EXHIBIT 2
CERTIFICATE OF RIGHTS AND PREFERENCES OF
CLASS B CONVERTIBLE PREFERRED STOCK OF
NAVARRE CORPORATION
The undersigned officers of Navarre Corporation, a Minnesota
corporation (the "Corporation"), do hereby certify as follows:
1. Eric H. Paulson is the duly elected and acting President of the
Corporation and Charles E. Cheney is the duly elected and acting Secretary of
the Corporation.
2. Pursuant to the authority conferred upon the Board of Directors of
the Corporation by the Restated Articles of Incorporation of the Corporation,
the Board of Directors duly adopted on August 11, 1999 the following resolution
creating the powers, designations, preferences and other rights of a newly
authorized series of 150,000 shares of Preferred Stock designated as Class B
Convertible Preferred Stock as required by Section 302A.401 of the Minnesota
Business Corporation Act, which resolution has not been subsequently modified or
rescinded:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the provisions of the
Corporation's Restated Articles of Incorporation, the Board of Directors hereby
creates a new series of Class B Convertible Preferred Stock, no par value per
share, of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences, and limitations thereof, as
follows:
Class B Convertible Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Class B Convertible Preferred Stock" ("Class B Preferred Stock")
and the number of shares constituting Class B Preferred Stock shall be 150,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors, provided that no decrease shall reduce the number of shares of
Class B Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Class B
Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the provisions of paragraph (B) below, no dividends
shall accrue or be payable in respect of the Class B Preferred Stock.
(B) Notwithstanding the limitation of paragraph (A) above, commencing
upon the date of occurrence (a "Default Event Date") of a Default Event (as
defined below), the holders of the Class B Preferred Stock shall be entitled to
receive, to the extent permitted by applicable law, in preference to the payment
of any dividend on any class or series of stock of the Corporation ranking
junior to the Class B Preferred Stock, cumulative dividends ("Dividends") on
each share of Class B Preferred Stock in an amount equal to, on an annualized
basis, $250.00 times fifteen percent (15%). Dividends shall accrue, whether or
not earned or declared, on each share of Class B Preferred Stock from the
Default Event Date through the earlier to occur of (i) the date on which any
Default Event shall have been resolved, and (ii) the redemption or conversion
thereof in accordance with the terms hereof. Accrued Dividends on shares of
Class B Preferred Stock shall be payable on the last day of each calendar
quarter (the "Dividend Payment Date") following a Default Event Date during
which a Default Event shall have occurred, and shall be paid in cash to the
holder of such shares within five (5) Trading Days (as defined below) following
the applicable Dividend Payment Date by delivering immediately available funds
to such holder in accordance with such holder's wiring instructions, provided
that, the Corporation may, at its option (the "Share Option"), pay 13% of such
accrued Dividends in the form of the Corporation's common stock, no par value
(the "Common Stock"), at a conversion price equal to the average closing bid
price of the Common Stock on the three Trading Days immediately preceding the
Dividend Payment Date, as long as, at the time of issuance, such shares of
Common Stock are duly registered under the Securities Act and are duly listed
and admitted for trading on Nasdaq. If the Corporation elects the Share Option,
the Corporation shall deliver to the holder within five (5) Trading Days
following the applicable Dividend Payment Date in the manner requested by the
holder, stock certificates representing such shares, duly registered on the
books of Navarre as instructed by such holder. If, on any date, Dividends on any
outstanding shares of Class B Preferred Stock are payable and have not been paid
with respect to all Dividend Payment Dates preceding such date, the aggregate
amount of such Dividends shall be fully paid before any distribution, whether by
way of dividend or otherwise, shall be declared, paid or set aside with respect
to any shares of stock of the Corporation ranking junior to the Class B
Preferred Stock. A "Trading Day" means any day on which the Common Stock is
quoted on Nasdaq. "Nasdaq" means the Nasdaq National Market, but if the Nasdaq
National Market is not then the principal U.S. trading market for the Common
Stock, then "Nasdaq" shall be deemed to mean the principal U.S. national
securities exchange (as defined in the Securities Exchange Act of 1934, as
amended) on which the Common Stock is then traded. Capitalized terms not
otherwise defined herein are used with the meanings contained in that certain
Amended and Restated Subscription Agreement of the Corporation dated as of July
31, 1999 (the "Subscription Agreement").
(C) A "Default Event" as used in this Certificate of Rights and
Preferences shall mean: (i) the failure of a Registration Statement to be
declared effective by the SEC before the Required Registration Date; or (ii) the
failure to obtain the Required Consent (as defined below) within 90 calendar
days of the 19.9% Limit (as defined below) becoming effective; or (iii) the
failure of the Corporation to redeem in full any shares of outstanding Class B
Preferred Stock which are Objecting Shares (as defined below) on or before the
date that is twenty (20) calendar days following
completion of a Non-Qualifying Combination (as defined below). A Default Event
shall be deemed to have been resolved at such time as, in the case of clause
(i), the Registration Statement shall be declared effective by the SEC, or, in
the case of clause (ii), the Required Consent shall have been obtained, or, in
the case of clause (iii), the date on which the Corporation (or any Surviving
Entity, as defined below) shall redeem in full all shares of Class B Preferred
Stock (or Similar Preferred Stock, as defined below) which are Objecting Shares,
and in all cases, all Dividends required under Section 2(B) above have been paid
in full.
SECTION 3. VOTING RIGHTS.
(A) Subject to the provisions of paragraph (B) below, except as
required by applicable law or Section 12, the holders of shares of Class B
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
of shareholders of the Corporation and their consent shall not be required for
taking any corporate action.
(B) Notwithstanding the limitation set forth in paragraph (A) above, if
the Corporation shall be required to pay Dividends in accordance with Section 2
above and fails to make timely payment in full of all Dividends so required to
be paid, then the holders of shares of Class B Preferred Stock shall be
entitled, voting as a separate class, to immediately elect and appoint to the
Board of Directors of the Corporation, and the Corporation shall otherwise take
appropriate action as necessary to permit the inclusion on the Board of
Directors of, a number of persons (not to be less than a minimum of one
designee) designated by the holders of the Class B Preferred Stock such that,
following such election, such designees represent a percentage of the total
members of the Board of Directors (assuming no vacancies) that most nearly
approximates the percentage of the total number of then outstanding shares of
Class B Preferred Stock (calculated on an as-if-converted to Common Stock basis
as of the date such election is held as if such date were the Conversion Date)
plus the total number of then outstanding shares of Common Stock into which
shares of Class B Preferred Stock have been converted and not sold to
unaffiliated parties, to the total outstanding shares of the voting capital
stock of the Corporation (also calculated on an as-if-converted to Common Stock
basis).
SECTION 4. CONVERSION.
(A) Subject to Section 4(C) and Section 4(D), a holder of shares of
Class B Preferred Stock may, at any time after the date of issuance of such
shares and on or prior to the fifth calendar day prior to such date, if any, as
may have been fixed for the redemption thereof in any permitted call for
redemption pursuant to Section 11 below, by delivering to the Corporation
written notice ("Conversion Notice"), convert one or more shares of Class B
Preferred Stock into the number of shares of Common Stock equal to (i) $250.00
divided by (ii) the Conversion Price (as defined in Section 4(E)). The
Conversion Notice shall specify the number of shares of Class B Preferred Stock
to be converted (which shall not be less than 5,000 shares of Class B Preferred
Stock, except if (i) all shares of Class B Preferred Stock then outstanding are
being converted to Common Stock or (ii)
the Conversion Notice could trigger the 19.9% Limit), the applicable Conversion
Price and the number of shares of Common Stock issuable on conversion. From and
after the date on which the Corporation received a Conversion Notice from a
holder of a share of Class B Preferred Stock (or if such date is not a Trading
Day, the next succeeding Trading Day) (the "Conversion Date"), such share shall
cease to be outstanding and the converting holder shall be deemed the owner of
the number of shares of Common Stock into which such share of Class B Preferred
Stock was converted; provided, however, that in the event of a notice of
redemption of any shares of Class B Preferred Stock pursuant to Section 11
hereof, the right of the holder to convert the Class B Preferred Stock shall
terminate as to the number of shares designated for redemption at the close of
business on the fifth calendar day preceding the redemption date, unless default
is made in payment of the redemption price, in which event such right of the
holder to convert any rights of the holder under Sections 2 and 3 hereof shall
continue until such payment. The Corporation shall deliver (against delivery of
the certificate representing the Class B Preferred Stock (the "Preferred
Certificate")) to such holder an uncertificated security evidencing such shares
of Common Stock through book-entry transfer within three Trading Days following
the Conversion Date or, at the written request of the holder at such address as
specified in the Conversion Notice, a physical stock certificate registered in
such holder's name evidencing such shares within three Trading Days following
the Conversion Date (such date of delivery referred to as the "Issue Date"). The
Corporation shall also deliver a written notice to the holder on the Issue Date
(the "Conversion Delivery Notice") confirming the number of shares of Common
Stock being delivered to the holder and the method of delivery for those shares.
For purposes of the second preceding sentence, the first Trading Day following
the Conversion Date shall count as the first Trading Day for delivery of
evidence of such shares of Common Stock. The Conversion Notice may be delivered
via facsimile transmission to Navarre Corporation, attention: Chief Financial
Officer, telecopy no. 612-504-1107.
On the Issue Date, the Corporation shall issue and cause to be
delivered to the registered holder cash (if any) as provided in Section 6. If on
such Issue Date the number of shares of Class B Preferred Stock to be delivered
shall be less than the total number of shares represented by the Preferred
Certificate, there shall be issued to the holder thereof or his assignee on such
Issue Date a new Preferred Certificate evidencing the remaining shares of Class
B Preferred Stock represented thereby.
(B) Subject to Section 4(C) and Section 4(D), each share of Class B
Preferred Stock shall automatically convert into Common Stock in accordance with
the terms hereof but without the delivery of a Conversion Notice on the third
annual anniversary of the later of (i) the effective date of the registration
statement with respect to shares of Common Stock issuable upon Conversion of
such share of Class B Preferred Stock and (ii) issuance of such share of Class B
Preferred Stock (or if such date is not a Trading Day, the next succeeding
Trading Day) (the "Automatic Conversion Date"); provided, however, that the
Automatic Conversion Date shall be extended as provided in the following
circumstances: (I) if a Default Event identified in clauses (i) or (ii) of
Section 2(C) above shall have occurred and continues at the time that such share
of Class B Preferred Stock (or Similar Preferred Stock) would otherwise
automatically convert into Common
Stock, then no such automatic conversion shall occur and the Automatic
Conversion Date shall be delayed for a period equal to 365 calendar days
following and excluding the date on which the Default Event shall have been
resolved pursuant to Section 2(C) hereof; (II) if a Default Event identified in
clause (iii) of Section 2(C) above shall have occurred and continues at the time
that such share of Class B Preferred Stock (or Similar Preferred Stock) would
otherwise automatically convert into Common Stock, then no such automatic
conversion shall occur and the Automatic Conversion Date shall be delayed for a
period equal to the number of days required for the resolution of such Default
Event; (III) if a Registration Statement relating to shares of Common Stock
issuable upon conversion of such share of Class B Preferred Stock is not
available for sales or resales for any reason within 360 calendar days of the
Automatic Conversion Date for such share of Class B Preferred Stock, then such
date shall be extended (even if no Default Event identified in clause (i) of
Section 2(C) shall have occurred) as necessary to ensure that the Automatic
Conversion Date is not less than 180 days from the date such Registration
Statement is available; and (IV) if a Required Consent has not been obtained
within 180 calendar days of the Automatic Conversion Date for such share of
Class B Preferred Stock, then such date shall be extended (even if no Default
Event identified in clause (ii) of Section 2(C) shall have occurred) as
necessary to ensure that the Automatic Conversion Date is not less than 90 days
from the date that the Required Consent is obtained. From and after the
Automatic Conversion Date, such shares of Class B Preferred Stock shall cease to
be outstanding and the converting holder shall be deemed the owner of the number
of shares of Common Stock into which such shares of Class B Preferred Stock were
converted. The Corporation shall deliver to such holder such shares of Common
Stock in accordance with Section 4(A). For such purpose and the purpose of
determining the applicable Conversion Price under Section 4(E), the Automatic
Conversion Date shall be deemed to be the Conversion Date.
(C) If, either at the time that the Corporation received a Conversion
Notice or on the Automatic Conversion Date, the aggregate number of shares of
Common Stock issuable pursuant to such Conversion Notice and all other
Conversion Notices received at that time (the "Subject Conversion Notices"),
when added to the aggregate number of shares of Common Stock (a) previously
issued pursuant to the conversion of shares of Class B Preferred Stock or upon
payment of accrued Dividends, as contemplated by Section 2(B), and (b) issuable
upon conversion of all unconverted shares of Class B Preferred Stock
(determining such number as if such Class B Preferred Stock were converted as of
the Conversion Date relating to such Conversion Notice), including Class B
Preferred Stock issuable (i) upon exercise by the Corporation of its right under
the Subscription Agreement to require the holder of the obligation thereunder to
purchase additional shares of Class B Preferred Stock, (ii) upon exercise by the
holder of the right under the Subscription Agreement to require the Corporation
to issue and sell to the holder additional shares of Class B Preferred Stock,
and (iii) upon exercise of Warrants issued or issuable under the Subscription
Agreement, in each case in accordance with the terms of the Subscription
Agreement, would exceed the number of shares equal to 19.9% of the total number
of shares of Common Stock outstanding (adjusted to reflect any split,
subdivision, combination, or consolidation of the Common Stock, whether by
reclassification, distribution of a dividend with respect to the outstanding
Common Stock payable in shares of Common Stock, or otherwise, or any
recapitalization of the Common Stock) on
the Effective Date (the "19.9% Limit") and such circumstance would require the
approval of the holders of the Common Stock pursuant to the listing requirements
or rules of Nasdaq, then the Navarre Rights shall be suspended until the
required consent has been obtained, and the number of shares of Class B
Preferred Stock identified in the Subject Conversion Notices that, if converted
into shares of Common Stock, would equal or exceed the 19.9% Limit (the "Excess
Preferred Shares"), shall not be converted unless and until the shareholder
approval referred to in Section 5 (the "Required Consent") is obtained or is no
longer required. The Excess Preferred Shares will be allocated among the holders
delivering Subject Conversion Notices on a pro rata basis based on the relative
number of shares of Class B Preferred Stock identified in each such Subject
Conversion Notice. Any Excess Preferred Shares shall not be converted into
shares of Common Stock until the later of the date on which the Required Consent
is obtained and the Corporation received a subsequent Conversion Notice with
respect thereto.
(D) Shares of Class B Preferred Stock shall be convertible only into
the Maximum Number of shares of Common Stock. The "Maximum Number" is equal to
the sum of 2,115,395 plus the Convertible Number. The "Convertible Number" is
initially zero and thereafter may be increased upon expiration of a 65 day
period (the "Notice Period") after either (i) holders representing a majority of
the outstanding shares of Class B Preferred Stock deliver a notice (a "65 Day
Notice") to the Corporation designating an aggregate number of shares of Common
Stock in excess of the Maximum Number which will become issuable, or (ii) the
Corporation delivers to each holder a notice (an "Increase Notice") stating the
increase, if any, in the aggregate number (the "Increased Number") of shares of
Common Stock outstanding as of the last day of the preceding month over the
number outstanding as of the last day of the second preceding month, or in the
case of the first day of the month immediately following the Effective Date, the
number of shares outstanding as of such date, in which event the Convertible
Number shall be increased by the number which is 9.75% of the Increased Number.
Unless expressly waived by the holder, the Corporation shall deliver an Increase
Notice to the holder on or before the 10th day of each calendar month from and
including the initial date of issuance of shares of Class B Preferred Stock. A
65 Day Notice may be given at any time. If the initial 65 Day Notice does not
designate all of the shares of Common Stock then issuable upon exercise of
outstanding shares of Class B Preferred Stock, additional shares of Common Stock
will become issuable for some or all of the remaining shares of Common Stock
upon delivery of one or more 65 Day Notices increasing the Convertible Number
after a further Notice Period. From time to time following the Notice Period,
shares of Common Stock may be issued on any Trading Day for any quantity of
Common Stock, such that the aggregate number of shares of Common Stock issued
hereunder is less than or equal to the Maximum Number.
(E) Subject to the next sentence, "Conversion Price" means the lowest
of (i) the average of the daily volume-weighted per share average prices as
reported by Bloomberg, L.P. (or otherwise as agreed mutually between the
Corporation and the holder of record of Class B Preferred Stock delivering a
Conversion Notice) of the Common Stock on Nasdaq during the fifteen Trading Days
ending and excluding five Trading Days before and excluding the Conversion Date
(the "Pricing Period"), (ii) the average of the daily volume-weighted average
prices of the first three
Trading Days of the Pricing Period, and (iii) 180% of the closing price of the
Common Stock (the "Conversion Ceiling Price") on the day prior to the Investment
Closing Date on which such shares of Class B Preferred Stock (or, if applicable,
the Warrant exercisable for such shares) had first been issued. Notwithstanding
the previous sentence, in the event the Initial Preferred Shares (or any shares
of Class B Preferred Stock issued upon prior exercise of the Warrant issued to
Fletcher on the Initial Closing Date) are converted during the period beginning
on the Initial Closing Date and ending on the sixth month anniversary thereof,
the Conversion Price shall not be less than $9.25 (the "Conversion Floor
Price"), but only if: (i) no Combination Notice has been issued and no
Combination has been announced or occurred, and (ii) no Default Event has
occurred and is continuing.
SECTION 5. SHAREHOLDER APPROVAL. In the event there are Excess
Preferred Shares as described in Section 4(C), the Corporation shall promptly
take all actions reasonably necessary to obtain the required consent, including
causing its Board of Directors to call a special meeting of shareholders and
recommend such approval.
SECTION 6. FRACTIONAL SHARES. Fractional shares of Common Stock shall
not be issued upon conversion of shares of Class B Preferred Stock. In lieu of
issuance of a fractional share, the Corporation shall pay to the holder of the
share of Class B Preferred Stock being converted a cash amount equal to such
fraction multiplied by the Conversion Price.
SECTION 7. 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 Class B 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 Class B Preferred Stock.
SECTION 8. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
Common Stock or any other series or class or classes of stock of the Corporation
ranking junior to the Class B Preferred Stock upon liquidation, dissolution or
winding up, the holders of the shares of Class B Preferred Stock shall be
entitled to receive $250.00 per share plus the amount of any accrued and unpaid
Dividends (the "Liquidation Preference"). If, upon any liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of Class B Preferred
Stock shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any other shares of stock ranking, as to liquidation,
dissolution or winding up, on a parity with the Class B Preferred Stock, if any,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Class B Preferred Stock and any such other stock ratably in
accordance with the respective amounts which would be payable on such shares of
Class B Preferred Stock and any such other stock if all amounts payable thereon
were paid in full.
SECTION 9. CONSOLIDATION, MERGER, ETC. In case the Corporation shall be
a party to any transaction providing for (i) any acquisition of the Corporation
by means of merger or other form of corporate reorganization in which
outstanding shares of the Corporation are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring corporation or
its subsidiary or (ii) a sale of all or substantially all of the assets of the
Corporation (on a consolidated basis) or (iii) any other transaction or series
of related transactions by the Corporation in which in excess of 50% of the
Corporation's voting power is transferred to a single entity or group acting in
concert (each of the foregoing being referred to as a "Combination"), each share
of Class B Preferred Stock which is not converted by the holder into the right
to receive Common Stock of the Corporation prior to or simultaneously with such
Combination shall thereafter be exchangeable at the election of the holder of
the Class B Preferred Stock for an equal number of shares of preferred stock of
the Surviving Entity (the "Similar Preferred Stock"), which preferred stock
shall have terms substantially identical to the terms provided in this
Certificate of Rights and Preferences, including without limitation, rights
specified in Sections 2 and 3 hereof and be convertible, at the holder's option,
into shares of any class of publicly traded common stock of the Surviving
Entity. For purposes hereof, "Surviving Entity" shall mean the direct or
indirect (as designated by holder) acquirer, purchaser or transferee
contemplated by clauses (i), (ii) and (iii), respectively, of the immediately
preceding sentence. The Corporation shall not be a party to any Combination
unless the terms of such Combination are consistent with the provisions of this
Section 9 and it shall not consent or agree to the occurrence of any Combination
unless and until the Corporation has entered into an agreement with the
Surviving Entity for the benefit of the holders of the Class B Preferred Stock
which will contain provisions ensuring the benefits contemplated by this Section
9 to the holders of the Class B Preferred Stock which remains outstanding after
such Combination and assuring compliance with the Subscription Agreement and the
Warrants. The provisions of this Section 9 shall apply similarly to successive
Combinations.
SECTION 10. STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Corporation
shall after the date of first issuance of shares of Class B Preferred Stock (A)
pay a dividend or make a distribution on its Common Stock in shares of its
Common Stock, (B) subdivide its outstanding Common Stock into a greater number
of shares, or (C) combine its outstanding Common Stock into a smaller number of
shares, which becomes effective on a Trading Day which is included in the
calculation of the Conversion Price, then the average of the daily
volume-weighted per share average prices of the Common Stock for the period from
the first Trading Day included in the calculation of the Conversion Price to
(but not including) the effective date of such event (the "Adjustable Average
Price"), the Conversion Ceiling Price and the Conversion Floor Price will be
proportionately adjusted to reflect such event in calculating the Conversion
Price. If the event in question causes an increase in the total number of
outstanding Common Stock, then the Adjustable Average Price, the Conversion
Ceiling Price and the Conversion Floor Price will be proportionately decreased.
If the event in question causes a decrease in the total number of outstanding
Common Stock, then the Adjustable Average Price, the Conversion Ceiling Price
and the Conversion Floor Price will be proportionately increased. In case the
Corporation shall after the date of the first issuance of the Class B Preferred
Stock issue any shares of capital stock by reclassification of its
Common Stock (excluding any transaction as to which Section 9 applies), each
share of Class B Preferred Stock shall thereafter be convertible into the kind
and in the proportion of shares of stock and other securities and property
("Reclassification Consideration") receivable by a holder of one share of Common
Stock immediately prior to the record date or effective date of such
reclassification, as appropriate, and the Conversion Price in such circumstances
shall be determined based upon weighted prices of the Reclassification
Consideration. In the event the market price of any portion of the
Reclassification Consideration cannot be determined in a manner reasonably
consistent with Section 4(E), the market value of such portion of the
Reclassification Consideration shall be determined in good faith by the
Corporation's Board of Directors on the basis of independent professional
financial and legal advice. In addition, the Conversion Price, the Conversion
Ceiling Price and the Conversion Floor Price following such a reclassification
shall be adjusted as appropriate in a manner consistent with the first three
sentences of this Section 10. Adjustments made pursuant to this Section 10 shall
become effective immediately after the close of business on the record date in
the case of a dividend or distribution and shall become effective immediately
after the close of business on the record date or effective date, as applicable,
in the case of a subdivision, combination or reclassification. All of the
adjustments provided for in this paragraph shall be made successively whenever
any event specified above shall occur.
SECTION 11. REDEMPTION.
(A) Following a Combination as a result of which the Class B Preferred
Stock would be convertible into (I) a class of common stock with (x) an
aggregate market capitalization of less than $230 million or (y) an average
weekly traded value as reported by Bloomberg, L.P. over the preceding six months
of less than $75 million, or (II) consideration other than shares of publicly
traded common stock of the Surviving Entity (other than cash in lieu of
fractional amounts or in connection with the exercise of statutory appraisal
rights) (either (I) or (II), a "Non-Qualifying Combination"), and provided that
the Corporation shall have legally available funds therefor, the Corporation
shall have the right, at the election of its Board of Directors upon
satisfaction of the terms and conditions stated herein, to redeem any or all
Objecting Shares (as defined below).
(B) Upon the occurrence of a public announcement with respect to a
Combination, at least forty-five (45) calendar days prior to the completion of
the Combination, the Company shall provide written notice thereof (a
"Combination Notice") to the holders of the Class B Preferred Stock, stating the
expected completion date of the Combination and whether such Combination will be
a Non-Qualifying Combination. In the event such notice provides that the
Combination is not a Non-Qualifying Combination, then the holders shall be bound
by the provisions of this Certificate and the Corporation shall have no right of
redemption herein. In the event the Combination is a Non-Qualifying Combination
and if the redemption right is exercised, then the Combination Notice or other
notice concerning redemption shall be sent in accordance with and include the
information set forth in paragraph (C) below. Not later than ten (10) calendar
days prior to the announced completion date of the Non-Qualifying Combination,
each holder of the Class B Preferred Stock shall respond in writing to the
Corporation indicating whether the holder objects to the Non-
Qualifying Combination and specifying the number of shares Class B Preferred
Stock as to which the holder thereof objects (the "Objecting Shares"). Each
holder of Class B Preferred Stock may object as to all, some or none of the
shares of Class B Preferred Stock held by it.
(C) The redemption price for each Objecting Share shall be equal to the
Liquidation Preference plus thirty-three percent (33%), and may be paid only out
of funds legally available therefor. Redemption of less than all of the then
outstanding shares of Class B Preferred Stock shall be pro rata among the
holders of the Class B Preferred Stock (as to the number of shares of Class B
Preferred Stock held on the date of the notice of redemption). Less than all of
the Class B Preferred Stock permitted to be redeemed hereunder may not be
redeemed until all Dividends, if any, accrued and unpaid on Class B Preferred
Stock outstanding shall have been paid. At least twenty (20) calendar days'
previous notice by first class mail, postage prepaid, shall be given to the
holders of record of the Objecting Shares for any permitted redemption, such
notice to be addressed to each holder at the address shown in the Corporation's
records and which shall specify the date of redemption, the number of shares of
the holder to be redeemed and the date at which the conversion rights provided
hereunder terminate. On or after the date of redemption as specified in such
notice, each holder shall surrender such holder's certificate for the number of
shares of Class B Preferred Stock to be redeemed as stated in the notice (except
that such number of shares shall be reduced by the number of shares of Class B
Preferred Stock which have been converted pursuant to the provisions of Section
4 above between the date of the notice and the date on which conversion rights
terminate) to the Corporation at the place specified in the notice. If less than
all of the shares represented by such certificates are redeemed, a new
certificate shall forthwith be issued for the unredeemed shares. Provided such
notice is duly given, and provided that on the redemption date specified there
shall be a source of funds legally available for such redemption and funds
necessary for the redemption shall have been paid in immediately available funds
in an account specified by the holder, then all rights with respect to such
shares shall, after the specified redemption date, terminate, whether or not
said certificates have been surrendered, excepting only in the latter instance
the right of the holder to receive the redemption price thereof, without
interest, upon such surrender. At least ten (10) days prior to the date of
redemption, the Corporation shall deposit the redemption price of all shares of
Class B Preferred Stock designated for redemption in said notice and not yet
redeemed with a bank or trust company having aggregate capital and surplus in
excess of $100,000,000 as a trust fund for the benefit of the respective holders
of the shares of Class B Preferred Stock designated for redemption and not yet
redeemed.
SECTION 12. AMENDMENT. So long as any shares of Class B Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
by vote or written consent, in the manner provided by law, of the holders of at
least a majority of the total number of shares of Class B Preferred Stock
outstanding, voting separately as a series, amend or repeal any provision of, or
add any provision to, the Corporation's Certificate of Incorporation if such
action would adversely affect the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the Class B Preferred Stock.
SECTION 13. REACQUIRED SHARES. Any shares of Class B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock of the Corporation and may be reissued as part of a new series
of preferred stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Rights and Preferences creating a series of preferred stock of the
Corporation or any similar stock or as otherwise required by applicable law.
SECTION 14. RANK.
(A) With respect to liquidation preferences and payment of dividends,
the Class B Preferred Stock shall rank senior to all other existing capital
stock of the Corporation and shall rank senior to all series of any class of the
Corporation's capital stock issued after the date of the filing of this
Certificate of Rights and Preferences.
(B) So long as any shares of the Class B Preferred Stock are
outstanding, no Common Stock or other capital stock of the Corporation ranking
junior to the Class B Preferred Stock will be redeemed, purchased or otherwise
acquired for any consideration by the Corporation (except by conversion into or
exchange for stock of the Corporation ranking junior to the Class B Preferred
Stock and except pursuant to restricted stock purchase or similar agreements
providing for the Company's repurchase of shares of Common Stock at their
original cost in connection with termination of employment) unless, in each case
the Corporation offers to redeem all outstanding shares of the Class B Preferred
Stock on substantially the same terms (provided that the redemption price per
share shall not be less than the Liquidation Preference).
IN WITNESS WHEREOF, this Certificate of Rights and Preferences is
executed on behalf of the Corporation by the President of the Corporation and
attested by its Secretary this 20th day of August, 1999.
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Name: Eric H. Paulson
Title: President
Attest:
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Name: Charles E. Cheney
Title: Secretary