and a sum

sufficient for the payment thereof reserved and set apart, no dividend (other

than a Common Stock Dividend) shall be paid or declared, and no Distribution

shall be made, on any Common Stock; PROVIDED, HOWEVER, that this restriction

shall not apply to Permitted Repurchases. Payments of any accrued dividends to

the holders of the Series C Preferred Stock and the Series A Preferred Stock

and the Series B Preferred Stock shall be made pro rata, on an equal priority,

pari passu basis.

 

2.2 PARTICIPATION RIGHTS. In the

event that the Corporation shall declare a dividend or other Distribution on

the Common Stock out of funds legally available therefor (other than a Common

Stock Dividend), then the holders of the then outstanding Series C Preferred

Stock shall be entitled to a proportionate share of any such dividend or other

Distribution as though each holder of such Series C Preferred Stock was the

holder of the greatest whole number of shares of Common Stock issuable upon

conversion pursuant to Section 5 of all such shares of Series C Preferred Stock

held by such holder, as of the record date fixed for the determination of

holders of Common Stock entitled to receive such dividend or other

Distribution.

 

2.3 NON-CASH DIVIDENDS. Whenever

a dividend provided for in this Section 2 shall be payable in property other

than cash, the value of such dividend shall be deemed to be the fair market

value of such property as determined in good faith by the Board, provided that

dividends payable in securities (other than Common Stock Dividends, dividends

declared and paid on the Series C Preferred Stock that are payable in shares of

Series C Preferred Stock, and dividends declared and paid on the Series A

Preferred Stock that are payable in shares of Series A Preferred Stock and

dividends declared and paid on the Series B Preferred Stock that are payable in

shares of Series B Preferred Stock) shall be valued in the manner set forth in

Sections 3.4(a) and (b) hereof.

 

2.4 PAYMENT ON CONVERSION. If

the Corporation shall have accrued but unpaid dividends with respect to any

Series C Preferred Stock upon its conversion as provided in Section 5, then, to

the extent such dividends have not been declared, all such accrued but unpaid

dividends on such converted shares of Series C Preferred Stock shall be

cancelled.

 

3.LIQUIDATION RIGHTS. In the event of any

liquidation, dissolution or winding up of the Corporation, whether voluntary or

involuntary, the funds and assets that may be legally distributed to the

Corporation’s stockholders (the “AVAILABLE FUNDS AND ASSETS”) shall be

distributed to stockholders in the following manner:

 

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3.1 LIQUIDATION PREFERENCE. The

holders of each share of Series C Preferred Stock then outstanding shall be

entitled to be paid, out of the Available Funds and Assets, and prior and in

preference to any payment or distribution (or any setting apart of any payment

or distribution) of any Available Funds and Assets on any shares of Common

Stock, an amount per share equal to the Original Issue Price for the Series C

Preferred Stock plus all accrued but unpaid dividends on the Series C Preferred

Stock. The Series A Preferred Stock and the Series B Preferred Stock shall rank

on parity with the Series C Preferred Stock with respect to the liquidation,

dissolution or winding up of the Corporation. If upon any liquidation,

dissolution or winding up of the Corporation, the Available Funds and Assets

shall be insufficient to permit the payment to holders of the Series C

Preferred Stock and the Series A Preferred Stock and the Series B Preferred

Stock of their full preferential amounts, then all of the Available Funds and

Assets shall be distributed among the holders of the then outstanding Series C

Preferred Stock and the Series A Preferred Stock and the Series B Preferred

Stock pro rata, on an equal priority, pari passu basis, according to their

respective liquidation preferences.

 

3.2 PARTICIPATION RIGHTS. If

there are any Available Funds and Assets remaining after the payment or

distribution (or the setting aside for payment or distribution) to the holders

of the Series C Preferred Stock and Series A Preferred Stock and Series B

Preferred Stock of their full liquidation preference amounts payable pursuant

to Section 3.1 above for the Series C Preferred Stock, and pursuant to Section

3.1 of the Series A Designation for the Series A Preferred Stock and pursuant

to Section 3.1 of the Series B Designation for the Series B Preferred Stock, in

connection with a liquidation, dissolution or winding up of the Corporation,

then all such remaining Available Funds and Assets shall be distributed among

the holders of the then outstanding Common Stock, Series C Preferred Stock and

Series A Preferred Stock and Series B Preferred Stock pro rata according to the

number of shares of Common Stock held by such holders, where, for this purpose:

(a) each holder of outstanding Series A Preferred Stock will be deemed to hold

(in lieu of their Series A Preferred Stock), the greatest whole number of

shares of Common Stock issuable upon conversion of the Series A Preferred Stock

held by such holder as of the record date fixed for the determination of

holders of Common Stock entitled to receive such distribution, (b) each holder

of outstanding Series B Preferred Stock will be deemed to hold (in lieu of

their Series B Preferred Stock), the greatest whole number of shares of Common

Stock issuable upon conversion of the Series B Preferred Stock held by such

holder as of the record date fixed for the determination of holders of Common

Stock entitled to receive such distribution, and (c) each holder of outstanding

Series C Preferred Stock will be deemed to hold (in lieu of their Series C

Preferred Stock), the greatest whole number of shares of Common Stock issuable

upon conversion of such holder’s Series C Preferred Stock pursuant to Section

5, as of the record date fixed for the determination of holders of Common Stock

entitled to receive such distribution; UNTIL SUCH TIME AS: (x) in the case of

the Series A Preferred Stock, each holder of then outstanding Series A

Preferred Stock shall have received, in distributions made in connection with

such liquidation, dissolution or winding up, an aggregate amount per share of

Series A Preferred Stock held equal to three (3) times the Original Issue Price

for the Series A Preferred Stock (such aggregate dollar amount to include all

amounts previously paid to such holder pursuant to the liquidation preference

of the Series A Preferred Stock including without limitation any dividends paid

thereon), (y) in the case of the Series B Preferred Stock, each holder of then

outstanding Series B Preferred Stock shall have received, in distributions made

in connection with such liquidation, dissolution or winding up, an aggregate

amount per share of Series B Preferred Stock held equal to three (3) times the

Original Issue Price for the Series B Preferred Stock (such aggregate dollar

amount to include all amounts previously paid to such holder pursuant to the

liquidation preference of the Series B Preferred Stock including without

limitation any dividends paid thereon), and (z) in the case of the Series C

Preferred Stock, each holder of then outstanding Series C Preferred Stock shall

have received, in distributions made in connection with such liquidation,

dissolution or winding up, an aggregate amount per share of Series C Preferred

Stock held 

 

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equal to three (3) times the

Original Issue Price for the Series C Preferred Stock (such aggregate dollar

amount to include all amounts previously paid to such holder pursuant to the

liquidation preference of the Series C Preferred Stock including without

limitation any dividends paid thereon); AFTER WHICH TIME the holders of then

outstanding Common Stock shall be entitled to receive all the remaining

Available Funds and Assets (if any) pro rata according to the number of

outstanding shares of Common Stock then held by each of them.

 

3.3 MERGER OR SALE OF ASSETS.

Each of the following transactions shall be deemed to be a liquidation,

dissolution or winding up of the Corporation as those terms are used in this

Section 3 (and in the case of a transaction described in Section 3.3(a) below,

the Available Funds and Assets shall be the consideration paid by the acquiror

in such transaction): (a) a Combination Transaction in which the Corporation is

a constituent corporation if, as a result of such Combination Transaction, the

voting securities of the Corporation that are outstanding immediately prior to

the consummation of such Combination Transaction (OTHER than any such

securities that are held by an Acquiring Stockholder) do not represent, or are

not converted into, securities of the surviving corporation of such Combination

Transaction (or such surviving corporation’s parent corporation if the

surviving corporation is owned by the parent corporation) that, immediately

after the consummation of such Combination Transaction, together possess at

least a majority of the total voting power of all securities of such surviving

corporation (or its parent corporation, if applicable) that are outstanding

immediately after the consummation of such Combination Transaction, including

securities of such surviving corporation (or its parent corporation, if

applicable) that are held by the Acquiring Stockholder; or (b) a sale of all or

substantially all of the assets of the Corporation (each of the foregoing

transactions, a “SALE TRANSACTION”).

 

Notwithstanding the foregoing or

the provisions of Section 5.7 below, if any of the above described transactions

are approved by both: (a) the vote of the holders of at least a majority of the

shares of Preferred Stock then outstanding, voting as a single class, and (b) a

vote sufficient under the Delaware General Corporation Law, the Certificate of

Incorporation (including this Designation Statement and the Series A

Designation and the Series B Designation) and the Bylaws of the Corporation to

approve such transaction, THEN the rights of the holders of Common Stock and

Preferred Stock with respect to such transaction will be governed by the

documents to be entered into in connection with such transaction.

 

The Corporation shall not enter

into any Sale Transaction that does not provide for the treatment of the

holders of Series C Preferred Stock in a manner consistent with the provisions

of this Section 3 (including, without limitation, the provisions in the second

sentence of this Section 3.3). In the event that the requirements of the

immediately preceding sentence are not complied with in connection with a Sale

Transaction, the Corporation shall forthwith either: (x) cause the closing of

Sale Transaction to be postponed until such time as such requirements have been

complied with, or (y) cancel such Sale Transaction, in which event the rights,

preferences and privileges of the holders of the Series C Preferred Stock shall

revert to and be the same as such rights, preferrences and privileges existing

immediately prior to the latest date on which the notice referred to in Section

3.5 below with respect to such Sale Transaction could be given in compliance

with the provisions of such Section 3.5.

 

3.4 NON-CASH CONSIDERATION. If

any assets of the Corporation distributed to stockholders in connection with

any liquidation, dissolution, or winding up of the Corporation are other than

cash, then the value of such assets shall be their fair market value as

determined in good faith by the Board, EXCEPT THAT any securities to be

distributed to stockholders in a liquidation, dissolution, or winding up of the

Corporation shall be valued as follows:

 

(a) The method of valuation of

securities not subject to investment letter or other similar restrictions on

 

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free marketability shall be as

follows:

 

(i) unless otherwise specified

in a definitive agreement for the acquisition of the Corporation, if the

securities are then traded on a national securities exchange, the Nasdaq

National Market or the Nasdaq SmallCap Market (or a similar national quotation

system), then the value shall be deemed to be the average of the closing prices

of the securities on such exchange or system over the twenty (20) trading day

period ending three (3) trading days prior to the distribution; and

 

(ii) if (i) above does not apply

but the securities are actively traded over-the-counter, then, unless otherwise

specified in a definitive agreement for the acquisition of the Corporation, the

value shall be deemed to be the average of the closing bid prices over the

twenty (20) trading day period ending three (3) trading days prior to the

distribution; and

 

(iii) if there is no active

public market as described in clauses (i) or (ii) above, then the value shall

be the fair market value thereof, as determined in good faith by the Board.

 

(b) The method of valuation of

securities subject to investment letter or other restrictions on free

marketability (other than restrictions arising solely by virtue of a

stockholder’s status as an affiliate or former affiliate) shall be to make an

appropriate discount from the market value determined as above in subparagraphs

(a)(i),(ii) or (iii) of this subsection to reflect the approximate fair market

value thereof, as determined in good faith by the Board.

 

(c) Any determination in good

faith by the Board pursuant to this Section 3.4 shall be conclusive and final

and shall be binding on the Corporation and all stockholders thereof.

 

3.5 NOTICE. Written notice of

any liquidation, dissolution or winding up of the Corporation within the

meaning of this Section 3, stating the nature of such liquidation, dissolution

or winding up, and specifying the anticipated effective date of such

liquidation, dissolution or winding up, shall be given in the manner specified

in Section 5.12 hereof at least twenty (20) days prior to, and no more than

sixty (60) days prior to, the effective date of such liquidation, dissolution

or winding up.

 

4.                 VOTING

RIGHTS.

 

4.1 SERIES C PREFERRED STOCK.

Each holder of shares of Series C Preferred Stock shall be entitled to the

number of votes equal to the number of whole shares of Common Stock into which

such shares of Preferred Stock could be converted pursuant to the provisions of

Section 5 below at the record date for the determination of the stockholders

entitled to vote on such matters or, if no such record date is established, the

date such vote is taken or any written consent of stockholders is solicited.

 

4.2 GENERAL. Subject to the

other provisions of this Designation Statement, each holder of Series C

Preferred Stock shall have full voting rights and powers equal to the voting

rights and powers of the holders of Common Stock, and shall be entitled to

notice of any stockholders’ meeting in accordance with the bylaws of the

Corporation (as in effect at the time in question) and applicable law, and

shall be entitled to vote, together with the holders of Common Stock, with

respect to any question upon which holders of Common Stock have the right to

vote, except as may be otherwise provided by applicable law. Except as

otherwise expressly provided herein or as required by law, the holders of

Series C Preferred Stock, the holders of Series A Preferred Stock and the

holders of Series B Preferred Stock and the holders of Common Stock shall vote

together and not as separate classes.

 

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4.3 PROTECTIVE PROVISIONS. So

long as the total number of outstanding shares of Series C Preferred Stock is

equal to or greater than seventy five thousand (75,000):

 

(a) the Corporation shall not,

without the prior approval, by vote or written consent, of the holders of a

majority of the Series C Preferred Stock then outstanding, voting as a separate

class:

 

(i) amend its Certificate of

Incorporation or Bylaws in any manner that would alter or change the rights,

preferences, privileges or restrictions of the Series C Preferred Stock so as

to adversely affect any of the rights, preferences, privileges or restrictions

of such series of Preferred Stock; or

 

(ii) increase or decrease (other

than pursuant to Section 6.1 below) the total number of authorized shares of

Series C Preferred Stock.

 

(b) the Corporation shall not,

without the prior approval, by vote or written consent, of the holders of a

majority of the Series A Preferred Stock, the Series B Preferred Stock and the

Series C Preferred Stock then outstanding, voting together as a single class:

 

(i) reclassify any outstanding

shares of capital stock of the Corporation into shares having rights,

preferences or privileges senior to or on a parity with the Series C Preferred

Stock;

 

(ii) take any action that

authorizes, creates or results in the issuance of any other equity security,

including any other security convertible into or exercisable for any equity

security, having any rights, preferences or privileges that are senior to or on

a parity with the Series C Preferred Stock; or

 

(iii) declare or pay any

dividends (other than dividends payable solely in shares of its own Common

Stock) on or declare or make any other distribution, purchase, redemption or

acquisition (other than Permitted Repurchases), directly or indirectly, on

account of any shares of Preferred Stock (other than the Series C Preferred

Stock) or Common Stock now or hereafter outstanding.

 

5.                  CONVERSION  RIGHTS.  The outstanding

shares of Series C Preferred Stock shall be convertible into Common Stock as

follows:

 

5.1            OPTIONAL CONVERSION.

 

(a) At the option of the holder

thereof, each share of Series C Preferred Stock shall be convertible, at any

time or from time to time, into fully paid and nonassessable shares of Common

Stock as provided herein.

 

(b) Each holder of Series C Preferred

Stock who elects to convert the same into shares of Common Stock shall

surrender the certificate or certificates therefor, duly endorsed, at the

office of the Corporation or any transfer agent for the Series C Preferred

Stock or Common Stock, and shall give written notice to the Corporation at such

office that such holder elects to convert the same and shall state therein the

number of shares of Series C Preferred Stock being converted. Thereupon the

Corporation shall promptly issue and deliver at such office to such holder a

certificate or certificates for the number of shares of Common Stock to which

such holder is entitled upon such conversion. Such conversion shall be deemed

to have been made immediately prior to the close of business on the date of

such surrender of the certificate or certificates representing the shares of

Series C Preferred Stock to be converted, and the person entitled to receive

the shares of Common Stock issuable upon such conversion shall be treated for

all purposes as the record holder of such shares of Common Stock on such date.

 

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5.2          AUTOMATIC

CONVERSION.

 

(a) At any time after May 31,

2005, the Corporation may cause each share of Series C Preferred Stock to be

automatically converted into fully paid and nonassessable shares of Common

Stock, as provided herein (such conversion, the “AUTOMATIC CONVERSION”), by

delivery of a notice to each registered holder of Series C Preferred Stock,

which notice shall describe the Automatic Conversion and include a

certification by the Corporation’s Chief Executive Officer and Chief Financial

Officer that each of the conditions to Automatic Conversion listed in Sections

5.2(a)(i) to 5.2(a)(iv), inclusive, have been satisfied (the “AUTOMATIC

CONVERSION NOTICE”); PROVIDED, HOWEVER, that the Corporation may not cause an

Automatic Conversion unless each of the following conditions is satisfied: (i)

as of the “Automatic Conversion Date” (as defined below), the Common Stock is

then traded, and was traded during the sixty (60) trading day period ending on

the Automatic Conversion Date, on a national securities exchange, the Nasdaq

National Market or the Nasdaq SmallCap Market (or a similar national quotation

system), (ii) the average of the per share closing prices of the Common Stock

on such exchange or system over the sixty (60) trading day period ending on the

Automatic Conversion Date (such prices to be proportionately adjusted to

reflect Common Stock Events) is greater than three (3) times the Initial

Conversion Price, (iii) a registration statement with respect to the resale of

the Common Stock issuable in the Automatic Conversion to holders of the Series

C Preferred Stock has been filed with the Securities and Exchange Commission,

such registration statement is then in effect, and the Corporation has agreed

with the holders of the Series C Preferred Stock to maintain the effectiveness

of such registration statement for at least 180 consecutive days beginning with

the date of the Automatic Conversion, and (iv) the average daily trading volume

of the Common Stock calculated over such sixty (60) day period equaled or

exceeded 200,000 shares (such share amount to be proportionately adjusted to

reflect Common Stock Events). For purposes of this Section 5, the “AUTOMATIC

CONVERSION DATE” shall mean the date on which the Automatic Conversion Notice

is, with respect to each registered holder of Series C Preferred Stock, either:

(Y) delivered to such registered holder by personal delivery, or (Z) delivered

to such registered holder by facsimile transmission to the fascimile address of

such holder appearing on the books of the Corporation (with confirmation of

receipt), and deposited with a recognized express courier for express delivery,

fees prepaid, addressed to such registered holder at the address of such holder

appearing on the books of the Corporation.

 

(b) Upon an Automatic Conversion

in accordance with the procedures specified in Section 5.2(a), and effective as

of the close of business on the Automatic Conversion Date, the outstanding

shares of Series C Preferred Stock shall be converted into Common Stock

automatically without the need for any further action by the holders of such

shares and whether or not the certificates representing such shares are

surrendered to the Corporation or its transfer agent; PROVIDED, HOWEVER, that

the Corporation shall not be obligated to issue certificates evidencing the

shares of Common Stock issuable upon such conversion unless the certificates

evidencing such shares of Series C Preferred Stock are either delivered to the

Corporation or its transfer agent as provided below, or the holder notifies the

Corporation or its transfer agent that such certificates have been lost, stolen

or destroyed and executes an agreement satisfactory to the Corporation and/or

its transfer agent to indemnify the Corporation and/or its transfer agent from

any loss incurred by it in connection with such certificates. Upon the

occurrence of such Automatic Conversion of the Series C Preferred Stock, the

holders of Series C Preferred Stock shall surrender the certificates

representing such shares at the office of any transfer agent for the Series C

Preferred Stock or Common Stock. Thereupon, there shall be issued and delivered

to such holder promptly at such office and in its name as shown on such

surrendered certificate or certificates, a certificate or certificates for the

number of shares of Common Stock into which the shares of Series C Preferred

Stock surrendered were convertible on the Automatic Conversion Date.

 

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5.3 CONVERSION PRICE. Each share

of Series C Preferred Stock shall be convertible in accordance with Section 5.1

or Section 5.2 above into the number of shares of Common Stock which results

from dividing the Original Issue Price for the Series C Preferred Stock by the

conversion price for the Series C Preferred Stock that is in effect at the time

of conversion (the “CONVERSION PRICE”). The initial Conversion Price for the

Series C Preferred Stock shall be the Closing Discounted Common Stock Price

(the “INITIAL CONVERSION PRICE”). The Conversion Price of the Series C

Preferred Stock shall be subject to adjustment from time to time as provided

below. Following each adjustment of the Conversion Price, such adjusted

Conversion Price shall remain in effect until a further adjustment of such

Conversion Price hereunder.

 

5.4 ADJUSTMENT UPON COMMON STOCK

EVENT. Upon the happening of a Common Stock Event, the Conversion Price of the

Series C Preferred Stock shall, simultaneously with the happening of such

Common Stock Event, be adjusted by multiplying the Conversion Price of the

Series C Preferred Stock in effect immediately prior to such Common Stock Event

by a fraction, (i) the numerator of which shall be the number of shares of

Common Stock issued and outstanding immediately prior to such Common Stock

Event, and (ii) the denominator of which shall be the number of shares of

Common Stock issued and outstanding immediately after such Common Stock Event,

and the product so obtained shall thereafter be the Conversion Price for the

Series C Preferred Stock. The Conversion Price for the Series C Preferred Stock

shall be readjusted in the same manner upon the happening of each subsequent

Common Stock Event.

 

5.5 ADJUSTMENTS FOR OTHER

DIVIDENDS AND DISTRIBUTIONS. If at any time or from time to time after the

Original Issue Date for the Series C Preferred Stock the Corporation pays a

dividend or makes another distribution to the holders of the Common Stock

payable in securities of the Corporation, other than an event constituting a

Common Stock Event, then in each such event provision shall be made so that the

holders of the Series C Preferred Stock shall receive upon conversion thereof,

in addition to the number of shares of Common Stock receivable upon conversion

thereof, the amount of securities of the Corporation which they would have

received had their Series C Preferred Stock been converted into Common Stock on

the date of such event (or such record date, as applicable) and had they

thereafter, during the period from the date of such event (or such record date,

as applicable) to and including the conversion date, retained such securities

receivable by them as aforesaid during such period, subject to all other

adjustments called for during such period under this Section 5 with respect to

the rights of the holders of the Series C Preferred Stock or with respect to

such other securities by their terms.

 

5.6 ADJUSTMENT FOR

RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any time or from time to

time after the Original Issue Date for the Series C Preferred Stock the Common

Stock issuable upon the conversion of the Series C Preferred Stock is changed

into the same or a different number of shares of any class or classes of stock,

whether by recapitalization, reclassification or otherwise (OTHER THAN by a

Common Stock Event or a stock dividend, reorganization, merger, or

consolidation provided for elsewhere in this Section 5), then in any such event

each holder of Series C Preferred Stock shall have the right thereafter to

convert such stock into the kind and amount of stock and other securities and

property receivable upon such recapitalization, reclassification or other

change by holders of the number of shares of Common Stock into which such

shares of Series C Preferred Stock could have been converted immediately prior

to such recapitalization, reclassification or change, all subject to further

adjustment as provided herein or with respect to such other securities or

property by the terms thereof.

 

5.7 REORGANIZATIONS, MERGERS AND

CONSOLIDATIONS. If at any time or from time to time after the Original Issue

Date for the Series C Preferred Stock there is a reorganization of the

Corporation

 

9

 

(other than a recapitalization,

subdivision, combination, reclassification or exchange of shares provided for

elsewhere in this Section 5) or a merger or consolidation of the Corporation

with or into another corporation (except an event which is governed under

Section 3.3), then, as a part of such reorganization, merger or consolidation,

provision shall be made so that the holders of the Series C Preferred Stock

thereafter shall be entitled to receive, upon conversion of the Series C

Preferred Stock, the number of shares of stock or other securities or property

of the Corporation, or of such successor corporation resulting from such

reorganization, merger or consolidation, to which a holder of Common Stock

deliverable upon conversion would have been entitled on such reorganization,

merger or consolidation. In any such case, appropriate adjustment shall be made

in the application of the provisions of this Section 5 with respect to the

rights of the holders of the Series C Preferred Stock after the reorganization,

merger or consolidation to the end that the provisions of this Section 5

(including adjustment of the Conversion Price then in effect and number of

shares issuable upon conversion of the Series C Preferred Stock) shall be

applicable after that event and be as nearly equivalent to the provisions

hereof as may be practicable. This Section 5.7 shall similarly apply to

successive reorganizations, mergers and consolidations.

 

5.8 SALE OF SHARES BELOW CONVERSION PRICE.

 

(a) ADJUSTMENT FORMULA. If at

any time or from time to time after the Original Issue Date for the Series C

Preferred Stock the Corporation issues or sells, or is deemed by the provisions

of this Section 5.8 to have issued or sold, Additional Shares of Common Stock

(as hereinafter defined), otherwise than in connection with a Common Stock

Event as provided in Section 5.4, a dividend or distribution as provided in

Section 5.5 or a recapitalization, reclassification or other change as provided

in Section 5.6, or a reorganization, merger or consolidation as provided in

section 5.7, for an Effective Price (as hereinafter defined) that is less than

the Conversion Price for the Series C Preferred Stock in effect immediately

prior to such issue or sale (or deemed issue or sale), then, and in each such

case, the Conversion Price for such series of Preferred Stock shall be reduced,

as of the close of business on the date of such issue or sale, to the price

obtained by multiplying such Conversion Price by a fraction:

 

(i) The numerator of which shall

be the sum of (A) the number of Common Stock Equivalents Outstanding (as

hereinafter defined) immediately prior to such issue or sale of Additional

Shares of Common Stock plus (B) the quotient obtained by dividing the Aggregate

Consideration Received (as hereinafter defined) by the Corporation for the

total number of Additional Shares of Common Stock so issued or sold (or deemed

so issued and sold) by the Conversion Price for such series of Preferred Stock

in effect immediately prior to such issue or sale; and

 

(ii) The denominator of which

shall be the sum of (A) the number of Common Stock Equivalents Outstanding

immediately prior to such issue or sale plus (B) the number of Additional

Shares of Common Stock so issued or sold (or deemed so issued and sold).

 

(b)            CERTAIN 

DEFINITIONS.  For the purpose of

making any adjustment required under this Section 5.8:

 

(i) The term “ADDITIONAL SHARES

OF COMMON STOCK” shall mean all shares of Common Stock issued by the

Corporation, or deemed issued as provided in Section 5.8(c) below, whether or

not subsequently reacquired or retired by the Corporation, other than:

 

(A) shares of Common Stock

issued or issuable upon conversion of any outstanding shares of Preferred

Stock;

 

10

 

(B) any shares of Common Stock

or Preferred Stock (or options, warrants or rights therefor) granted or issued

hereafter to employees, officers, directors, contractors, consultants or

advisers to, the Corporation or any Subsidiary pursuant to incentive

agreements, stock purchase or stock option plans, stock bonuses or awards,

warrants, contracts or other arrangements approved by the Board;

 

(C) any shares of the

Corporation’s Common Stock or Preferred Stock (and/or options or warrants

therefor) issued to parties that are strategic partners investing in connection

with a commercial relationship with the Corporation under arrangements that

are, in each case, approved by the Board;

 

(D) shares of Common Stock or

Preferred Stock issued pursuant to: (i) acquisitions of other corporations or

entities by the Corporation by consolidation, merger, purchase of all or

substantially all of the assets, or other reorganization in which the

Corporation acquires, in a single transaction or series of related

transactions, all or substantially all of the assets of such other corporation

or entity or fifty percent (50%) or more of the voting power of such other

corporation or entity or fifty percent (50%) or more of the equity ownership of

such other entity; provided that each such transaction or series of

transactions has been approved by the Board, or (ii) purchases of less than a

fifty percent (50%) equity ownership of other corporations or entities in

connection with joint ventures or other strategic arrangements or other

commercial relationships, provided such arrangements are approved in each case

by the Board;

 

(E) shares of Common Stock or

Preferred Stock issuable upon exercise of any options or warrants to purchase

any securities of the Corporation outstanding as of the date of this

Designation Statement and any securities issuable upon the conversion thereof;

 

(F) shares of Common Stock

issued pursuant to a transaction described in Section 5.4 hereof; and

 

(G) any shares of Common Stock

or Preferred Stock (or options, or warrants or rights to acquire the same),

issued or issuable hereafter that are: (i) approved by the Board, and (ii)

approved by the holders of a majority of the outstanding shares of Preferred

Stock, voting as a single class, as being excluded from the definition of

“Additional Shares of Common Stock” under this subsection 5.8(b)(i).

 

(ii) The term “AGGREGATE

CONSIDERATION RECEIVED” by the Corporation for any issue or sale (or deemed

issue or sale) of securities shall (A) to the extent it consists of cash, be

computed at the gross amount of cash received by the Corporation before

deduction of any underwriting or similar commissions, compensation or

concessions paid or allowed by the Corporation in connection with such issue or

sale and without deduction of any expenses payable by the Corporation; (B) to

the extent it consists of property other than cash, be computed at the fair

value of that property as determined in good faith by the Board of Directors;

and (C) if Additional Shares of Common Stock, Convertible Securities or Rights

or Options to purchase either Additional Shares of Common Stock or Convertible

Securities are issued or sold together with other stock or securities or other

assets of the Corporation for a consideration which covers both, be computed as

the portion of the consideration so received that may be reasonably determined

in good faith by the Board to be allocable to such Additional Shares of Common

Stock, Convertible Securities or Rights or Options.

 

(iii) The term “COMMON STOCK

EQUIVALENTS OUTSTANDING” shall mean the number of shares of Common Stock that

is equal to the sum of (A) all shares of Common Stock of the Corporation that

are outstanding at the time in question, plus (B) all shares of Common Stock of

the Corporation issuable upon conversion of all shares of Preferred Stock or

other Convertible Securities that are outstanding at the time in question, plus

(C) all shares of Common Stock of the Corporation that are issuable upon the

exercise of Rights or Options that are outstanding at the time in question

assuming the full conversion or exchange

 

11

 

into Common Stock of all such

Rights or Options that are Rights or Options to purchase or acquire Convertible

Securities into or for Common Stock.

 

(iv) The term “CONVERTIBLE

SECURITIES” shall mean stock or other securities ultimately convertible into or

exchangeable for shares of Common Stock.

 

(v) The term “EFFECTIVE PRICE”

of Additional Shares of Common Stock shall mean the quotient determined by

dividing the total number of Additional Shares of Common Stock issued or sold,

or deemed to have been issued or sold, by the Corporation under this Section

5.8, into the Aggregate Consideration Received, or deemed to have been

received, by the Corporation under this Section 5.8, for the issue of such

Additional Shares of Common Stock; and

 

(vi) The term “RIGHTS OR

OPTIONS” shall mean warrants, options or other rights to purchase or acquire

shares of Common Stock or Convertible Securities.

 

(c) DEEMED ISSUANCES. For the

purpose of making any adjustment to the Conversion Price of Series C Preferred

Stock required under this Section 5.8, if the Corporation issues or sells any

Rights or Options or Convertible Securities and if the Effective Price of the

shares of Common Stock issuable upon exercise of such Rights or Options and/or

the conversion or exchange of Convertible Securities (computed without

reference to any additional or similar protective or antidilution clauses) is

less than the Conversion Price then in effect for a series of Preferred Stock,

then the Corporation shall be deemed to have issued, at the time of the

issuance of such Rights, Options or Convertible Securities, that number of

Additional Shares of Common Stock that is equal to the maximum number of shares

of Common Stock issuable upon exercise or conversion of such Rights, Options or

Convertible Securities upon their issuance and to have received, as the

Aggregate Consideration Received for the issuance of such shares, an amount

equal to the total amount of the consideration, if any, received by the

Corporation for the issuance of such Rights or Options or Convertible

Securities, plus, in the case of such Rights or Options, the minimum amounts of

consideration, if any, payable to the Corporation upon the exercise in full of

such Rights or Options, plus, in the case of Convertible Securities, the

minimum amounts of consideration, if any, payable to the Corporation (other

than by cancellation of liabilities or obligations evidenced by such

Convertible Securities) upon the conversion or exchange thereof; PROVIDED THAT:

 

(i) if the minimum amounts of

such consideration cannot be ascertained, but are a function of antidilution or

similar protective clauses, then the Corporation shall be deemed to have

received the minimum amounts of consideration without reference to such

clauses;

 

(ii) if the minimum amount of

consideration payable to the Corporation upon the exercise of Rights or Options

or the conversion or exchange of Convertible Securities is reduced over time or

upon the occurrence or non-occurrence of specified events other than by reason

of antidilution or similar protective adjustments, then the Effective Price

shall be recalculated using the figure to which such minimum amount of

consideration is reduced; and

 

(iii) if the minimum amount of

consideration payable to the Corporation upon the exercise of such Rights or

Options or the conversion or exchange of Convertible Securities is subsequently

increased, then the Effective Price shall again be recalculated using the

increased minimum amount of consideration payable to the Corporation upon the

exercise of such Rights or Options or the conversion or exchange of such

Convertible Securities.

 

No further adjustment of the

Conversion Price, adjusted upon the issuance of such Rights or Options or

 

12

 

Convertible Securities, shall be

made as a result of the actual issuance of shares of Common Stock on the

exercise of any such Rights or Options or the conversion or exchange of any

such Convertible Securities. If any such Rights or Options or the conversion

rights represented by any such Convertible Securities shall expire without

having been fully exercised, then the Conversion Price as adjusted upon the

issuance of such Rights or Options or Convertible Securities shall be

readjusted to the Conversion Price which would have been in effect had an

adjustment been made on the basis that the only shares of Common Stock so issued

were the shares of Common Stock, if any, that were actually issued or sold on

the exercise of such Rights or Options or rights of conversion or exchange of

such Convertible Securities, and such shares of Common Stock, if any, were

issued or sold for the consideration actually received by the Corporation upon

such exercise, plus the consideration, if any, actually received by the

Corporation for the granting of all such Rights or Options, whether or not

exercised, plus the consideration received for issuing or selling all such

Convertible Securities actually converted or exchanged, plus the consideration,

if any, actually received by the Corporation (other than by cancellation of

liabilities or obligations evidenced by such Convertible Securities) on the

conversion or exchange of such Convertible Securities, provided that such

readjustment shall not apply to prior conversions of Preferred Stock.

 

5.9 CERTIFICATE OF ADJUSTMENT.

In each case of an adjustment or readjustment of the Conversion Price for the Series

C Preferred Stock, the Corporation, at its expense, shall promptly cause its

Chief Financial Officer to compute such adjustment or readjustment in

accordance with the provisions hereof and prepare a certificate showing such

adjustment or readjustment, and shall cause such certificate to be delivered to

each registered holder of the Series C Preferred Stock in accordance with

Section 5.12.

 

5.10 FRACTIONAL SHARES. No

fractional shares of Common Stock shall be issued upon any conversion of Series

C Preferred Stock. In lieu of any fractional share to which the holder would

otherwise be entitled, the Corporation shall pay the holder cash equal to the

product of such fraction multiplied by the closing price of the Corporation’s

Common Stock (as reported by a national securities exchange, the Nasdaq

National Market, the Nasdaq SmallCap Market or a similar national quotation

system on which the Common Stock is then traded) on the date of conversion.

 

5.11 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.

 

5.12 NOTICES. Except as provided

in Section 5.2 with respect to the Automatic Conversion Notice, any notice or

certificate required by the provisions of this Designation Statement to be

given to the holders of shares of the Series C Preferred Stock shall be deemed

given upon the earliest of: (i) actual receipt, (ii) one (1) business day after

deposit with a recognized express courier, fees prepaid, addressed to each

holder of record at the address of such holder appearing on the books of the

Corporation, or (iii) on the date of transmission by facsimile (with

confirmation of receipt), sent to each holder of record at the fascimile

address of such holder appearing on the books of the Corporation.

 

5.13 NO IMPAIRMENT. The Corporation

shall not avoid or seek to avoid the observance or performance of any of the

terms to be observed or performed hereunder by the Corporation, but shall at

all times in

 

13

 

good faith assist in carrying

out all such action as may be reasonably necessary or appropriate in order to

protect the conversion rights of the holders of the Series C Preferred Stock

against impairment.

 

6.                 MISCELLANEOUS.

 

6.1 NO REISSUANCE OF 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 cancelled, retired and eliminated from

the shares which the Corporation shall be authorized to issue.

 

6.2 PREEMPTIVE RIGHTS. No

stockholder of the Corporation shall have a right to purchase shares of capital

stock of the Corporation sold or issued by the Corporation except to the extent

that such a right may from time to time be set forth in a written agreement

between the Corporation and a stockholder.

 

6.3 PREFERRED STOCK WRITTEN

CONSENT. Notwithstanding any other provision of this Designation Statement,

with respect to matters involving only the Series C Preferred Stock and the

rights, preferences, privileges and restrictions granted to and imposed on the

Series C Preferred Stock, the holders of the Series C Preferred Stock may take

action without a meeting, without prior notice and without a vote, if a consent

or consents in writing, setting forth the action so taken, shall be signed by

the holders of majority of the Series C Preferred Stock then outstanding.

 

END OF TEXT

 

SIGNATURE PAGE FOLLOWS

 

14

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, the

undersigned has executed this Certificate of Designation of Series C

Convertible Preferred Stock of 24/7 Real Media, Inc. and acknowledges, under

penalty of perjury, that this instrument is the act and deed of the Corporation

and that the facts stated herein are true and correct of his own knowledge on

this 23th day of May, 2003.

 

 

	

   

  	

  /s/ Mark E.

  Moran

  	

   

  
	

   

  	

  Mark E. Moran

  
	

   

  	

  Senior Vice

  President & General Counsel

  

 

15Exhibit 4.2

 

	

  

  

 

 

CERTIFICATE

OF DESIGNATION

OFSERIES C-1 NONVOTING CONVERTIBLE PREFERRED STOCK
OF
24/7 REAL MEDIA, INC.

 

WHEREAS, the Amended and

Restated Certificate of Incorporation of 24/7 Real Media, Inc., a Delaware

corporation (the “CORPORATION”), as amended to the date

hereof (the “CERTIFICATE OF INCORPORATION”) authorizes the Corporation

to issue a total of 10,000,000 shares of preferred stock, par value $0.01 per

share (“PREFERRED STOCK”), which may be divided into one or more

classes and/or series as the Corporation’s Board of Directors (the “BOARD”)

may determine;

 

WHEREAS, the Certificate of

Incorporation expressly vests in the Board of Directors the authority to fix

the powers, designations, preferences, rights and qualifications, limitations or

restrictions, of the Preferred Stock; and

 

WHEREAS, the Board of Directors

deems it advisable to designate a series of the Preferred Stock consisting of

Five Hundred Thousand (500,000) shares designated as Series C-1 Nonvoting

Convertible Preferred Stock;

 

NOW, THEREFORE, IT IS HEREBY

RESOLVED, that pursuant to Article Fourth of the Certificate of Incorporation,

there be and hereby is authorized and created, pursuant to the terms of this

designation statement (this “DESIGNATION STATEMENT”) a series of Preferred

Stock, which series shall have the powers, designations, preferences, relative

and other special rights, and the qualifications, limitations and restrictions

set forth below:

 

SERIES C-1 CONVERTIBLE PREFERRED

STOCK. Five Hundred Thousand (500,000) of the authorized shares of Preferred

Stock of the Corporation are hereby designated “Series C-1 Nonvoting

Convertible Preferred Stock”, $0.01 par value per share (the “SERIES

C-1 PREFERRED STOCK”). The powers, designations, preferences,

relative and other special rights, and the qualifications, limitations and

restrictions and other matters relating to the Series C-1 Preferred Stock are

as follows:

 

1.                        DEFINITIONS.

For purposes of this Designation Statement, the following definitions apply:

 

1.1 “ACQUIRING STOCKHOLDER”

shall mean, with respect to a Combination Transaction, a stockholder or

stockholders of the Corporation that (i) merges or combines with the

Corporation in such Combination Transaction or (ii) owns or controls a majority

of another corporation that merges or combines with the Corporation in such

Combination Transaction.

 

1.2  “COMBINATION TRANSACTION” shall mean a

reorganization, consolidation, merger or similar transaction or series of

related transactions.

 

1.3  “COMMON STOCK” shall mean the Common

Stock, par value $0.01 per share, of the Corporation.

 

1

 

1.4  “COMMON STOCK DIVIDEND”

shall mean a stock dividend declared and paid on the Common Stock that is

payable in shares of Common Stock.

 

1.5 “CONVERSION SHARES” shall mean Five Hundred Thousand

(500,000) shares of Series C Preferred Stock issuable upon conversion of the

Series C-1 Preferred Stock originally issued under the Stock Purchase  agreement.

 

1.6 “DISTRIBUTION” shall mean the transfer of cash or property

by the Corporation to one or more of its stockholders without consideration,

whether by dividend or otherwise (except a dividend in shares of Corporation’s

stock). A Permitted Repurchase (defined below) is not a Distribution.

 

1.7  “DIVIDEND ACCRUAL DATE”

shall mean the first day of each calendar month.

 

1.8 “DIVIDEND RATE” shall mean a dollar amount per share equal

to six percent (6%) of the Original Issue Price for the Series C-1 Preferred

Stock, per annum, for the Series C-1 Preferred Stock (as adjusted for any stock

splits, stock dividends, recapitalizations or the like, with respect to the

Series C-1 Preferred Stock).

 

1.9 “ORIGINAL ISSUE DATE” for the Series C-1 Preferred Stock

shall mean the date on which the first share of Series C-1 Preferred Stock is

issued by the Corporation.

 

1.10 “ORIGINAL ISSUE PRICE” shall mean $10.00 per share for the

Series C-1 Preferred Stock, and $10.00 per share for the Series C Preferred

Stock (as adjusted for any stock splits, stock dividends, recapitalizations or

the like, with respect to such series of Preferred Stock).

 

1.11 “PERMITTED REPURCHASES” shall mean the repurchase by the

Corporation of shares of Common Stock held by employees, officers, directors,

consultants, independent contractors, advisors, or other persons performing

services for the Corporation or a Subsidiary that are subject to

restricted  stock purchase agreements,

stock option exercise agreements or similar agreements under which the Corporation

has the option to repurchase such shares.

 

1.12 “SERIES C DESIGNATION” shall mean the resolutions adopted

by the Board authorizing the Series C Preferred Stock, as filed with the

Delaware Secretary of State.

 

1.13 “SERIES C PREFERRED STOCK” shall mean the Series C

Preferred Stock, par value $0.01 per share, of the Corporation.

 

1.14 “SERIES C PREFERRED STOCK EVENT” shall mean, at any time or

from time to time after the Original Issue Date for the Series C-1 Preferred

Stock, (i) the issue by the Corporation of additional shares of Series C Preferred

Stock in connection with a dividend payable in shares of Series C Preferred

Stock, or other distribution, on outstanding Series C Preferred Stock, (ii) a

subdivision of the outstanding shares of Series C Preferred Stock into a

greater number of shares of Series C Preferred Stock, or (iii) a combination of

the outstanding shares of Series C Preferred Stock into a smaller number of

shares of Series C Preferred Stock.

 

1.13 “SERIES A DESIGNATION” shall mean the resolutions adopted

by the Board authorizing the Series A Preferred Stock, as filed with the

Delaware Secretary of State.

 

1.14 “SERIES A PREFERRED STOCK” shall mean the Series A

Preferred Stock, par value $0.01, of

 

2

 

the Corporation.

 

1.13 “SERIES B DESIGNATION” shall mean the resolutions adopted

by the Board authorizing the Series B Preferred Stock, as filed with the

Delaware Secretary of State.

 

1.14 “SERIES B PREFERRED STOCK” shall mean the Series B

Preferred Stock, par value $0.01, of the Corporation.

 

1.15 “STOCK PURCHASE AGREEMENT” shall mean that certain Stock

Purchase Agreement, dated on or about May    , 2003 by and among

the Corporation and the persons and entities listed on the signature page

thereto.

 

1.16 “SUBSIDIARY” shall mean any corporation of which at least

fifty percent (50%) of the outstanding voting stock is at the time owned

directly or indirectly by the Corporation or by one or more of such subsidiary

corporations.

 

2.                       DIVIDEND

RIGHTS.

 

2.1 CUMULATIVE DIVIDEND PREFERENCE. The holders of the then outstanding

Series C-1 Preferred Stock shall be entitled to receive, when, as and if

declared by the Board, out of any funds and assets of the Corporation legally

available therefor, cumulative dividends at the annual Dividend Rate for the

Series C-1 Preferred Stock, prior and in preference to the payment of any

dividend or other Distribution on the Common Stock (other than a Common Stock

Dividend). Such dividends shall begin accruing on each share of Series C-1

Preferred Stock on the first Dividend Accrual Date occurring after the date on

which such share of Series C Preferred Stock is issued by the Corporation, and

shall accrue on each subsequent Dividend Accrual Date thereafter until paid,

whether or not earned or declared. No accumulation of dividends on the Series

C-1 Preferred Stock shall compound or bear any interest. Unless the full amount

of any accrued and unpaid dividends accrued on the Series C-1 Preferred Stock

shall have been paid or declared in full and a sum sufficient for the payment

thereof reserved and set apart, no dividend (other than a Common Stock

Dividend) shall be paid or declared, and no Distribution shall be made, on any

Common Stock; provided, however, that this restriction shall not

apply to Permitted Repurchases. Payments of any accrued dividends to the

holders of the Series C-1 Preferred Stock, the Series C Preferred Stock and the

Series A Preferred Stock and the Series B Preferred Stock shall be made pro

rata, on an equal priority, pari passu basis.

 

2.2 PARTICIPATION RIGHTS. In the event that the Corporation shall

declare a dividend or other Distribution on the Common Stock out of funds

legally available therefor (other than a Common Stock Dividend), then the

holders of the then outstanding Series C-1 Preferred Stock shall be entitled to

a proportionate share of any such dividend or other Distribution as though each

holder of such Series C-1 Preferred Stock was the holder of the greatest whole

number of shares of Common Stock issuable upon conversion of the Series C

Preferred Stock issuable upon conversion pursuant to Section 5 of all the

Series C-1 Preferred Stock held by such holder, in each case as of the record

date fixed for the determination of holders of Common Stock entitled to receive

such dividend or other Distribution, assuming for this purpose that the

Automatic Conversion Date is such record date.

 

2.3 NON-CASH DIVIDENDS. Whenever a dividend provided for in this Section

2 shall be payable in property other than cash, the value of such dividend shall

be deemed to be the fair market value of such property as determined in good

faith by the Board, provided that dividends payable in securities (other

 

3

 

than Common Stock Dividends, dividends declared and paid on the Series C

Preferred Stock that are payable in shares of Series C Preferred Stock, and

dividends declared and paid on the Series A Preferred Stock that are payable in

shares of Series A Preferred Stock and dividends declared and paid on the Series

B Preferred Stock that are payable in shares of Series B Preferred Stock) shall

be valued in the manner set forth in Sections 3.4(a) and (b) hereof.

 

3.                        LIQUIDATION

RIGHTS. In the event of any liquidation, dissolution or winding up of the

Corporation, whether voluntary or involuntary, the funds and assets that may be

legally distributed to the Corporation’s stockholders (the “AVAILABLE

FUNDS AND ASSETS”) shall be distributed to stockholders in the

following manner:

 

3.1 LIQUIDATION PREFERENCE. The holders of each share of Series C-1

Preferred Stock then outstanding shall be entitled to be paid, out of the

Available Funds and Assets, and prior and in preference to any payment or

distribution (or any setting apart of any payment or distribution) of any Available

Funds and Assets on any shares of Common Stock, an amount per share equal to

the Original Issue Price for the Series C-1 Preferred Stock plus all accrued

but unpaid dividends on the Series C-1 Preferred Stock.  The Series C-1 Preferred Stock shall rank on

parity with the Series C Preferred Stock, Series B Preferred Stock and Series A

Preferred Stock with respect to the liquidation, dissolution or winding up of

the Corporation. If upon any liquidation, dissolution or winding up of the

Corporation, the Available Funds and Assets shall be insufficient to permit the

payment to holders of the Series C-1 Preferred Stock and the Series A Preferred

Stock. the Series B Preferred Stock and the Series C Preferred Stock of their

full preferential amounts, then all of the Available Funds and Assets shall be

distributed among the holders of the then outstanding shares

of Series C-1 Preferred Stock, Series C Preferred Stock, Series B

Preferred Stock and Series A Preferred Stock pro rata, on an equal priority,

pari passu basis, according to their respective liquidation preferences.

 

3.2 PARTICIPATION RIGHTS. If there are any Available Funds and Assets

remaining after the payment or distribution (or the setting aside for payment

or distribution) to the holders of the Series C-1 Preferred Stock, the Series A

Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock

of their full liquidation preference amounts payable pursuant to Section 3.1

above for the Series C-1 Preferred Stock, pursuant to Section 3.1 of the Series

A Designation for the Series A Preferred Stock, pursuant to Section 3.1 of the

Series B Designation for the Series B Preferred Stock and pursuant to Section

3.1 of the Series C Designation for the Series C Preferred Stock, in connection

with a liquidation, dissolution or winding up of the Corporation, then all such

remaining Available Funds and Assets shall be distributed among the holders of

the then outstanding Common Stock, Series A Preferred Stock, Series B Preferred

Stock, Series C Preferred Stock and Series C-1 Preferred Stock pro rata

according to the number of shares of Common Stock held by such holders, where,

for this purpose: (a) each holder of outstanding Series C-1 Preferred Stock

will be deemed to hold (in lieu of their Series C-1 Preferred Stock), the

greatest whole number of shares of Common Stock issuable upon conversion of the

Series C Preferred Stock issuable upon conversion pursuant to Section 5 of all

the Series C-1 Preferred Stock held by such holder, in each case as of the

record date fixed for the determination of holders of Common Stock entitled to

receive such distribution, and assuming for this purpose that the Automatic

Conversion Date is such record date, (b) each holder of outstanding Series A

Preferred Stock will be deemed to hold (in lieu of their Series A Preferred

Stock), the greatest whole number of shares of Common Stock issuable upon

conversion of such holder’s Series A Preferred Stock, as of the record date

fixed for the determination of holders of Common Stock entitled to receive such

distribution, (c) each holder of outstanding Series B Preferred Stock will be

deemed to hold (in lieu of their Series B Preferred Stock), the greatest whole

number of shares of Common Stock issuable upon conversion of such holder’s

Series B Preferred Stock, as of the record date fixed for the determination of

holders of Common Stock entitled to receive such distribution,

 

4

 

and (d) each holder of outstanding Series C Preferred Stock will be

deemed to hold (in lieu of their Series C Preferred Stock), the greatest whole

number of shares of Common Stock issuable upon conversion of such holder’s

Series C Preferred Stock, as of the record date fixed for the determination of

holders of Common Stock entitled to receive such distribution; UNTIL SUCH

TIME AS: each holder of then outstanding shares of Preferred Stock shall

have received, in distributions made in connection with such liquidation,

dissolution or winding up, an aggregate amount per share of Preferred Stock

held equal to three (3) times the Original Issue Price for such share of

Preferred Stock (such aggregate dollar amount to include all amounts previously

paid to such holder pursuant to the liquidation preference of the such share of

Preferred Stock including without limitation any dividends paid thereon); AFTER

WHICH TIME the holders of then outstanding Common Stock shall be entitled

to receive all the remaining Available Funds and Assets (if any) pro rata

according to the number of outstanding shares of Common Stock then held by each

of them.

 

3.3 MERGER OR SALE OF ASSETS. Each of the following transactions shall

be deemed to be a liquidation, dissolution or winding up of the Corporation as

those terms are used in this Section 3 (and in the case of a transaction

described in Section 3.3(a) below, the Available Funds and Assets shall be the

consideration paid by the acquiror in such transaction): (a) a Combination

Transaction in which the Corporation is a constituent corporation if, as a

result of such Combination Transaction, the voting securities of the

Corporation that are outstanding immediately prior to the consummation of such

Combination Transaction (OTHER THAN any such securities that are held by

an Acquiring Stockholder) do not represent, or are not converted into,

securities of the surviving corporation of such Combination Transaction (or

such surviving corporation’s parent corporation if the surviving corporation is

owned by the parent corporation) that, immediately after the consummation of

such Combination Transaction, together possess at least a majority of the total

voting power of all securities of such surviving corporation (or its parent

corporation, if applicable) that are outstanding immediately after the consummation

of such Combination Transaction, including securities of such surviving

corporation (or its parent corporation, if applicable) that are held by the

Acquiring Stockholder; or (b) a sale of all or substantially all of the assets

of the Corporation (each of the foregoing transactions, a “SALE TRANSACTION”).

 

Notwithstanding the foregoing or the provisions of Section 5.7 below, if

any of the above described transactions are approved by both: (a) the vote of

the holders of at least a majority of the shares of Preferred Stock then

outstanding, voting as a single class, and (b) a vote sufficient under the

Delaware General Corporation Law, the Certificate of Incorporation (including

this Designation Statement and the Series A Designation and the Series B Designation)

and the Bylaws of the Corporation to approve such transaction, THEN the rights

of the holders of Common Stock and Preferred Stock with respect to such

transaction will be governed by the documents to be entered into in connection

with such transaction.

 

The Corporation shall not enter into any Sale Transaction that does not

provide for the treatment of the holders of Series C-1 Preferred Stock in a

manner consistent with the provisions of this Section 3. In the event that the

requirements of the immediately preceding sentence are not complied with in

connection with a Sale Transaction, the Corporation shall forthwith either: (x)

cause the closing of Sale Transaction to be postponed until such time as such

requirements have been complied with, or (y) cancel such Sale Transaction, in

which event the rights, preferences and privileges of the holders of the Series

C-1 Preferred Stock shall revert to and be the same as such rights,

preferrences and privileges existing immediately prior to the latest date on

which the notice referred to in Section 3.5 below with respect to such Sale

Transaction could be given in compliance with the provisions of such Section

3.5.

 

3.4 NON-CASH CONSIDERATION. If any assets of the Corporation distributed

to stockholders in connection with any liquidation, dissolution, or winding up

of the Corporation are other than cash, then the value of such assets shall be

their fair market value as determined in good faith by the Board,

 

5

 

EXCEPT THAT any securities to be distributed to

stockholders in a liquidation, dissolution, or winding up of the Corporation

shall be valued as follows:

 

(a) The method of valuation of securities not subject to investment

letter or other similar restrictions on free marketability shall be as follows:

 

(i) unless otherwise specified in a definitive agreement for the

acquisition of the Corporation, if the securities are then traded on a national

securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market

(or a similar national quotation system), then the value shall be deemed to be

the average of the closing prices of the securities on such exchange or system

over the twenty (20) trading day period ending three (3) trading days prior to

the distribution; and

 

(ii) if (i) above does not apply but the securities are actively traded

over-the-counter, then, unless otherwise specified in a definitive agreement

for the acquisition of the Corporation, the value shall be deemed to be the

average of the closing bid prices over the twenty (20) trading day period

ending three (3) trading days prior to the distribution; and

 

(iii) if there is no active public market as described in clauses (i) or

(ii) above, then the value shall be the fair market value thereof, as

determined in good faith by the Board.

 

(b) The method of valuation of securities subject to investment letter

or other restrictions on free marketability (other than restrictions arising

solely by virtue of a stockholder’s status as an affiliate or former affiliate)

shall be to make an appropriate discount from the market value determined as

above in subparagraphs (a)(i),(ii) or (iii) of this subsection to reflect the

approximate fair market value thereof, as determined in good faith by the Board.

 

(c) Any determination in good faith by the Board pursuant to this

Section 3.4 shall be conclusive and final and shall be binding on the

Corporation and all stockholders thereof.

 

3.5 NOTICE. Written notice of any liquidation, dissolution or winding up

of the Corporation within the meaning of this Section 3, stating the nature of

such liquidation, dissolution or winding up, and specifying the anticipated

effective date of such liquidation, dissolution or winding up, shall be given

in the manner specified in Section 5.10 hereof at least twenty (20) days prior

to, and no more than sixty (60) days prior to, the effective date of such

liquidation, dissolution or winding up.

 

4.                       VOTING

RIGHTS.

 

4.1 NO VOTING RIGHTS. Except as otherwise provided by law and as provided

in Section 4.2 below, holders of Series C-1 Preferred Stock shall have no

voting rights.

 

4.2 PROTECTIVE PROVISIONS. The Corporation shall not, without the

approval, by vote or written consent, of the holders of a majority of the

Series C-1 Preferred Stock then outstanding, voting as a separate class: (a)

amend its Certificate of Incorporation or Bylaws in any manner that would alter

or change the rights, preferences, privileges or restrictions of the Series C-1

Preferred Stock so as to adversely affect any of the rights, preferences,

privileges or restrictions of such series of Preferred Stock, or (b) increase

or decrease (other than pursuant to Section 7.1 below) the total number of

authorized shares of Series C-1 Preferred Stock.

 

5.                       CONVERSION.

The outstanding shares of Series C-1 Preferred Stock shall be convertible into

 

6

 

Series C

Preferred Stock as follows:

 

5.1 AUTOMATIC CONVERSION.

 

(a) At the close of business on the date: (i) of any meeting of the

holders of the Common Stock at which a quorum shall be present and at which a

majority of the shares of Common Stock voting shall have voted (in person or by

proxy) to increase the number of shares of Common Stock authorized to be issued

under the Company’s certificate of incorporation, and, to the extent required

under the rules of the Nasdaq Stock Market, in favor of a proposal to approve

the issuance of the Conversion Shares upon conversion of the Series C-1

Preferred Stock, or (ii) that such other action shall have been taken by the

stockholders of the Corporation as shall have satisfied the stockholder

approval requirements of Nasdaq with respect to the issuance of the Conversion

Shares upon conversion of the Series C-1 Preferred Stock, in either case prior

to the Corporation’s receipt of a Redemption Request (as defined in Section 6.1

below) delivered in accordance with Section 6.1, each then outstanding share of

Series C-1 Preferred Stock shall be automatically converted into fully paid and

nonassessable shares of Series C Preferred Stock effective as of the date such

stockholder approval is obtained (the “AUTOMATIC CONVERSION DATE”), as

provided herein (such conversion, the “AUTOMATIC CONVERSION”).

 

(b) Upon an Automatic Conversion in accordance with Section 5.1(a), and

effective as of the close of business on the Automatic Conversion Date, the

outstanding shares of Series C-1 Preferred Stock shall be converted into Series

C Preferred Stock automatically without the need for any further action by the

holders of such shares and whether or not the certificates representing such

shares are surrendered to the Corporation or its transfer agent; provided,

however, that the Corporation shall not be obligated to issue certificates

evidencing the shares of Series C Preferred Stock issuable upon such conversion

unless the certificates evidencing such shares of Series C-1 Preferred Stock

are either delivered to the Corporation or its transfer agent as provided

below, or the holder notifies the Corporation or its transfer agent that such

certificates have been lost, stolen or destroyed and executes an agreement

satisfactory to the Corporation and/or its transfer agent to indemnify the

Corporation and/or its transfer agent from any loss incurred by it in connection

with such certificates. Upon the occurrence of such Automatic Conversion of the

Series C-1 Preferred Stock: (i) the Corporation shall deliver written notice of

such Automatic Conversion in the manner specified in Section 5.10 hereof

promptly after the Automatic Conversion Date to each holder of Series C-1

Preferred Stock that was converted into Series C Preferred Stock in the

Automatic Conversion, and (ii) the holders of Series C-1 Preferred Stock shall

surrender the certificates representing such shares at the office of any

transfer agent for the Series C-1 Preferred Stock or Series C Preferred Stock.

Thereupon, there shall be issued and delivered to such holder promptly at such

office and in its name as shown on such surrendered certificate or certificates,

a certificate or certificates for the number of shares of Series C Preferred

Stock into which the shares of Series C-1 Preferred Stock surrendered were

convertible on the Automatic Conversion Date.

 

5.2 CONVERSION PRICE. Each share of Series C-1 Preferred Stock shall be

convertible in accordance with Section 5.1 above into the number of shares of

Series C Preferred Stock which results from dividing the Original Issue Price

for the Series C-1 Preferred Stock by the conversion price for the Series C-1 Preferred

Stock that is in effect at the time of conversion (the “CONVERSION PRICE”).

The initial Conversion Price for the Series C-1 Preferred Stock shall be the

Original Issue Price for the Series C-1 Preferred Stock. The Conversion Price

of the Series C-1 Preferred Stock shall be subject to adjustment from time to

time as provided below. Following each adjustment of the Conversion Price, such

adjusted Conversion Price shall remain in effect until a further adjustment of

such Conversion Price hereunder.

 

5.3 ADJUSTMENT UPON SERIES C PREFERRED STOCK EVENT. Upon the happening

of a Series C

 

7

 

Preferred Stock Event, the Conversion Price of the Series C-1 Preferred

Stock shall, simultaneously with the happening of such Series C Preferred Stock

Event, be adjusted by multiplying the Conversion Price of the Series C-1

Preferred Stock in effect immediately prior to such Series C Preferred Stock

Event by a fraction, (i) the numerator of which shall be the number of shares

of Series C Preferred Stock issued and outstanding immediately prior to such

Series C Preferred Stock Event, and (ii) the denominator of which shall be the

number of shares of Series C Preferred Stock issued and outstanding immediately

after such Series C Preferred Stock Event, and the product so obtained shall

thereafter be the Conversion Price for the Series C-1 Preferred Stock. The

Conversion Price for the Series C-1 Preferred Stock shall be readjusted in the

same manner upon the happening of each subsequent Series C Preferred Stock

Event.

 

5.4 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at any time or

from time to time after the Original Issue Date for the Series C-1 Preferred

Stock the Corporation pays a dividend or makes another distribution to the

holders of the Series C Preferred Stock payable in securities of the

Corporation, other than an event constituting a Series C Preferred Stock Event,

then in each such event provision shall be made so that the holders of the

Series C-1 Preferred Stock shall receive upon conversion thereof, in addition

to the number of shares of Series C Preferred Stock receivable upon conversion

thereof, the amount of securities of the Corporation which they would have

received had their Series C-1 Preferred Stock been converted into Series C

Preferred Stock on the date of such event (or such record date, as applicable)

and had they thereafter, during the period from the date of such event (or such

record date, as applicable) to and including the conversion date, retained such

securities receivable by them as aforesaid during such period, subject to all

other adjustments called for during such period under this Section 5 with

respect to the rights of the holders of the Series C-1 Preferred Stock or with

respect to such other securities by their terms.

 

5.5 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at

any time or from time to time after the Original Issue Date for the Series C-1

Preferred Stock the Series C Preferred Stock issuable upon the conversion of

the Series C-1 Preferred Stock is changed into the same or a different number

of shares of any class or classes of stock, whether by recapitalization,

reclassification or otherwise (OTHER THAN by a Series C Preferred Stock

Event or a stock dividend, reorganization, merger, or consolidation provided

for elsewhere in this Section 5), then in any such event each holder of Series

C-1 Preferred Stock shall have the right thereafter to convert such stock into

the kind and amount of stock and other securities and property receivable upon

such recapitalization, reclassification or other change by holders of the

number of shares of Series C Preferred Stock into which such shares of Series

C-1 Preferred Stock could have been converted immediately prior to such

recapitalization, reclassification or change, all subject to further adjustment

as provided herein or with respect to such other securities or property by the

terms thereof.

 

5.6 REORGANIZATIONS, MERGERS AND CONSOLIDATIONS. If at any time or from

time to time after the Original Issue Date for the Series C-1 Preferred Stock

there is a reorganization of the Corporation (other than a recapitalization,

subdivision, combination, reclassification or exchange of shares provided for

elsewhere in this Section 5) or a merger or consolidation of the Corporation

with or into another corporation (except an event which is governed under

Section 3.3), then, as a part of such reorganization, merger or consolidation,

provision shall be made so that the holders of the Series C-1 Preferred Stock

thereafter shall be entitled to receive, upon conversion of the Series C-1

Preferred Stock, the number of shares of stock or other securities or property

of the Corporation, or of such successor corporation resulting from such reorganization,

merger or consolidation, to which a holder of Series C Preferred Stock

deliverable upon conversion would have been entitled on such reorganization,

merger or consolidation. In any such case, appropriate adjustment shall be made

in the application of the provisions of this Section 5 with respect to the

rights of the holders of the Series C-1 Preferred Stock after the

 

8

 

reorganization, merger or consolidation to the end that the provisions

of this Section 5 (including adjustment of the Conversion Price then in effect

and number of shares issuable upon conversion of the Series C-1 Preferred

Stock) shall be applicable after that event and be as nearly equivalent to the

provisions hereof as may be practicable. This Section 5.6 shall similarly apply

to successive reorganizations, mergers and consolidations.

 

5.7 CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or

readjustment of the Conversion Price for the Series C-1 Preferred Stock, the

Corporation, at its expense, shall promptly cause its Chief Financial Officer

to compute such adjustment or readjustment in accordance with the provisions

hereof and prepare a certificate showing such adjustment or readjustment, and

shall cause such certificate to be delivered to each registered holder of the

Series C-1 Preferred Stock in accordance with Section 5.10.

 

5.8 FRACTIONAL SHARES. No fractional shares of Series C Preferred Stock

shall be issued upon any conversion of Series C-1 Preferred Stock. In lieu of

any fractional share to which the holder would otherwise be entitled, the

Corporation shall pay the holder cash equal to the product of such fraction

multiplied by the fair value of one share of Series C Preferred Stock, which

shall be equal to the fair market value of the shares of Common Stock and other

securities or property issuable upon conversion of such share of Series C

Preferred Stock on the Automatic Conversion Date as determined in good faith by

the Board (with reference to the closing price of the Corporation’s Common

Stock (as reported by a national securities exchange, the Nasdaq National

Market, the Nasdaq SmallCap Market or a similar national quotation system on

which the Common Stock is then traded).

 

5.9 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall

at all times reserve and keep available out of its authorized but unissued

shares of Series C Preferred Stock and Common Stock, solely for the purpose of

effecting the conversion of the shares of the Series C-1 Preferred Stock and

the conversion of the Series C Preferred Stock issuable upon conversion of the

Series C-1 Preferred Stock: (a) such number of its shares of Series C Preferred

Stock as shall from time to time be sufficient to effect the conversion of all

outstanding shares of the Series C-1 Preferred Stock, and (b) 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

issuable upon conversion of all Series C-1 Preferred Stock; and if at any time

the number of authorized but unissued shares of Series C Preferred Stock or

Common Stock shall not be sufficient to effect the conversion of all then

outstanding shares of the Series C-1 Preferred Stock and the conversion of all

Series C Preferred Stock issuable upon conversion of all then outstanding

Series C-1 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 Series C Preferred Stock and/or Common Stock to such number

of shares as shall be sufficient for such purposes.

 

5.10 NOTICES. Any notice or certificate required by the provisions of

this Designation Statement to be given to the holders of shares of the Series

C-1 Preferred Stock shall be deemed given upon the earliest of: (i) actual

receipt, (ii) one (1) business day after deposit with a recognized express

courier, fees prepaid, addressed to each holder of record at the address of

such holder appearing on the books of the Corporation, or (iii) on the date of

transmission by facsimile (with confirmation of receipt), sent to each holder

of record at the fascimile address of such holder appearing on the books of the

Corporation.

 

5.11 NO IMPAIRMENT. The Corporation shall not avoid or seek to avoid the

observance or performance of any of the terms to be observed or performed

hereunder by the Corporation, but shall at all times in good faith assist in

carrying out all such action as may be reasonably necessary or appropriate in

order to protect the conversion rights of the holders of the Series C-1

Preferred Stock against impairment.

 

9

 

6.                       REDEMPTION.

 

6.1 MANDATORY REDEMPTION. Subject to the terms and conditions of this

subsection, if the Corporation receives a written request signed by the holders

of a majority of the then outstanding shares of Series C-1 Preferred Stock

requesting that the Corporation redeem their shares of Series C-1 Preferred

Stock (the “REDEMPTION REQUEST”) at any time  (i) after August 15, 2003 and (ii) before December 31, 2003,

unless, prior to August 15, 2003: (x) the Corporation shall have taken all

corporate action necessary to permit the issuance of the Conversion Shares upon

conversion of the Series C-1 Preferred Stock, and (y) Publigroupe USA Holding

shall have transferred and delivered to the Corporation for cancellation all

promissory notes that the Corporation has executed in favor of Publigroupe,

then the Corporation shall redeem, from any source of funds legally available

therefor, on the date seven (7) business days following its receipt of such

written redemption request (or the next succeeding business day if such date is

a holiday or weekend) (the “REDEMPTION DATE”), all shares of Series

C-1 Preferred Stock outstanding on the Redemption Date for an amount per share

of Series C-1 Preferred Stock so redeemed equal to the Original Issue Price for

the Series C-1 Preferred Stock (the “REDEMPTION PRICE”).

 

6.2 EXCESS REDEMPTION. If upon the Redemption Date or any Excess

Redemption Date (as defined below) the funds and assets of the Corporation

legally available to redeem the Series C-1 Preferred Stock shall be

insufficient to redeem all shares of Series C-1 Preferred Stock, then the

Corporation shall redeem shares of Series C-1 Preferred Stock on the Redemption

Date to the extent of the funds and assets of the Corporation legally available

therefor, pro rata among all holders of then outstanding Series C-1 Preferred

Stock according to the number of shares held by each holder thereof on the

Redemption Date, and any shares of Series C-1 Preferred Stock not so redeemed

on the Redemption Date (the “EXCESS REDEMPTION SHARES”) shall

continue to be outstanding and entitled to all dividend, liquidation, and other

rights, preferences, privileges and restrictions of the Series C-1 Preferred

Stock until such shares have been redeemed hereunder. The Corporation shall

promptly return the certificate(s) representing the Excess Redemption Shares,

or issue new certificates representing the Excess Redemption Shares to the

extent such certificates were cancelled, to the holders of record thereof to

the extent such holders had delivered their certificate(s) representing such

Excess Redemption Shares to the Corporation in connection with the applicable

redemption. Excess Redemption Shares shall be redeemed by the Corporation on

the first business day of each calendar month after the calendar month

following the calendar month including the Redemption Date, to the full extent

of legally available funds of the Corporation at such time (each such date of

redemption of Excess Redemption Shares, an “EXCESS REDEMPTION DATE”).

 

6.3 REDEMPTION NOTICE. At least five (5) days prior to the Redemption

Date and each Excess Redemption Date, if any, written notice shall be given by

the Corporation pursuant to Section 5.10 hereof to each holder of record (at

the close of business on the business day next preceding the day on which

notice is given) of the Series C-1 Preferred Stock, notifying such holder of

the redemption to be effected, specifying the subsection hereof under which

such redemption is being effected, the Redemption Date or Excess Redemption

Date, as applicable, the applicable Redemption Price (calculated to take into

effect all dividends accrued and unpaid on the Series C-1 Preferred Stock as of

such Redemption Date or Excess Redemption Date), and the place at which payment

may be obtained and calling upon such holder to surrender to the Corporation,

in the manner and at the place designated, the certificate or certificates

representing the shares to be redeemed (the “REDEMPTION NOTICE”).

 

6.4 SURRENDER OF CERTIFICATES. On or before the Redemption Date and any

Excess Redemption

 

10

 

Date, if any, each holder of Series C-1 Preferred Stock to be redeemed

shall surrender the certificate(s) representing such shares of Series C-1

Preferred Stock to be redeemed to the Corporation, in the manner and at the

place designated in the Redemption Notice, and thereupon the Redemption Price

for each shares shall be payable to the order of the person whose name appears

on such certificate(s) as the owner thereof, and each surrendered certificate

shall be cancelled and retired.

 

6.5 EFFECT OF REDEMPTION. If the Redemption Notice shall have been duly

given, and if on the Redemption Date or the Excess Redemption Date the

applicable Redemption Price is paid, then notwithstanding that the certificates

evidencing any of the shares of Series C-1 Preferred Stock so called for

redemption shall not have been surrendered, all dividends with respect to such

shares shall cease to accrue after such Redemption Date or Excess Redemption

Date, as the case may be, such shares shall not thereafter be transferred on

the Corporation’s books and the rights of all of the holders of such shares

with respect to such shares shall terminate after such Redemption Date or

Excess Redemption Date, except only the right of the holders to receive the

applicable Redemption Price without interest upon surrender of their

certificate(s) therefor.

 

7.                       MISCELLANEOUS.

 

7.1 NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series C-1

Preferred Stock acquired by the Corporation by reason of redemption, purchase,

conversion or otherwise shall be reissued, and all such shares shall be

cancelled, retired and eliminated from the shares which the Corporation shall

be authorized to issue.

 

7.2 PREEMPTIVE RIGHTS. No stockholder of the Corporation shall have a

right to purchase shares of capital stock of the Corporation sold or issued by

the Corporation except to the extent that such a right may from time to time be

set forth in a written agreement between the Corporation and a stockholder.

 

7.3 PREFERRED STOCK WRITTEN CONSENT. Notwithstanding any other provision

of this Designation Statement, with respect to matters involving only the

Series C-1 Preferred Stock and the rights, preferences, privileges and

restrictions granted to and imposed on the Series C-1 Preferred Stock, the

holders of the Series C-1 Preferred Stock may take action without a meeting,

without prior notice and without a vote, if a consent or consents in writing,

setting forth the action so taken, shall be signed by the holders of a majority

of the Series C-1 Preferred Stock then outstanding.

 

END OF TEXT

 

SIGNATURE PAGE FOLLOWS

 

11

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, the

undersigned has executed this Certificate of Designation of Series C-1

Convertible Preferred Stock of 24/7 Real Media, Inc. and acknowledges, under

penalty of perjury, that this instrument is the act and deed of the Corporation

and that the facts stated herein are true and correct of his own knowledge on

this 23th day of May, 2003.

 

 

	

   

  	

  /s/ Mark E.

  Moran

  	

   

  
	

   

  	

  Mark E. Moran

  
	

   

  	

  Senior Vice President & General Counsel

  

 

12

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