Document/Exhibit Description Pages Size
1: 8-K Current Report on Form 8-K 4 13K
2: EX-3.1 Certificate of Designations 19 70K
3: EX-10.1 Securities Purchase Agreement 27 128K
4: EX-10.2 Warrant Issued to Elliot Associates, L.P. 14 58K
5: EX-10.3 Warrant Issued to Westgate International, L.P. 13 58K
6: EX-10.4 Registration Rights Agreement 20 74K
7: EX-99.1 Press Release 2 11K
CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF
of
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
for
GENESISINTERMEDIA.COM, INC.
GENESISINTERMEDIA.COM, INC., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, does hereby make this Certificate of Designations and does
hereby state and certify that pursuant to the authority expressly vested in the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following resolutions,
which resolutions remain in full force and effect as of the date hereof:
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of 4,000
shares, par value $.001, to be designated Series B Cumulative Convertible
Preferred Stock (the "Preferred Shares").
RESOLVED, that subject to the terms and conditions of the Purchase
Agreement (as defined herein), 4,000 Preferred Shares may be issued.
RESOLVED, that each of the Preferred Shares shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. Designation. There is hereby created out of the authorized and unissued
shares of preferred stock of the Corporation a series of preferred stock
designated as the Series B Cumulative Convertible Preferred Stock (the
"Preferred Shares"). The number of shares constituting such series shall be
4,000.
2. Dividends.
(a) Cumulative. The holders of the Preferred Shares shall be entitled to
receive cumulative dividends at the per share rate of five percent (5%) of the
Liquidation Preference (as defined below) of each Preferred Share, per annum
accruing daily and payable quarterly on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date") commencing with the
first Dividend Payment Date occurring after the original issuance date of such
share, in preference and priority to any payment of any dividend on the Common
Stock (as defined below) or any other class or series of equity security of the
Corporation. Such dividends shall accrue on any given share from the most recent
date on which a dividend has been paid with respect to such share, or if no
dividends have been paid, from the date of the original issuance of such share,
and such dividends shall accrue from day to day whether or not declared, based
on the actual number of days elapsed. If at any time dividends on the
outstanding Preferred Shares at the rate set forth above shall not have been
paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of equity security of the Corporation. For
so long as any Preferred Shares are outstanding, the Corporation shall not pay
any dividends on any shares of Common Stock or any shares of any other capital
stock, or repurchase any shares of Common Stock or capital stock, without having
received written consent of two-thirds in interest of the holders of Preferred
Shares, except as otherwise provided herein or in the Purchase Agreement or
Registration Rights Agreement (as such terms are defined herein). For purposes
of computing any per diem accrual, calculations shall be made using a 360-day
year.
(b) PIK Payment or Cash Payment. Any dividend payable on the outstanding
Preferred Shares shall be paid by adding the amount thereof to the Liquidation
Preference (as defined below) of such Preferred Shares. Upon the payment of
dividends as required by the immediately preceding sentence, such dividends will
be deemed paid in full. Notwithstanding the foregoing, the Corporation may pay
dividends in cash if on 10 Trading Day' (as defined below) irrevocable prior
written notice, it informs the holders of the Preferred Shares of its election
to pay cash dividends. Following notice of payment of cash dividends by the
Corporation, all dividends on the Preferred Shares shall be paid in cash, until
such time as the Corporation provides 10 Trading Days' irrevocable written
notice to the holders of Preferred Shares of its election to pay dividends
in-kind.
3. Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Preferred Shares shall rank senior to the holders of all other classes or
series of equity securities (including without limitation the Series A
Convertible Preferred Stock of the Corporation) and shall be entitled to
receive, out of the assets of the Corporation available for distribution to
stockholders, prior and in preference to any distribution of any assets of the
Corporation to the holders of any other class or series of equity securities
(including without limitation the Series A Convertible Preferred Stock of the
Corporation), the amount of $1,000 per share plus (i) dividends added to the
Liquidation Preference in accordance with Section 2(b) above; (ii) all accrued
but unpaid dividends; and (iii) all "Monthly Delay Payments" payable under the
Registration Rights Agreement (as defined below) (the "Liquidation Preference");
provided, however, in the event that the Corporation obtains a firm commitment
from a reputable financing source, as reasonably determined by the holders of
Preferred Shares, to provide financing ("Refinancing") to the Corporation in
excess of $10 million on terms which would require the Corporation to issue
equity securities ranking pari passu with the Preferred Shares, then if, and
only if, the holders of the Preferred Shares do not consent in writing to such
pari passu ranking within twenty (20) Trading Days of the Corporation's written
request therefor ("Company Request"), the Corporation may elect to purchase all,
but not part, of the outstanding Preferred Shares at a purchase price equal to
the Refinancing Redemption Price (as defined below), subject to the terms
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contained herein. If the Corporation elects to exercise its redemption right
hereunder, the Corporation shall provide at least 30 days prior written notice
to the holders of Preferred Shares specifying such redemption date, which date
shall be on or prior to closing of the Refinancing, and the Corporation shall
pay the entire Refinancing Redemption Price in cash to the holders of Preferred
Shares on such redemption date. The Corporation shall deliver the Company
Request to all holders of Preferred Shares at least thirty (30) days prior to
the closing of such Refinancing, together with the identity of such financing
source and any and all other information concerning the Refinancing reasonably
requested by the holders of Preferred Shares. The Corporation may not deliver a
Company Request hereunder unless at such time there shall exist Effective
Registration (as defined below). The Corporation's redemption right contained
herein, and any consent given by the holders of Preferred Shares hereunder,
shall automatically become null and void and revoked in the event that at any
time after such Company Request through the closing date of the Refinancing
there shall fail to exist Effective Registration. Holders of Preferred Shares
may continue to convert any or all of their Preferred Shares after receiving the
Company Request whether or not they consent and whether or not the Corporation
exercises its redemption right hereunder. Notwithstanding anything contained
herein, no holder of Preferred Shares shall be obligated to redeem any Preferred
Shares held by such holder unless and until each of the following conditions has
been satisfied or exists, each of which shall be a condition precedent to any
such redemption (waivable by any holder with respect to such holder's Preferred
Shares, in which case such holder may compel the Corporation to redeem the
Preferred Shares as provided herein):
(A) no material default or breach exists which has not been cured, and
no event shall have occurred which constitutes (or would constitute with
notice or the passage of time or both) a material default or breach of the
Purchase Agreement, the Registration Rights Agreement, the Warrants or this
Certificate of Designations, which has not been cured;
(B) none of the events described in clauses (i) through (iv) of
Section 2(b) of the Registration Rights Agreement shall have occurred and
be continuing;
(C) the Registration Statement (as defined in the Registration Rights
Agreement) is effective and holders have received unlegended certificates
representing Common Shares with respect to all conversions for which
Conversion Notices have been given and with respect to all exercises of
Warrants for which Notices of Exercise have been given; and
(D) the Corporation and its subsidiaries are able to pay all their
debts as they become due in the ordinary course of business, and the
Corporation is not subject to any liquidation, dissolution or winding up of
its affairs, or any bankruptcy, insolvency or similar proceeding.
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The "Refinancing Redemption Price" shall equal the greater of (x) 135% of the
Liquidation Preference of all such Preferred Shares being sold to the
Corporation, or (y) the Liquidation Preference for the Preferred Shares being
sold to the Corporation divided by the then applicable Conversion Price
multiplied by the greater of the last closing price of the Common Stock on (i)
the Trading Day immediately preceding the redemption date, or (ii) the date on
which the Company Request is delivered, in each case payable in cash.
4. Issuance of Preferred Shares. The Preferred Shares shall be issued by
the Corporation pursuant to a Securities Purchase Agreement, dated on or about
the date hereof ("Purchase Agreement") between the Corporation and the initial
subscriber(s) for the Preferred Shares thereunder (the "Subscriber"), and
holders of Preferred Shares shall enjoy the benefits of the Registration Rights
Agreement, dated the date hereof ("Registration Rights Agreement") between such
parties in connection with the Purchase Agreement.
5. Conversion. Each holder of the Preferred Shares shall have the right at
any time and from time to time, at the option of such holder, to convert any or
all Preferred Shares held by such holder, for such number of fully paid, validly
issued and nonassessable shares ("Common Shares") of common stock, par value
$0.001, of the Corporation ("Common Stock"), free and clear of any liens, claims
or encumbrances, as is determined by dividing (i) the Liquidation Preference
times the number of Preferred Shares being converted (the "Conversion Amount"),
by (ii) the applicable Conversion Price determined as hereinafter provided in
effect on the Conversion Date. Immediately following such conversion, the rights
of the holders of converted Preferred Shares shall cease and the persons
entitled to receive the Common Shares upon the conversion of Preferred Shares
shall be treated for all purposes as having become the owners of such Common
Shares, subject to the rights provided herein to holders.
(a) Mechanics of Conversion. To convert Preferred Shares into Common
Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
may be given by facsimile transmission no later than the Conversion Date)
stating that such holder elects to convert the same and shall state therein the
number of Preferred Shares to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Shares to be issued
(the conversion date specified in such Conversion Notice shall be referred to
herein as the "Conversion Date"). Either simultaneously with the delivery of the
Conversion Notice, or within one (1) Trading Day (as defined below) thereafter,
the holder shall deliver (which also may be done by facsimile transmission) page
2 to Exhibit A hereto indicating the computation of the number of Common Shares
to be received. As soon as possible after delivery of the Conversion Notice,
such holder shall surrender the certificate or certificates representing the
Preferred Shares being converted, duly endorsed, at the office of the
Corporation or, if identified in writing to all the holders by the Corporation,
at the offices of any transfer agent for such shares. The Corporation shall,
immediately upon receipt of such Conversion Notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing the
Preferred Shares which have been converted, a certificate or certificates for
the number of Common Shares to which such holder shall be entitled (with the
number of and denomination of such certificates designated by such holder), and
the Corporation shall immediately issue and deliver to such holder a certificate
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or certificates for the number of Preferred Shares (including any fractional
shares) which such holder has not yet elected to convert hereunder but which are
evidenced in part by the certificate(s) delivered to the Corporation in
connection with such Conversion Notice. The Corporation shall effect such
issuance of Common Shares (and certificates for unconverted Preferred Shares)
within three (3) Trading Days of the Conversion Date and shall transmit the
certificates by messenger or overnight delivery service to reach the address
designated by such holder within three (3) Trading Days after the receipt of
such Conversion Notice ("T+3"). If certificates evidencing the Common Shares are
not received by the holder within five (5) Trading Days of the Conversion
Notice, then the holder will be entitled to revoke and withdraw its Conversion
Notice, in whole or in part, at any time prior to its receipt of those
certificates. In lieu of delivering physical certificates representing the
Common Shares issuable upon conversion of Preferred Shares, provided the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
holder, the Corporation shall use its best efforts to cause its transfer agent
to electronically transmit the Common Shares issuable upon conversion or
exercise to the holder, by crediting the account of the holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with DTC
to accomplish this objective. The conversion pursuant to this Section 5 shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date. The person or persons entitled to receive the Common Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Shares at the close of business on the
Conversion Date.
The term "Trading Day" means a day on which there is trading on the Nasdaq
National Market or such other market or exchange on which the Common Stock is
then principally traded.
If a holder of Preferred Shares converts any of such holder's Preferred
Shares, the Corporation shall pay any documentary or stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the conversion.
However, such holder shall pay any such tax that is due because the shares of
Common Stock are issued in a name other than such holder's name.
The Corporation's obligation to issue Common Shares upon conversion of
Preferred Shares shall, except as set forth below, be absolute, is independent
of any covenant of any holder of Preferred Shares, and shall not be subject to:
(i) any offset or defense; or (ii) any claims against the holders of Preferred
Shares whether pursuant to this Certificate, the Purchase Agreement, the
Registration Rights Agreement or otherwise.
(b) Determination of Conversion Price and Optional Redemption.
(i) Conversion Price. The Conversion Price applicable with respect to
the Preferred Shares (the "Conversion Price"), shall be as follows:
5
(A) Beginning on the date of closing of the Purchase
Agreement (the "Closing Date"), the Conversion Price shall be a
price equal to 115% of the Closing Price (the "Fixed Price").
(B) Beginning 45 days after the Closing Date, the Conversion
Price shall be the lesser of:
1) the Fixed Price or
2) the Market Price.
As used herein, "Principal Market" shall mean Nasdaq National Market or
such other principal market where the Common Stock is then listed for trading.
As used herein "Closing Price" shall mean the average of the closing prices
of the Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) for the 5
Trading Days immediately prior to the Closing Date (including the Trading Day
immediately preceding the Closing Date).
As used herein, "Market Price" shall mean the average of the lowest closing
prices of the Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) on any 3 Trading
Days out of the 15 Trading Days (the "Market Price Period") immediately prior to
the Conversion Date (including the Trading Day immediately preceding the
Conversion Date).
(ii) Optional Redemption. Subject to the provisions of this paragraph (ii),
the Corporation may honor conversions of Preferred Shares by redeeming Preferred
Shares for cash at the Cash Redemption Price (as defined below) by delivering a
written notice ("Cash Conversion Notice") to all holders of Preferred Shares
stating the Corporation's election to honor such conversions by redemption
pursuant to the terms of this Section 5(b)(ii), provided, however, that (a) such
Cash Conversion Notice may only be delivered in the event that the average of
the closing prices for shares of Common Stock recorded on the Principal Market
(as reported by the Bloomberg financial network or any successor reporting
service) for the fifteen (15) consecutive Trading Days immediately preceding the
Cash Conversion Notice is less than Fixed Price, and (b) such election shall
take effect exactly five (5) Trading Days after receipt of the Cash Conversion
Notice and shall continue thereafter until five (5) Trading Days after the
Corporation delivers a written notice ("Withdrawal Notice") to all holders of
Preferred Shares stating that the Corporation will no longer honor conversion of
Preferred Shares through cash redemption (such period of cash redemptions being
hereinafter referred to as the "Cash Redemption Period"). Upon any conversion of
Preferred Shares during the Cash Redemption Period, the Corporation shall redeem
any Preferred Shares submitted for conversion by paying the holder thereof the
Cash Redemption Price within two (2) Trading Days following the date which would
have been the Conversion Date pursuant to the applicable Conversion Notice. In
the event that any such holder does not receive such Cash Redemption Price
6
within such two (2) Trading Days, then the amount so due shall accrue interest
daily at a rate of 20% per annum. In addition to and not in lieu of such
interest accrual, if such holder does not receive such Cash Redemption Price
within five (5) Trading Days following such Conversion Date, then such holder
shall have the right at any time thereafter, at the holder's option, to either
(1) to sell any or all of its Preferred Shares then held by such holder at the
Mandatory Repurchase Price (as defined in the Registration Rights Agreement), or
(2) force the Corporation to convert the Preferred Shares submitted for
conversion into Common Shares pursuant to the provisions of Section 5(a) above.
If at any time during the Cash Redemption Period, the closing price for shares
of Common Stock recorded on the Principal Market (as reported by the Bloomberg
financial network or any successor reporting service) exceeds the Fixed Price
for five (5) consecutive Trading Days, any holder may, at the option of such
holder, terminate the Cash Redemption Period, with respect to such holder only,
upon five (5) Trading Days' written notice to the Corporation, and the
Corporation shall again be obligated to convert the Preferred Shares submitted
for conversion by such holder into Common Shares pursuant to the provisions of
Section 5(a) above at any time after such fifth (5th) Trading Day. For
clarification purposes, any Preferred Shares submitted for conversion during the
five (5) Trading Day period immediately following delivery of a Cash Conversion
Notice shall be converted into Common Shares as provided in Section 5(a) hereof,
and any Preferred Shares submitted for conversion during the five (5) Trading
Day period immediately following delivery of a Withdrawal Notice shall be
redeemed for cash as provided in this paragraph. The "Cash Redemption Price"
shall mean the amount equal to (x) the value of one share of Common Stock (based
on the closing price of the Common Stock on the Principal Market on the Trading
Day immediately preceding the date which would have been the Conversion Date had
the conversion occurred in the normal course pursuant to Section 5(a) hereof),
times (y) the number of shares of Common Stock that the holder would have
received had the conversion occurred in the normal course pursuant to Section
5(a) hereof.
(c) Stock Splits; Dividends; Adjustments.
(i) If the Corporation, at any time while the Preferred Shares are
outstanding, (A) shall pay a stock dividend or otherwise make a distribution or
distributions on any equity securities (including instruments or securities
convertible into or exchangeable for such equity securities) in shares of Common
Stock, (B) subdivide outstanding Common Shares into a larger number of shares,
or (C) combine outstanding Common Stock into a smaller number of shares, then
each Affected Conversion Price (as defined below) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(c)(i) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
7
As used herein, the Affected Conversion Prices (each an "Affected
Conversion Price") shall refer to: (i) the Fixed Price; and (ii) each reported
price for the Common Stock on the Principal Market occurring on any Trading Day
included in the Market Price Period, which Trading Day occurred before the
record date in the case of events referred to in clause (A) of this subparagraph
5(c)(i) and the effective date in the case of the events referred to in clauses
(B) and (C) of this subparagraph 5(c)(i).
(ii) In the event that the Corporation issues or sells any Common Stock or
securities which are convertible into or exchangeable for its Common Stock
(other than Preferred Shares), or any warrants or other rights to subscribe for
or to purchase or any options for the purchase of its Common Stock (other than
shares or options issued or which may be issued pursuant to (i) the
Corporation's current or future employee, director or bona fide consultant
option plans or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Purchase Agreement and listed in the
Corporation's most recent periodic report filed under the Securities Exchange
Act of 1934, as amended, or in the Purchase Agreement, or (ii) arrangements with
the holders of Preferred Shares) at an effective purchase price per share which
is less than the greater of (1) the closing market price per share of the Common
Stock on the Principal Market on the Trading Day next preceding such issue or
sale or, in the case of issuances to holders of its Common stock, the date fixed
for the determination of stockholders entitled to receive such warrants, rights,
or options ("Fair Market Price") or (2) the Fixed Price, then in each such case,
the Fixed Price in effect immediately prior to such issue or sale or record
date, as applicable, shall be reduced effective concurrently with such issue or
sale to an amount determined by multiplying the Fixed Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock and Convertible Securities (as defined below) outstanding
immediately prior to such issue or sale, plus (2) the number of shares of Common
Stock which the aggregate consideration received by the Corporation for such
additional shares would purchase at such Fixed Price or Fair Market Price, as
the case may be; and (y) the denominator of which shall be the number of shares
of Common Stock and Convertible Securities (as defined below) of the Corporation
outstanding immediately after such issue or sale.
For purposes of the preceding paragraph, in the event that the effective
purchase price is less than both the Fair Market Price and the Fixed Price, then
the calculation method which yields the greatest downward adjustment in the
Conversion Price shall be used.
For the purposes of the foregoing adjustment, in the case of the issuance
of any convertible securities, warrants, options or other rights to subscribe
for or to purchase or exchange for, shares of Common Stock ("Convertible
Securities"), the maximum number of shares of Common Stock issuable upon
exercise, exchange or conversion of such Convertible Securities shall be deemed
to be outstanding, provided that no further adjustment shall be made upon the
8
actual issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities.
(iii) If the Corporation, at any time while the Preferred Shares are
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets or cash or rights or warrants to subscribe for or
purchase any security of the Corporation or any of its subsidiaries (excluding
those referred to in Sections 5(c)(i) or 5(c)(ii) above), then concurrently with
such distributions to holder of Common Stock, the Corporation shall distribute
to holders of the Preferred Shares, the amount of such indebtedness, assets,
cash or rights or warrants which the holders of Preferred Shares would have
received had they converted all their Preferred Shares into Common Shares
immediately prior to the record date for such distribution.
(iv) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(i)
or (ii) above or the Corporation makes a distribution as described in Section
5(c)(iii) above, the Corporation shall promptly mail to each holder of the
Preferred Shares a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, or setting forth a description of the distribution and the facts
surrounding same.
(v) All calculations under this Section 5(c) shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(vi) No adjustment in the Conversion Price shall reduce the Conversion
price below the then par value of the Common Stock.
(vii) The Corporation from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 Trading Days and
if the reduction is irrevocable during the period. Whenever the Conversion Price
is reduced, the Corporation shall mail to the holders of Preferred Shares a
notice of the reduction. The Corporation shall mail, first class, postage
prepaid, the notice at least 15 days before the date the reduced Conversion
Price takes effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does not change
or adjust the Conversion Price otherwise in effect for purposes of Section
5(c)(i), (ii), or (iii).
(d) Notice of Record Date. In the event of any taking by the Corporation of
a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible into or entitling the
holder thereof to receive additional Common Shares, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
deliver to each holder of Preferred Shares at least 20 days prior to the date
specified therein (or such lesser time as is equal to the period between the
fixing of such record date and such record date, but in no event less than 10
days prior notice), a notice specifying the date on which any such record is to
9
be taken for the purpose of such dividend, distribution, security or right and
the amount and character of such dividend, distribution, security or right.
(e) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of Common Shares on conversion of Preferred
Shares pursuant hereto. However, the holder of any Preferred Shares shall pay
any tax that is due because the Common Shares issuable upon conversion thereof
are issued in a name other than such holder's name.
(f) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purposes of effecting the conversion of the Preferred
Shares, an amount of Common Shares equal to or greater than 200% of the number
of shares issuable upon conversion of the Preferred Shares at the then
applicable Conversion Price. The Corporation promptly will take such corporate
action as may, in the opinion of its outside counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
best efforts to obtain the requisite stockholder approval.
(g) Fractional Shares. No fractional shares shall be issued upon the
conversion of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon conversion of more than one Preferred Share by a holder
thereof and all Preferred Shares issuable upon the purchase thereof shall be
aggregated for purposes of determining whether the conversion and/or purchase
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion and/or purchase would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, either round up the number of shares to
the next highest whole number or, at the Corporation's option, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date (as determined in good faith by the
Board of Directors of the Corporation).
(h) Reorganization, Merger or Going Private. In case of any reorganization
or any reclassification of the capital stock of the Corporation or any
consolidation or merger of the Corporation with or into any other corporation or
corporations or a sale or transfer of all or substantially all of the assets of
the Corporation to any other person or a "going private" transaction under Rule
13e-3 promulgated pursuant to the Exchange Act, then, as part of such
reorganization, consolidation, merger, or transfer if the holders of shares of
Common Stock receive any publicly traded securities as part or all of the
consideration for such reorganization, consolidation, merger or sale, then it
shall be a condition precedent of any such event or transaction that provision
shall be made such that each Preferred Share shall thereafter be convertible
into such new securities at a conversion price and pricing formula which places
the holders of Preferred Shares in an economically equivalent position as they
would have been if not for such event. In addition to the foregoing, if the
holders of shares of Common Stock receive any non-publicly traded securities or
other property or cash as part or all of the consideration for such
reorganization, consolidation, merger or sale, then such distribution shall be
treated to the extent thereof as a distribution under Section 5(c) above and
such Section shall also apply to such distribution.
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(i) Limitations on Holder's Right to Convert.
(i) Notwithstanding anything to the contrary contained herein, the number
of shares of Common Stock that may be acquired by the holder upon conversion
pursuant to the terms hereof shall not exceed a number that, when added to the
total number of shares of Common Stock deemed beneficially owned by such holder
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the holder's right to convert, exercise or
purchase similar to the limitation set forth herein), together with all shares
of Common Stock deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
total issued and outstanding shares of the Common Stock (the "Restricted
Ownership Percentage"); provided that (w) each holder shall have the right at
any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Corporation and (x) each holder shall have the
right (subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of the announcement as
pending or planned, of a transaction or event referred to in Section 5(m) below.
(ii) Each time (a "Covenant Time") the holder or an Aggregation Party makes
a Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares"), the holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at that
Covenant Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x) 9.99% of the
number of shares of Common Stock outstanding at that Covenant Time (including
the Triggering Shares) minus (y) the number of shares of Common Stock actually
owned by the holder at that Covenant Time (regardless of how or when acquired,
and including the Triggering Shares). A "Triggering Acquisition" means the
giving of a Conversion Notice or any other acquisition of Common Stock by the
holder or an Aggregation Party; provided, however, that with respect to the
giving of such Conversion Notice, if the associated issuance of shares of Common
Stock does not occur, such event shall cease to be a Triggering Acquisition and
the related covenant under this paragraph shall terminate. At each Covenant
Time, the holder shall be deemed to waive any right it would otherwise have to
acquire shares of Common Stock to the extent that such acquisition would violate
any covenant given by the holder under this paragraph. Notwithstanding anything
to the contrary in the Transaction Documents, in the event of a conflict between
any covenant given under this paragraph and any obligation of the holder to
convert Preferred Shares pursuant to the Transaction Documents, the former shall
supersede the latter, and the latter shall be reduced accordingly. For the
avoidance of doubt:
(A) The covenant to be given pursuant to this paragraph will be given at
every Covenant Time and shall be calculated based on the circumstances
11
then in effect. The making of a covenant at one Covenant Time shall
not terminate or modify any prior covenants.
(B) The holder may therefore from time to time be subject to multiple such
covenants, each one having been made at a different Covenant Time, and
some possibly being more restrictive than others. The holder must
comply with all such covenants then in effect.
(iii) Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, the number of shares of Common Stock issuable
by the Corporation and acquirable by the holders hereunder shall not exceed
19.9% of the number of shares of Common Stock outstanding on the Closing Date,
subject to appropriate adjustment for stock splits, stock dividends, or other
similar recapitalizations affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Corporation's shareholders
in accordance with applicable law and the By-laws and Articles of Incorporation
of the Corporation. If at any point in time and from time to time (each a
"Trigger Date") the number of Common Shares issued pursuant to conversion of the
Preferred Shares and exercise of the Warrants, together with the number of
Common Shares that would then be issuable by the Corporation in the event of
conversion of all the Preferred Shares and exercise of all the Warrants then
outstanding, would exceed the Maximum Common Stock Issuance but for this Section
5(i)(iii), then the Corporation shall, at the Corporation's election, either (A)
promptly call a shareholders meeting to obtain shareholder approval for the
issuance of Common Shares hereunder in excess of the Maximum Common Stock
Issuance, which such shareholder approval shall be obtained within 60 days of
the Trigger Date, or (B) purchase from the holders of Preferred Shares and
Warrants on a pro rata basis such number of Preferred Shares and Warrants which
cannot be converted or exercised due to such Maximum Common Stock Issuance
limitation ("Shortfall") at a redemption price equal to the "Mandatory
Repurchase Price" (as defined in the Registration Rights Agreement), which such
redemption price shall be paid within three (3) Trading Days after a Trigger
Date if this clause (B) is elected. The Corporation shall make such election
with two (2) days following the Trigger Date by giving written notice to all
holders of Preferred Shares and Warrants. If the Corporation fails to timely
make such election, or elects clause (A) but then fails to obtain such
shareholder approval within 60 days following the Trigger Date, then the
Corporation shall purchase the Shortfall at the Mandatory Repurchase Price
within three (3) Trading Days following any such failure.
(j) Certificate for Conversion Price Adjustment. The Corporation shall
promptly furnish or cause to be furnished to each holder a certificate prepared
by the Corporation setting forth any adjustments or readjustments of the
Conversion Price pursuant to this Section 5.
(k) Specific Enforcement. The Corporation agrees that irreparable damage
would occur in the event that any of the provisions of this Certificate of
Designations were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the holders of Preferred
Shares shall be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
12
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(l) Mandatory Repurchase. Each holder shall have the unilateral option and
right to compel the Corporation to repurchase any or all of such holder's
Preferred Shares within 3 days of a written notice requiring such repurchase, at
a price per Preferred Share equal to the Mandatory Repurchase Price if any of
the following events involving the Corporation shall have occurred:
(i) A Change in Control Transaction (as defined below);
(ii) A "going private" transaction under Rule 13e-3 promulgated
pursuant to the Exchange Act; or
(iii) A tender offer by the Corporation under Rule 13e-4 promulgated
pursuant to the Exchange Act.
A "Change in Control Transaction" will be deemed to exist if (i) there
occurs any consolidation or merger of the Corporation with or into any other
corporation or other entity or person (whether or not the Corporation is the
surviving corporation), or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Corporation's
voting power is transferred through a merger, consolidation, tender offer or
similar transaction, (ii) any person (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), together with
its affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act of 1933, as amended (the "Act")), beneficially owns or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act without
regard to the 60-day exercise period) in excess of 50% of the Corporation's
voting power, (iii) there is a replacement of more than one-half of the members
of the Corporation's Board of Directors which is not approved by those
individuals who are members of the Corporation's Board of Directors on the date
thereof, in one or a series of related transactions or (iv) a sale or transfer
of all or substantially all of the assets of the Corporation, determined on a
consolidated basis.
(m) Automatic Conversion and Forced Conversion.
(1) Automatic Conversion. Subject to Subsections 5(i)(3) and 5(i)(4)
below, on the second (2nd) anniversary of the Closing Date (the "Automatic
Conversion Date"), at the option of the Corporation, all the Preferred
Shares shall either be (i) automatically converted into Common Shares as of
the Automatic Conversion Date at the Conversion Price in effect on such
date or (ii) redeemed by the Corporation pursuant to Section 5(b)(ii)
above; provided, however, that the Corporation shall provide at least
thirty (30) days prior written notice to all holders of its election
hereunder, otherwise each holder of Preferred Shares will have the option
to choose such cash redemption or conversion on the Automatic Conversion
Date, and provided further, that such Automatic Conversion Date shall be
deferred, at the sole option of a holder of Preferred Shares, for up to
such number of days as is equal to 1.5 times the number of days (A) there
is a lack of Effective Registration (as defined in subsection (5) below) at
any time after 120 days following the Closing Date; (B) there is not a
13
sufficient amount of Common Stock available for conversion of all
outstanding Preferred Shares and exercise of all outstanding Warrants (as
defined in the Purchase Agreement); (C) for any other reason the
Corporation refuses or announces its refusal to honor conversion of
Preferred Shares or exercise of Warrants; or (D) for any other reason there
is a suspension, restriction or limitation in the ability of holders of
Preferred Shares or Warrants to sell Common Shares received upon conversion
of Preferred Shares or exercise of Warrants pursuant to the prospectus
included in the Registration Rights Agreement.
(2) Forced Conversion. Subject to Subsections 5(i)(3) and 5(i)(4)
below, in the event that the in the event that the closing price for shares
of Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) exceeds
200% times the Fixed Price for twenty (20) consecutive Trading Days, the
Corporation shall have the right to compel holders of Preferred Shares (on
a pro rata basis) to convert all or a portion of their Preferred Shares at
the Conversion Price in effect on the conversion date by delivering written
notice ("Forced Conversion Notice") to all holders of its election
hereunder, specifying the conversion date ("Forced Conversion Date") and
the number of shares to be converted; provided, however, that (1) the
Forced Conversion Date shall not occur until at least fifteen (15) Trading
Days' following the Forced Conversion Notice, (2) the closing price for
shares of Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) shall
exceed 200% times the Fixed Price for at least twenty (20) Trading Days
immediately preceding delivery of the Forced Conversion Notice and at all
times thereafter through and including the Forced Conversion Date, (3)
there shall be an Effective Registration at the time of such election
notice and all times thereafter through and including the Forced Conversion
Date, and (4) holders of Preferred Shares may continue to convert any or
all of their Preferred Shares after receiving the Corporation's election
notice under this Section 5(m)(2). Such forced conversion shall be subject
to and governed by all the provisions relating to voluntary conversion of
the Preferred Shares contained herein. If such forced conversion occurs
during a Cash Redemption Period, then the provisions of Section 5(b)(ii)
shall apply.
(3) Notwithstanding the preceding subsections (1) and (2), no holder
of Preferred Shares shall be obligated to convert or redeem any Preferred
Shares held by such holder on the applicable Automatic Conversion Date or
Forced Conversion Date, as the case may be, unless and until each of the
following conditions has been satisfied or exists, each of which shall be a
condition precedent to any such automatic conversion or forced conversion
(waivable by any holder with respect to such holder's Preferred Shares):
(A) no material default or breach exists which has not been
cured, and no event shall have occurred which constitutes (or would
constitute with notice or the passage of time or both) a material
default or breach of the Purchase Agreement, the Registration Rights
14
Agreement, the Warrants or this Certificate of Designations, which has
not been cured;
(B) none of the events described in clauses (i) through (iv) of
Section 2(b) of the Registration Rights Agreement shall have occurred
and be continuing;
(C) the Registration Statement (as defined in the Registration
Rights Agreement) is effective and holders have received unlegended
certificates representing Common Shares with respect to all
conversions for which Conversion Notices have been given and with
respect to all exercises of Warrants for which Notices of Exercise
have been given; and
(D) the Corporation and its subsidiaries are able to pay all
their debts as they become due in the ordinary course of business, and
the Corporation is not subject to any liquidation, dissolution or
winding up of its affairs, or any bankruptcy, insolvency or similar
proceeding.
(4) Notwithstanding anything contained in subsections (1) or (2)
above, no holder's Preferred Shares shall be subject to automatic
conversion or forced conversion to the extent such conversion would result
in the holder of Preferred Shares exceeding the limitation contained in
Section 5(i) above. In such event, the Preferred Shares of such holder
shall be converted in such amount until such limitation is reached, and the
remaining Preferred Shares shall be purchased by the Corporation at the
Cash Redemption Price or Mandatory Redemption Price, as applicable, as if
such Preferred Shares were being redeemed pursuant to Section 5(b)(ii)
above.
(5) For purposes of this Certificate of Designations, a lack of
Effective Registration shall be deemed to have occurred at any time the
Common Shares issuable upon conversion of the Preferred Shares or exercise
of the Warrants are not capable of being sold on an Approved Market (as
defined in the Purchase Agreement) pursuant to an effective registration
statement and deliverable prospectus.
6. Voting Rights. In addition to all other requirements imposed by Delaware
law, and all other voting rights granted under the Corporation's Certificate of
Incorporation, the affirmative vote of two-thirds in interest of the
Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment, modification or repeal of this Certificate of Designations (whether
by merger, consolidation or otherwise) or for any merger, reclassification,
consolidation or reorganization,) or (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or change or
adversely affect any of the rights, preferences, or privileges of the Preferred
Shares, provided, however, that holders of Preferred Shares (other than the
Investor under the Purchase Agreement and their affiliates) who are affiliates
of the Corporation (and the Corporation itself) shall not participate in such
15
vote and the Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.
7. Notices. The Corporation shall distribute to the holders of Preferred
Shares copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed generally
to the holders of shares of Common Stock of the Corporation, at such times and
by such method as such documents are distributed to such holders of such Common
Stock.
8. Replacement Certificates. The certificate(s) representing the Preferred
Shares held by any holder of Preferred Shares may be exchanged by such holder at
any time and from time to time for certificates with different denominations
representing an equal aggregate number of Preferred Shares, as reasonably
requested by such holder, upon surrendering the same. No service charge will be
made for such registration or transfer or exchange. Upon receipt by the
Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any stock certificate representing the Preferred
Shares and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it, or upon surrender and cancellation of such stock certificate
if mutilated, the Corporation will make and deliver a new stock certificate of
like tenor and dated as of such cancellation at no charge to the holder.
9. Attorneys' Fees. In connection with enforcement by a holder of Preferred
Shares of any obligation of the Corporation hereunder, the prevailing party
shall be entitled to recovery of reasonable attorney' fees and expenses
incurred.
10. No Reissuance. No Preferred Shares acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.
11. Severability of Provisions. If any right, preference or limitation of
the Preferred Shares set forth in this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation herein
set forth be deemed dependent upon any such other right, preference or
limitation unless so expressed herein.
16
12. Limitations. Except as may otherwise be required by law and as are set
forth in the Purchase Agreement and the Registration Rights Agreement, the
Preferred Shares shall not have any powers, preference or relative
participating, optional or other special rights other than those specifically
set forth in this Certificate of Designations (as may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
Signed on April _____, 2000
GENESISINTERMEDIA.COM, INC.
By:________________________________
Name: Ramy El-Batrawi
Title: President
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of SERIES B Cumulative
Convertible Preferred Stock ("Preferred Shares") of GenesisIntermedia.com, Inc.
(the "Corporation"), hereby irrevocably elects to convert _____________
Preferred Shares for shares ("Common Shares") of common stock, par value $0.001
per share (the "Common Stock"), of the Corporation according to the terms and
conditions of the Certificate of Designations for the Preferred Shares as of the
date written below. The undersigned hereby requests that share certificates for
the Common Shares to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. No fee will be charged to the Holder of Preferred
Shares for any conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER:_________________________________
By:_____________________________________________
Print Name:_____________________________________
Print Title:____________________________________
Print Address of Holder:
_________________________________________________
_________________________________________________
Issue Common Stock to:___________________________
at:______________________________________________
_________________________________________________
If Common Shares are to be issued to a person other than Holder,
Holder's signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
Page 1 of Conversion Notice
Page 2 to Conversion Notice dated _______________ for:__________________________
(Conversion Date) (Name of Holder)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of Preferred Shares converted:___________________ shares
Number of Preferred Shares converted x Liquidation Preference $
Total dollar amount converted $
===========
Conversion Price $
Number of Common Shares = Total dollar amount converted = ___________
______________________________
Conversion Price
Number of Common Shares = _______________
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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