EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FRESH ENTERPRISES, INC.
The undersigned, Gregory G. Dollarhyde and Donald D. Breen, hereby certify
that:
1. They are the President and Chief Financial Officer, respectively, of Fresh
Enterprises, Inc., a California corporation.
2. The Articles of Incorporation of the corporation are amended and restated
in full to read as follows:
I. CORPORATE NAME
The name of the corporation (the "Corporation") is Fresh Enterprises, Inc.
II. PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession to be incorporated by the California Corporations Code.
III. AUTHORIZED CAPITALIZATION
A. The Corporation shall have authority to issue thirty million
(30,000,000) shares of capital stock, without par value, of which fifteen
million (15,000,000) shares shall be designated as "preferred stock" and fifteen
million (15,000,000) shares shall be designated as "common stock." The preferred
stock may be divided into such number of classes or series as the Board of
Directors may determine.
B. The Board of Directors is authorized to determine and alter the rights,
preferences, privileges and restrictions granted to and imposed upon the
preferred stock or any class or series thereof with respect to any wholly
unissued class or series of preferred stock, and to fix the number of shares of
any class or series of preferred stock and the designation of any such class or
series of preferred stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any class or series, may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any class or series subsequent to the issue
of shares of that class or series.
C. Preferred Stock
Section 1. Certain Definitions.
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Unless the context otherwise requires, the terms defined in this Section 1
shall have, for all purposes of these Articles, the meanings herein specified
(with terms defined in the singular having comparable meanings when used in the
plural).
"Affiliate" shall have the meaning set forth for such term in the
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Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. Without limiting the foregoing, all directors and officers of a
Person that is a corporation shall be deemed Affiliates of such Person for all
purposes hereunder.
"Business Day" shall mean a day other than a Saturday, a Sunday or any
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other day on which banking institutions in New York, New York are authorized or
obligated by law to close.
"Catterton" shall mean Catterton Partners IV, L.P., or any Affiliate
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thereof.
"Change of Control" shall mean an event or series of events by which any
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"person" or "group" (as such terms are defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
Catterton or its Affiliates, becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than
25% of the shares of Common Stock outstanding and Preferred Stock outstanding on
an as converted basis upon consummation of such event.
"Common Dividend" shall have the meaning set forth in Section 3(a) below.
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"Common Equity" shall mean all shares now or hereafter authorized of any
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class of common stock of the Corporation, however designated, including the
Common Stock, and any other stock of the Corporation, howsoever designated,
authorized after the Effective Date, which has the right (subject always to
prior rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
"Common Stock" shall mean the common stock, no par value, of the
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Corporation.
"Conversion Date" shall have the meaning set forth in Section 5.1(b) below.
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"Conversion Price" shall mean $4.53 with respect to each share of Series A
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Stock, $7.28 with respect to each share of Series B Stock, or $9.25 with respect
to each share of Series C Stock (in each case, as adjusted to reflect any stock
split or any subdivision, reclassification, combination of or with respect to
outstanding shares of Common Stock or any similar transaction).
"Corporation's Line of Business" shall mean the line of business conducted
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by the Corporation on the Effective Date, which is limited to operating and
franchising quick service restaurants in a manner consistent with the operations
on the Effective Date.
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"Debt" shall mean any indebtedness, contingent or otherwise, of any person
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in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such person or only to a portion thereof) or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or representing the balance deferred and unpaid of the purchase price of
any property or interest therein, except any such balance that constitutes a
trade payable, if and to the extent such indebtedness would appear as a
liability upon a balance sheet of such person prepared on a consolidated basis
in accordance with generally accepted accounting principles.
"Debt to Equity Ratio" shall mean the ratio of (i) the total Indebtedness
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to (ii) Total Stockholders' Equity.
"Delinquent Mandatory Redemption Price" shall mean $6.80 with respect to
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each share of Series A Stock, $7.28 with respect to each share of Series B
Stock, and $9.25 with respect to each share of Series C Stock (in each case, as
adjusted for stock splits, subdivisions, combinations and similar transactions),
plus all accrued and unpaid dividends payable in respect of such share of
Preferred Stock pursuant to Section 3(a), plus interest thereon in an amount
accruing from the Mandatory Redemption Date to the date of payment at an annual
rate equal to the highest rate permitted by law, compounded monthly.
"Effective Date" shall mean October 2, 2001.
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"Equivalent Common Dividend" shall have the meaning set forth in Section
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3(a) below.
"Final Mandatory Redemption Date" shall have the meaning set forth in
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Section 6(a) below.
"Grumman Hill" shall mean Grumman Hill Investments III, L.P., or any
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Affiliate thereof.
"Indebtedness" shall mean the Debt of the Corporation or a subsidiary of
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the Corporation plus, to the extent not otherwise included, (i) the guaranty of
any Debt of any other person; and (ii) obligations in respect of borrowed money
secured by any Lien to which any property or asset owned or held by the
Corporation or a subsidiary is subject, whether or not the obligations secured
thereby shall have been assumed by the Corporation or such subsidiary; and (iii)
capitalized lease obligations.
"Initial Mandatory Redemption Date" shall have the meaning set forth in
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Section 6(a) below.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
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assignment, encumbrance, lien (statutory or other) or other security interest of
any kind or nature whatsoever (excluding preferred stock or equity related
preferences) including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
"Liquidation Price" shall mean $6.80 per share of Series A Stock, $7.28 per
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share of Series B Stock, and $9.25 per share of Series C Stock (in each case, as
adjusted for stock splits,
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subdivisions, combinations and similar transactions), plus all accrued and
unpaid dividends payable in respect of such share of Preferred Stock pursuant to
Section 3(a).
"Mandatory Redemption Date" shall mean the Initial Mandatory Redemption
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Date and the Final Mandatory Redemption Date.
"Mandatory Redemption Obligation" shall have the meaning set forth in
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Section 6(c) below.
"Oak Investment" shall mean Oak Investment Partners VIII, or any Affiliate
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thereof.
"Preferred Stock" shall mean collectively, the shares of Series A Stock,
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Series B Stock, and Series C Stock.
"Prime Rate" shall mean the rate announced as the "prime rate" by the Wall
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Street Journal.
"Qualified Initial Public Offering" shall mean an underwritten public
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offering pursuant to an effective registration statement under the Securities
Act of 1933 of shares of the Common Stock, (i) the aggregate gross proceeds of
which equal or exceed $25,000,000, (ii) the per share offering price of which
equals or exceeds $20.00, and (iii) is underwritten by a nationally prominent
investment bank; provided, however, that the per share offering price referred
to in clause (ii) shall be adjusted to reflect the effect of any stock split or
any subdivision, reclassification, combination or like event of or with respect
to outstanding shares of Common Stock occurring after the Effective Date.
"Redemption Price" shall mean $6.80 with respect to each share of Series A
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Stock, $7.28 with respect to each share of Series B Stock, and $9.25 with
respect to each share of Series C Stock (in each case, adjusted for stock
splits, subdivisions, combinations and similar transactions) plus all accrued
and unpaid dividends payable in respect of such share of Preferred Stock
pursuant to Section 3(a).
"Series A Stock" shall have the meaning set forth in Section 2(a) below.
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"Series B Stock" shall have the meaning set forth in Section 2(a) below.
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"Series C Stock" shall have the meaning set forth in Section 2(a) below.
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"Shareholders' Agreement" shall mean the Amended and Restated Shareholders'
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Agreement between the Corporation and the shareholders listed on Schedule A
thereto, dated the Effective Date.
"Subordinate Stock" shall mean the Common Equity and any class or series of
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capital stock of the Corporation, however designated, which is not entitled to
receive (i) any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Preferred Stock pursuant to Section
3(a) shall have been so paid or declared and set apart for payment and (ii) any
assets upon liquidation, dissolution or winding up of the affairs of the
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Corporation until the Preferred Stock shall have received the entire amount to
which such stock is entitled upon such liquidation, dissolution or winding up.
"Total Stockholders' Equity" shall mean the stockholders' equity of the
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Corporation as it appears in the monthly balance sheet of the Corporation.
"Voting Securities" shall mean any shares of capital stock of the
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Corporation entitling the holders thereof to vote on any matter submitted to the
shareholders of the Corporation for vote.
Section 2. Designation and Amount.
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(a) The shares of the first series of preferred stock shall be
designated as Series A Convertible Preferred Stock and the number of shares
constituting such series shall be 2,727,941 (the "Series A Stock"). The shares
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of the second series of preferred stock shall be designated as Series B
Convertible Preferred Stock and the number of shares constituting such series
shall be 2,153,507 (the "Series B Stock"). The shares of the third series of
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preferred stock shall be designated as Series C Convertible Preferred Stock and
the number of shares constituting such series shall be 1,351,405 (the "Series C
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Stock").
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Section 3. Dividends.
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(a) If at any time during which any shares of Preferred Stock remain
outstanding, the Corporation declares, pays or sets apart for payment any
dividend on any Common Equity, whether in cash, property or otherwise (a "Common
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Dividend"), each holder of shares of Preferred Stock shall be entitled to
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receive a per share dividend (an "Equivalent Common Dividend"), when and as
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declared by the Corporation, equal to (i) the number of shares of Common Equity
on which such Common Dividend is declared into which such share of Preferred
Stock is convertible on the date on which such Common Dividend is paid,
multiplied by (ii) the amount of cash or property paid, or the number of shares
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of capital stock issued, per share of Common Equity as part of such Common
Dividend. For any Equivalent Common Dividend that is not paid in full when due,
then on such due date such accrued and unpaid Equivalent Common Dividend shall
be added to the Liquidation Price and the Redemption Price of each share of
Preferred Stock effective at such due date when such Equivalent Common Dividend
was not paid, and the amount owing in respect of such accrued and unpaid
Equivalent Common Dividend and the related increment to the Liquidation Price
and the Redemption Price shall thereafter increase at the highest annual rate of
interest permitted by law, compounded monthly, in respect thereof until such
accrued and unpaid Equivalent Common Dividend has been paid in full. If any
accrued and unpaid Equivalent Common Dividend is so added to the Liquidation
Price and the Redemption Price of any series of Preferred Stock, such
Liquidation Price and Redemption Price shall be reduced, effective on the date
of payment, to the extent any accrued and unpaid Equivalent Common Dividend is
subsequently paid.
(b) So long as any shares of Preferred Stock shall be outstanding, the
Corporation shall not declare, pay or set apart for payment on any Subordinate
Stock any dividends or distributions whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Subordinate Stock other than Common
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Stock, together with cash in lieu of fractional shares), nor shall any
Subordinate Stock be purchased, redeemed or otherwise acquired by the
Corporation or any of its subsidiaries of which it owns not less than a majority
of the outstanding voting power, nor shall any monies be paid or made available
for a sinking fund for the purchase or redemption of any Subordinate Stock,
without the prior written consent of the holders of the outstanding shares of
Preferred Stock required pursuant to Section 7(c) and unless all dividends to
which the holders of Preferred Stock shall have been entitled pursuant to
Section 3(a) shall have been (i) paid or (ii) declared and a sum of money, in
the case of dividends payable in cash, sufficient for the payment thereof has
been set apart.
(c) Notwithstanding anything contained herein to the contrary, with
respect to the declaration and payment of dividends pursuant to this Section 3,
the Series A Stock, the Series B Stock, and the Series C Stock shall rank on a
pari passu basis and, in the event that full dividends are not paid or made
available to the holders of all outstanding shares of Preferred Stock and funds
available for payment of dividends shall be insufficient to permit payment in
full to holders of all such stock of the full preferential amounts to which they
are then entitled, then the entire amount available for payment of dividends
shall be distributed ratably among the holders of all shares of Preferred Stock
in proportion to the full amount to which they would otherwise be respectively
entitled.
(d) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Preferred Stock shall be declared by the Board of
Directors of the Corporation or paid or set apart for payment by the Corporation
at such time if such declaration or payment shall be restricted or prohibited by
law.
Section 4. Distributions Upon Liquidation, Dissolution or Winding Up.
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(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, before any
payment or distribution shall be made to the holders of Subordinate Stock, the
holders of Preferred Stock shall be entitled to be paid out of the assets of the
Corporation in cash, or, if the Corporation does not have sufficient cash on
hand to pay such amounts, property of the Corporation at its fair market value
as determined by the Board of Directors of the Corporation, the greater of (i)
the Liquidation Price payable in respect of such share of Preferred Stock, or
(ii) such amount per share of Preferred Stock as would have been payable had
each such share been converted into Common Stock pursuant to Section 5
immediately prior to such liquidation, dissolution or other winding up of the
affairs of the Corporation. Immediately preceding such liquidation, dissolution
or winding up, adjustment shall be made for accrued but unpaid dividends.
(b) For the purposes of this Section 4, the Series A Stock, Series B
Stock, and Series C Stock shall rank on liquidation on a parity and if, upon
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation shall be insufficient to permit the payment in full to the holders
of all shares of Preferred Stock outstanding of the full amount thus
distributable pursuant to the terms hereof, then the entire assets of the
Corporation available for such distribution shall be distributed ratably among
the holders of shares of Preferred Stock in proportion to the full amounts
distributable in liquidation pursuant to the terms hereof if all amounts payable
with respect to said shares were paid in full. After such payment shall have
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been made in full to the holders of Preferred Stock outstanding or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of holders of any Preferred Stock so as to be available for such
payment, then the remaining assets of the Corporation available for such
distribution shall be distributed ratably among the holders of the Common Stock
of the Corporation. The liquidation rights and preferences of the Preferred
Stock shall be subject to the liquidation rights and preferences of any series
of stock designated to be senior to, or on a parity with, the Preferred Stock.
Section 5. Conversion Rights.
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5.1 Conversion at the Option of the Holder.
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(a) At any time before the close of business on the Final Mandatory
Redemption Date (unless the Corporation shall default in payment of the
Redemption Price or the Delinquent Mandatory Redemption Price, in which case,
the conversion rights set forth in this paragraph shall continue until the cure
of any such default), each holder of Series A Stock may, at its option, convert
each share of Series A Stock held by such holder into one and one half (1.5)
shares of Common Stock, and each holder of Series B Stock and Series C Stock
may, at its option, convert each share of Series B Stock or Series C Stock held
by such holder into one (1) share of Common Stock, in each case, subject to
adjustment pursuant to Section 5.3. Upon such conversion, the rights of the
holders of converted Preferred Stock with respect to the shares of Preferred
Stock so converted shall cease.
(b) To convert Preferred Stock in accordance with this Section 5.1, a
holder must (i) surrender the certificate or certificates evidencing the shares
of Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the
Preferred Stock, (ii) notify the Corporation at such office that he elects to
convert Preferred Stock, and the number of shares he wishes to convert, (iii)
state in writing the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued, and (iv) pay any transfer
or similar tax with respect to the transfer of the shares of Preferred Stock
converted, if required. The date on which the holder satisfies the foregoing
requirements shall be the "Conversion Date." As soon as practical but in any
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event within five (5) Business Days of the Conversion Date, the Corporation
shall deliver a certificate for the number of shares of Common Stock issuable
upon the conversion, a check for the amount payable in respect of any fractional
share pursuant to Section 5.1(c) and a new certificate representing the
unconverted portion, if any, of the shares of Preferred Stock represented by the
certificate or certificates surrendered for conversion. The person in whose name
the Common Stock certificate is registered shall be treated as the shareholder
of record on and after the Conversion Date. Adjustment (or cash payment, if
applicable) shall be made for accrued and unpaid dividends, as of the Conversion
Date, on converted shares of Preferred Stock. If the last day on which Preferred
Stock may be converted is not a Business Day, Preferred Stock may be surrendered
for conversion on the next succeeding day that is a Business Day.
(c) The Corporation will not issue a fractional share of Common Stock
upon conversion of Preferred Stock. Instead the Corporation will deliver its
check in an amount equal
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to the applicable fraction multiplied by the fair market value of the Common
Stock (subject to adjustment for stock splits, subdivisions, combinations or
other similar transactions).
(d) If a holder converts shares of Preferred Stock, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion; provided, however, that
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pursuant to Section 5.1(b) the holder shall pay any such tax which is due
because the shares are issued in a name other than the holder's name.
5.2 Mandatory Conversion. Subject to the adjustments set forth in Section
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5.3, each share of Series A Stock shall be automatically converted into one and
one half (1.5) shares of Common Stock, and each share of Series B Stock and
Series C Stock shall be automatically converted into one (1) share of Common
Stock, on the date (x) a Qualified Initial Public Offering is consummated and,
(y) if earlier, each share of Series C Stock, shall automatically convert into
one (1) share of Common Stock on the date notice of the vote of the holders of
at least sixty percent (60%) of the then outstanding shares of Series C Stock
approving such conversion is received by the Corporation or on such later date
as is set forth in such resolution (as applicable, the "Mandatory Conversion
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Date"). In the case of a Mandatory Conversion Date as defined in the foregoing
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clause (x), the Corporation shall notify all holders of the Preferred Stock at
least sixty (60) days prior to the occurrence of the Mandatory Conversion Date.
In all cases, the Corporation shall (i) notify all holders of the Preferred
Stock to be converted of the occurrence of the Mandatory Conversion Date, (ii)
demand that all shares representing such Preferred Stock be returned to the
Corporation's offices or to the designated transfer agent, and (iii) pay any
transfer or similar tax with respect to the conversion, if any. As soon as
practical but in any event within thirty (30) days of the later of the Mandatory
Conversion Date and the date a holder of Preferred Stock delivers the
certificate representing such shares, duly endorsed in a form satisfactory to
the Corporation, to the office of the Corporation or the transfer agent for the
Preferred Stock, the Corporation shall deliver a certificate to and in the name
of the holder of the Preferred Stock for the number of shares of Common Stock
issuable upon the conversion and a check in an amount calculated in accordance
with Section 5.1(c) for any fractional shares, if any, for the shares of
Preferred Stock represented by the certificate. The name of the person in which
the Preferred Stock was issued shall be treated as the shareholder of record of
the Common Stock into which the Preferred Stock was converted on and after the
Mandatory Conversion Date. Adjustment (or cash payment, if applicable) shall be
made for accrued and previously declared and unpaid dividends, as of the
Mandatory Conversion Date, on shares of Preferred Stock converted pursuant to
this Section 5.2. Upon such conversion, the rights of the holders of converted
Preferred Stock with respect to the shares of Preferred Stock so converted shall
cease.
5.3 Certain Matters With Respect to Conversion.
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(a) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Preferred Stock in
full. All shares of Common Stock which may be issued upon conversion of
Preferred Stock shall be duly authorized, validly issued, fully paid and
nonassessable. The Corporation shall comply with all securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of Preferred
Stock
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and will list such shares on each national securities exchange on which the
Common Stock is listed.
(b) If the Corporation:
(i) pays a dividend or makes a distribution on its Common Stock
or any other class of the Corporation's stock other than the Preferred Stock in
shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares
of its capital stock;
then an appropriate and proportionate adjustment shall be made to the number of
shares into which each share of Preferred Stock is convertible so that
immediately after the occurrence of such event each holder of Preferred Stock
shall be entitled to receive the same percentage of the issued and outstanding
Common Stock upon conversion of the Preferred Stock as such holder would have
received if converted immediately prior to such dividend, distribution,
subdivision, combination or reclassification. The adjustment shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(c) If the Corporation distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within
sixty (60) days after the record date mentioned below to purchase additional
shares of Common Stock at a price per share less than the Conversion Price
applicable to any series of Preferred Stock, then on that record date, the
number of shares of Common Stock into which each share of Series A Stock, Series
B Stock, and/or Series C Stock, as applicable, is convertible shall be adjusted,
in accordance with the following formula:
N x (O+A)
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N'= O+AxP
---
M
where:
N' = the number of shares of Common Stock into which each share of
Preferred Stock is convertible after such distribution.
O = the number of shares of Common Stock outstanding on the
record date.
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N = the number of shares of Common Stock into which each share of
Preferred Stock was convertible prior to such distribution.
P = the offering price per share of the additional shares of
Common Stock.
M = the Conversion Price applicable to such share of Preferred
Stock.
A = the number of additional shares of Common Stock offered.
The adjustment shall be made successively whenever any such rights, options
or warrants are issued and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
option or warrants. If at the end of the period during which such warrants,
options or rights are exercisable, not all warrants, options or rights shall
have been exercised, the number of shares of Common Stock into which each share
of Preferred Stock is convertible shall be immediately readjusted to what it
would have been if "A" in the above formula had been the number of shares
actually issued.
(d) If the Corporation issues shares of Common Stock for a
consideration per share less than the Conversion Price applicable to any series
of Preferred Stock, then on that record date, the number of shares of Common
Stock into which each share of Series A Stock, Series B Stock, and/or Series C
Stock, as applicable, is convertible shall be adjusted, in accordance with the
following formula:
NxA
---
N'= O+P
-
M
where:
N' = the number of shares of Common Stock into which each share of
Preferred Stock is convertible after such issuance.
N = the number of shares of Common Stock into which each share of
Preferred Stock was convertible prior to such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Conversion Price applicable to such share of Preferred
Stock.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
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The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance. This Section
5.3(d) does not apply to (i) any transaction or issuance described in Sections
5.3(b) or 5.3(c) above or Section 5.3(e) below, including issuances of Common
Stock pursuant to warrants, options, rights or other convertible securities
described in Sections 5.3(c) and 5.3(e), (ii) the conversion of Preferred Stock,
or the conversion, exchange or exercise of other securities convertible into or
exchangeable or exercisable for Common Stock, (iii) Common Stock issued to the
Corporation's employees or consultants under bona fide employee benefit plans
adopted by the Board of Directors of the Corporation and approved by the holders
of Common Stock when required by law, if such Common Stock would otherwise be
covered by this Section 5.3(d) (but only to the extent that the aggregate number
of shares excluded hereby (together with the aggregate number of shares issuable
upon conversion, exchange or exercise of the securities excluded by the last
sentence of Section 5.3(e) below) and issued shall not exceed 1,725,000 shares
of the Common Stock of the Corporation (as adjusted to reflect any stock split
or any subdivision, reclassification, combination of or with respect to
outstanding shares of Common Stock or any similar transaction)).
(e) If the Corporation issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common Stock
(other than Preferred Stock or securities issued in transactions described in
Section 5.3(c) above) for a consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such securities of less
than the Conversion Price applicable to any series of Preferred Stock, then on
that record date, the number of shares of Common Stock into which each share of
Series A Stock, Series B Stock, and/or Series C Stock, as applicable, is
convertible shall be adjusted, in accordance with the following formula:
N x (O+D)
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N' = O+P
-
M
where:
N' = the number of shares of Common Stock into which each share of
Preferred Stock is convertible immediately after such
issuance.
N = the number of shares of Common Stock into which each share of
Preferred Stock was convertible immediately prior to such
issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Conversion Price applicable to such share of Preferred
Stock.
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D = the maximum number of shares deliverable upon conversion or in
exchange for or upon exercise of such securities at the initial
conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the Common
Stock deliverable upon conversion, exchange or exercise of such securities has
not been issued when such securities are no longer outstanding, then the number
of shares of Common Stock into which each share of Preferred Stock is
convertible shall immediately be readjusted on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities. This Section 5.3(e) does not apply to the issuance of any such
securities to the Corporation's employees or consultants under bona fide
employee benefit plans adopted by the Board of Directors of the Corporation and
approved by the holders of Common Stock when required by law, if such securities
would otherwise be covered by this Section 5.3(e) (but only to the extent that
the aggregate number of shares issuable upon the conversion, exchange or
exercise of the aggregate number of securities excluded hereby (together with
the aggregate number of shares excluded by clause (iii) of Section 5.3(d) above)
and issued shall not exceed 1,725,000 shares of the Common Stock of the
Corporation (as adjusted to reflect any stock split or any subdivision,
reclassification, combination of or with respect to outstanding shares of Common
Stock or any similar transaction)).
(f) For purposes of computation of the number of shares of Common
Stock outstanding, such computation shall be made assuming conversion of all
shares of Preferred Stock. For purposes of any computation respecting
consideration received pursuant to Sections 5.3(d) and 5.3(e) above, the
following shall apply:
(i) in case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other expenses
incurred by the Corporation for any underwriting of the issue or otherwise in
connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Corporation in its reasonable judgment exercised in
good faith (irrespective of the accounting treatment thereof); and
(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock, the aggregate consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such options,
warrants or other securities plus the additional minimum consideration, if any,
to be received by the Corporation upon the conversion or exchange or exercise
thereof (the consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this Section 5.3(f)).
(g) No adjustment in the number of shares of Common Stock into which
each share of Preferred Stock is convertible need be made unless the adjustment
would require an
12
increase or decrease of at least one-half of one percent (0.5%) in the number of
shares of Common Stock into which each share of Preferred Stock is convertible.
Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 5.3
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
(h) No adjustment in the number of shares of Common Stock into which
each share of Preferred Stock is convertible need be made under this Section 5.3
for (i) rights to purchase Common Stock pursuant to a Corporation plan for
reinvestment of dividends or interest, or (ii) any change in the par value or no
par value of the Common Stock. If an adjustment is made to the number of shares
of Common Stock into which each share of Preferred Stock is convertible upon the
establishment of a record date for a distribution subject to Section 5.3 above
and if such distribution is subsequently canceled, the number of shares of
Common Stock into which each share of Preferred Stock is convertible then in
effect shall be readjusted, effective as of the date when the Board of Directors
of the Corporation determines to cancel such distribution, to the number of
shares of Common Stock into which each share of Preferred Stock is convertible
as would have been in effect if such record date had not been fixed. No
adjustment need be made under Section 5.3 if the Corporation issues or
distributes to each holder of Preferred Stock at least the number of shares of
Common Stock, evidences of indebtedness, assets, rights, options or warrants
referred to in such paragraph which each holder would have been entitled to
receive had Preferred Stock been converted into Common Stock prior to or
simultaneously with the happening of such event or the record date with respect
thereto.
(i) Whenever the number of shares of Common Stock into which each
share of Preferred Stock is convertible is adjusted, the Corporation shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment. The Corporation shall file with the transfer agent, if
any, for Preferred Stock a certificate from the Corporation's independent public
accountants briefly stating the facts requiring the adjustment and the manner of
computing it. Subject to Section 5.3(m) below, the certificate shall be
conclusive evidence that the adjustment is correct.
(j) If:
(i) the Corporation takes any action that would require an
adjustment pursuant to Section 5.3;
(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and stockholders
of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the Corporation;
a holder of Preferred Stock may want to convert such stock into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that it may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Corporation
shall mail to such holders, first class, postage prepaid, a
13
notice stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least thirty (30) days before such date.
(k) If the Corporation is party to a consolidation or merger which
reclassifies or changes its Common Stock or to the sale of all or substantially
all of the assets of the Corporation, upon consummation of such transaction the
Preferred Stock shall automatically become convertible into the kind and amount
of securities, cash or other assets which the holder of shares of Preferred
Stock would have owned immediately after the sale, consolidation or merger, if
such holder had converted the Preferred Stock immediately before the effective
date of the transaction, and an appropriate adjustment (as determined by the
Board of Directors of the Corporation) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of Preferred Stock, to the end that the provisions set forth
herein (including provisions with respect to changes in and other adjustment of
the number of shares of Common Stock into which each share of Preferred Stock is
convertible) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the conversion of Preferred Stock. If this Section 5.3(k)
applies, Sections 5.3(b), 5.3(c), 5.3(d) and 5.3(e) do not apply.
(l) In any case in which this Section 5.3 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Preferred Stock converted
after such record date and before the occurrence of such event of the additional
shares of Common Stock issuable upon such conversion over and above the shares
issuable immediately prior to adjustment and (ii) the delivery of a check for
any remaining fractional shares as provided in Section 5.1(c) above.
(m) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this Section 5.3 shall be conclusive. Whenever the Corporation or its Board
of Directors shall be required to make a determination under this Section 5.3,
such determination shall be made in good faith and may be challenged in good
faith by the holders of a majority of any outstanding series of Preferred Stock,
and any dispute shall be resolved promptly (and in no event later than 90 days
after any challenge), at the Corporation's expense, by an investment banking
firm of recognized national standing selected by the Corporation and acceptable
to such holders of Preferred Stock. Any such determination shall be deemed
approved if the requisite holders have not notified the Corporation of any
challenge within thirty (30) days after receiving notice (including a statement
in reasonable detail of the basis therefor) of such determination.
Section 6. Redemption by the Corporation.
---------- -----------------------------
(a) To the extent the Corporation shall have funds legally available
for such payment under the CGCL, the Corporation shall redeem, at the option of
each holder, on November 24, 2003 (the "Initial Mandatory Redemption Date"), a
---------------------------------
number of shares not to exceed fifty percent (50%) of the then outstanding
shares of each series of Preferred Stock at such shares' Redemption Price. In
addition, to the extent the Corporation shall have funds legally available for
such payment under the CGCL, the Corporation shall redeem, at the option of each
holder, on November 24, 2004 (the "Final Mandatory Redemption Date"), a number
-------------------------------
of
14
shares not to exceed one hundred percent (100%) of the then outstanding shares
of Preferred Stock at such shares' Redemption Price.
(b) Shares of Preferred Stock which have been issued and converted or
reacquired in any manner, including as a result of redemption, shall (upon
compliance with any applicable provisions of the CGCL) have the status of
authorized and unissued shares of the class of preferred stock of the
Corporation undesignated as to series, and may be redesignated and reissued as
part of any series of preferred stock of the Corporation; provided, however,
that no such issued and reacquired shares of Series A Stock, Series B Stock, or
Series C Stock shall be reissued as Series A Stock, Series B Stock, or Series C
Stock.
(c) If on any Mandatory Redemption Date the Corporation is unable or
shall fail to discharge its obligation to redeem all outstanding shares of
Preferred Stock required to be redeemed on such date pursuant to Section 6(a)
(the "Mandatory Redemption Obligation"), the Corporation shall redeem on such
-------------------------------
Mandatory Redemption Date the number of shares of Preferred Stock which it is
able to redeem, ratably among the holders of Preferred Stock in proportion to
the full amounts distributable in redemption to which they would otherwise be
respectively entitled if all shares of Preferred Stock required to be redeemed
on such date were redeemed. In such a case, the remainder of the Redemption
Price payable but not paid at the Mandatory Redemption Date shall be converted
into the Delinquent Mandatory Redemption Price and shall be discharged as soon
as the Corporation is able to discharge such Delinquent Mandatory Redemption
Price out of funds legally available therefor. If and so long as any Mandatory
Redemption Obligation (or any obligation in respect of the Delinquent Mandatory
Redemption Price) with respect to any series of Preferred Stock shall not be
fully discharged and paid, the Corporation shall not declare or pay any dividend
or make any distribution on, or, directly or indirectly, purchase, redeem or
satisfy any mandatory redemption, sinking fund or other similar obligation in
respect of the Subordinate Stock.
(d) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to any Mandatory Redemption Date, by first class mail, postage prepaid, to all
holders of record of each series of Preferred Stock at their respective last
addresses as they shall appear on the books of the Corporation; provided,
--------
however, that no failure to give such notice or any defect therein or in the
- -------
mailing thereof shall affect the validity of the proceedings for the redemption
of any shares of Preferred Stock except as to the holder to whom the Corporation
has failed to give notice or except as to the holder to whom notice was
defective. In addition to any information required by law or by the applicable
rules of any exchange upon which the applicable series of Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) the Mandatory
Redemption Date; (ii) the Redemption Price; (iii) the number and series of
shares of Preferred Stock to be redeemed; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the Redemption
Price; (v) the number of shares of Common Stock into which each share of
Preferred Stock is convertible; (vi) that Preferred Stock called for redemption
may be converted at any time before the close of business on the Mandatory
Redemption Date; and (vii) that holders of Preferred Stock must satisfy the
requirements of Section 5.1(b) above if such holders desire to convert such
shares. Upon the mailing of any such notices of redemption, the Corporation
shall become obligated to redeem at the time of redemption specified therein all
15
shares called for redemption other than shares converted into Common Stock prior
to the Mandatory Redemption Date.
(e) If notice has been mailed in accordance with Section 6(d) above
and provided that on or before the Mandatory Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Mandatory
Redemption Date, the shares of Preferred Stock so called for redemption shall no
longer be deemed to be outstanding and shall not have the status of shares of
Preferred Stock, and all rights of the holders thereof as shareholders of the
Corporation (except the right to receive from the Corporation the Redemption
Price) shall cease, irrespective of whether any certificates for shares called
for redemption have been surrendered to the Corporation. Upon surrender, in
accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer), such shares shall be redeemed by
the Corporation at the Redemption Price and no holder of shares called for
redemption shall be entitled to receive payment of the Redemption Price therefor
until such surrender to the Corporation has been accomplished or a duly executed
affidavit of lost certificate shall have been delivered to the Corporation. In
case fewer than all the shares represented by any such certificate are redeemed,
a new certificate or certificates shall be issued representing the unredeemed
shares without cost to the holder thereof (so long as such certificate is issued
to the holder).
(f) Any funds deposited with a bank or trust company for the purpose
of redeeming Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such bank
or trust company the interest or other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares redeemed shall have no claim
to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Preferred Stock entitled thereto at the
expiration of two (2) years from the applicable Mandatory Redemption Date shall
be repaid, together with any interest or other earnings earned thereon, to the
Corporation, and after any such repayment, the holders of the shares entitled to
the funds so repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.
Section 7. Voting Rights.
---------- -------------
(a) Except as otherwise set forth in this Section 7 (including
without limitation the voting provisions set forth in Sections 7(b) and 7(c)) or
as otherwise required by law, each share of Preferred Stock issued and
outstanding (or issued by way of stock dividend in respect thereof, or any
securities issued in substitution thereof) shall have the right to vote on all
matters presented to the holders of the Common Stock for vote, in the number of
votes equal at any time to the number of shares of Common Stock into which each
share of Preferred Stock would then be convertible, and the holders of the
Preferred Stock shall vote with the holders of the Common Stock as a single
class.
16
(b) The holders of Preferred Stock, voting together as a single class
on an as-converted basis, shall have the right to elect four (4) members of the
Board of Directors of the Corporation.
(c) In addition to any vote or consent of shareholders required by
law or required herein, so long as at least fifty percent (50%) of the
originally issued shares of Preferred Stock (calculated on an as-converted
basis) remains outstanding, and except as set forth below, the affirmative vote
of the holders of at least sixty percent (60%) of the Preferred Stock then
outstanding, voting together as a single class on an as-converted basis, either
in writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting, validating or permitting:
(i) any initial public offering other than a Qualified Initial
Public Offering;
(ii) any (1) consolidation or merger involving the Corporation
or its subsidiary (other than a consolidation or merger in which the Corporation
is the surviving entity and no change in the capital stock or ownership of the
Corporation occurs), (2) reclassification or recapitalization of any capital
stock of the Corporation or any subsidiary, (3) dissolution, liquidation or
winding up of the Corporation or any subsidiary, (4) sale of all or
substantially all of the assets of the Corporation or any subsidiary, or (5)
Change of Control;
(iii) change in the Corporation's Line of Business;
(iv) any amendment, alteration or repeal of any of the
provisions of the (1) Amended and Restated Articles of Incorporation of the
Corporation; (2) the by-laws of the Corporation; or (3) the Shareholders'
Agreement;
(v) any authorization, issuance or creation of, or increase in
the authorized amount of, any shares of capital stock of the Corporation (other
than for options issued in connection with stock option plans approved by the
affirmative vote of a majority of the holders of the Preferred Stock, voting
together as a class on an as-converted basis, then outstanding);
(vi) the incurrence of, or agreement to incur, any Indebtedness
which would result in a Debt to Equity Ratio at the time the Indebtedness is
incurred (after giving effect to such incurrence) of greater than 1:1, as
measured based upon the consolidated balance sheet of the Corporation and the
Corporation's subsidiaries prepared as of the last day of the immediately
preceding month, with a pro forma adjustment for the Indebtedness incurred by,
and any equity invested in, the Corporation and its subsidiaries since such
date;
(vii) any loan, advance or guarantee to, or for the benefit of,
or any sale, lease, transfer or disposition of any of the properties or assets
of the Corporation or its subsidiaries to, or for the benefit of, or any
purchase or lease of any property or assets from, or the execution, performance
or amendment of any contract, agreement or understanding with, or for the
benefit of, any Affiliate of the Corporation or its subsidiaries other than in
the ordinary course of business consistent with the past practice of the
Corporation or its subsidiaries; provided, however, that this clause (vii) shall
-------- -------
not apply to (A) any payment pursuant to the terms
17
of contracts or agreements existing on the Effective Date or (B) transactions in
the ordinary course of business consistent with the past practice of the
Corporation or its subsidiaries involving individually or in the aggregate no
more than $100,000 per year which transactions shall have been promptly reported
to the Board of Directors of the Corporation;
(viii) any declaration or payment of any dividends on or any
declaration or making of any other distribution, directly or indirectly, through
subsidiaries or otherwise, on account of any Subordinate Stock or the setting
apart of any sum for any such purpose except as set forth herein;
(ix) any termination or hiring of senior officers of the
Corporation (including the Chairman, President, Chief Executive Office, Chief
Operating Officer and Chief Financial Officer);
(x) any acquisition or transaction or series of related
transactions by the Corporation or any subsidiary having a value greater than $1
million (measured by the fair market value at the date of such transaction) or
any agreement to do any of the foregoing; or
(xi) any agreement to do any of the foregoing.
If at any time any one of Catterton, Grumman Hill or Oak Investment
individually owns in excess of sixty percent (60%) of the Preferred Stock then
outstanding, then the affirmative vote of the holders of at least seventy
percent (70%) of the Preferred Stock then outstanding, voting together as a
single class on an as-converted basis, shall be necessary for effecting,
validating or permitting any of the actions set forth in this Section 7(c),
other than actions set forth in Section 7(c)(ii)(3), in which case the
affirmative vote of 66 2/3% of the Preferred Stock then outstanding, voting
together as a single class on an as-converted basis, shall be necessary.
(d) The rights of the holders of Preferred Stock may be exercised
either at a special meeting of the holders of Preferred Stock, called as
hereinafter provided, or at any annual meeting of shareholders held for the
purpose of electing directors, and thereafter at such annual meetings or by a
holder of Preferred Stock designated in writing by the written consent of the
holders of Preferred Stock.
(e) A special meeting of the holders of Preferred Stock for purposes
of voting on matters with respect to which the holders of such shares are
entitled to vote as a class may be called by the Secretary of the Corporation or
by a holder of Preferred Stock designated in writing by the holders of record of
twenty percent (20%) of the shares of Preferred Stock then outstanding. Such
meeting may be called at the expense of the Corporation by either such person.
At any meeting of the holders of Preferred Stock, the presence in person or by
proxy of the holders of a majority of the shares of Preferred Stock then
outstanding shall constitute a quorum of Preferred Stock for the purpose of
electing directors by holders of Preferred Stock.
(f) If any of the directors so elected by the holders of Preferred
Stock shall cease to serve as a director before his or her term shall expire,
the holders of Preferred Stock then outstanding may, at a special meeting of the
holders called in accordance with the foregoing, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant. Any
action taken by the Board of Directors after the occurrence of any vacancy due
to
18
the death, disability, resignation, retirement or removal of any director
elected by the holders of Preferred Stock (other than any action as may be
necessary to fill such vacancy) until such vacancy is filled in accordance with
the foregoing provisions of this Section 7 shall be subject to the unanimous
approval of the remaining directors elected by the holders of Preferred Stock.
Section 8. Information Rights.
---------- ------------------
So long as any shares of the Preferred Stock are outstanding, the
Corporation covenants and agrees as follows:
8.1 Financial Statements and Other Information.
------------------------------------------
(a) The Corporation and its subsidiaries shall maintain correct and
complete books and records of accounts in which full and correct entries will be
made of all its business transactions pursuant to a system of accounting
established and administered in accordance with generally accepted accounting
principles ("GAAP") consistently applied to the extent applicable, and set aside
on its books all such proper accruals and reserves as shall be required under
GAAP consistently applied. The Corporation shall retain one of the "Big Five"
accounting firms for the purpose of auditing its financial statements and
reports for each fiscal year.
(b) The Corporation shall deliver to each holder of at least five
percent (5%) of the then outstanding Voting Securities of the Corporation:
(i) As soon as available after the end of each fiscal year, and
in any event within ninety (90) calendar days thereafter, (1) a balance sheet of
the Corporation and its subsidiaries, if any, as at the end of such fiscal year,
and consolidated statements of income and retained earnings and consolidated
statements of changes in cash flows of the Corporation and its subsidiaries, if
any, for such year, setting forth in each case in comparative form the
corresponding figures for the previous fiscal year, all prepared in accordance
with GAAP consistently applied and accompanied by a report and opinion thereon
by the Corporation's independent certified public accountants, which audit
report shall state that such consolidated financial statements present fairly in
all material respects the financial position as of such date and results of
operations and cash flows for the periods indicated, all in conformity with
GAAP; and (2) a schedule setting forth the number, class and series of all
authorized shares of stock of the Corporation, the number, class and series of
issued and outstanding stock of the Corporation, the name of each record holder
of any such stock and the number, class and series of such stock held by each
such holder.
(ii) As soon as available after the end of the first fiscal
quarter of the Corporation after the date hereof, and in any event within
forty-five (45) calendar days after the end of each of the first three fiscal
quarters of each fiscal year, an unaudited balance sheet of the Corporation and
its subsidiaries, if any, as of end of such quarter, and unaudited statements of
income, retained earnings, and changes in cash flows of the Corporation and its
subsidiaries, if any, for such period and the fiscal year to date, setting forth
in comparative form the corresponding figures for the corresponding fiscal
quarter of the previous fiscal year, in each case prepared in accordance with
GAAP (subject to normal year-end adjustments and without footnote disclosure)
and certified on behalf of the Corporation by its chief accounting officer.
19
(iii) As soon as available after the end of each month, and in
any event within thirty (30) calendar days after the end of each month, an
unaudited balance sheet of the Corporation and its subsidiaries, if any, as of
end of such month, and unaudited statements of income of the Corporation and its
subsidiaries, if any, in each case prepared in accordance with GAAP (subject to
normal year-end adjustments and without footnote disclosure) and certified on
behalf of the Corporation by its chief accounting officer.
(iv) Thirty (30) calendar days prior to the end of each fiscal
year of the Corporation, a business plan (the "Budget") which (i) forecasts
------
ahead at least one year the Corporation's projected costs, revenues, income,
balance sheet and cash flow on a monthly basis, (ii) forecasts ahead at least
one year the capital requirements necessary to reasonably expand the
Corporation.
(v) Promptly, upon preparation thereof, any other budgets that
the Corporation may prepare and any revisions of the Corporation's Budget.
8.2 Right to Inspection, Etc. The Corporation shall, upon reasonable
------------------------
prior written notice, make available to any holder of outstanding Voting
Securities (i) all corporate and business financial records of the Corporation
and its subsidiaries, if any, for inspection and copying at the Corporation's
offices by any officer, employee, agent, attorney or accountant designated by
each such holder; and (ii) the officers and employees of the Corporation and its
subsidiaries and its independent accountants for interviews by each such holder
of Voting Securities (or any of such designees of such holder) concerning the
affairs and finances of the Corporation and its subsidiaries, if any. Such
inspection, copying, and interviews may be made by each such holder of Voting
Securities (or any of such holder's designees) at any time during normal
business hours or at such other times as may be reasonably requested, but in no
event more than once a quarter.
Each such holder of Voting Securities and its agents and representatives,
in exercising its rights of inspection, copying, interviewing and attendance of
board meetings hereunder, shall maintain the confidentiality of all financial
and other confidential information of the Corporation acquired by it in
exercising such rights and shall use such information right fairly, and in
compliance with applicable state and federal securities laws. This right shall
not apply to or be assignable to any person or entity that competes with the
Corporation or that would obtain a competitive advantage from disclosure of such
information.
Section 9. Exclusion of Other Rights.
---------- -------------------------
Except as may otherwise be required by law, the shares of Preferred Stock
shall not have any voting powers, preferences and relative, participating,
optional or other special rights, other than those specifically set forth in
this Amended and Restated Articles of Incorporation. Notwithstanding anything to
the contrary, Sections 3(b), 4, 6(c) and 7(b)(viii) shall not prohibit any party
from exercising its respective rights under the Warrant Agreement between the
Corporation and Imperial Bank; provided, however, nothing contained herein or in
the Warrant Agreement shall give the holders of such Warrants any priority over
the rights of the holders of the Preferred Stock.
20
Section 10. Headings of Subdivisions.
----------- ------------------------
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
Section 11. Severability of Provisions.
----------- --------------------------
If any voting powers, preferences and relative, participating, optional and
other special rights of any series of Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this Amended and Restated
Articles of Incorporation is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other voting powers, preferences
and relative, participating, optional and other special rights of such Preferred
Stock and qualifications, limitations and restrictions thereof set forth in this
Amended and Restated Articles of Incorporation which can be given effect without
the invalid, unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of such Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of such Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of such Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.
D. Common Stock
Section 1. Priority.
---------- --------
All preferences, voting powers, relative, participating, optional or other
special rights and privileges, and qualifications, limitations or restrictions
of the Common Stock are expressly made subject to and subordinate to those that
may be fixed with respect to the Preferred Stock (and any other series of
preferred stock).
Section 2. Dividends.
---------- ---------
Subject to provisions of law, this Amended and Restated Articles of
Incorporation, and the rights of the Preferred Stock (and any other series of
preferred stock), the holders of Common Stock shall be entitled to receive
dividends out of funds legally available therefor at such times and in such
amounts as the Board of Directors may determine in their sole discretion.
Section 3. Liquidation.
---------- -----------
Upon any liquidation, after the payment or provision for payment of all
debts and liabilities of the Corporation and all preferential amounts to which
the holders of the Preferred Stock (and any other series of preferred stock) are
entitled with respect to the distribution of assets in liquidation, the holders
of Common Stock shall be entitled to share ratably in the remaining assets of
the Corporation available for distribution.
Section 4. Voting Rights.
---------- -------------
21
Each holder of record of Common Stock shall be entitled to one vote for
each share of Common Stock standing in such holder's name on the books of the
Corporation. Except as otherwise provided by this Amended and Restated Articles
of Incorporation or by law, the holders of Common Stock and the holders of the
Preferred Stock (and any other series of preferred stock) shall vote together as
a single class on all matters as to which the Common Stock is entitled to vote
in accordance with Article III, Section C(7)(a).
IV. LIMITATION OF LIABILITY OF DIRECTORS
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
V. INDEMNIFICATION OF AGENTS
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the corporation and its shareholders through bylaw provisions or through
agreements with the agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code.
3. The foregoing Amended and Restated Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing Amended and Restated Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section
903 of the California Corporations Code. The total number of outstanding
shares of Common Stock of the Corporation is 1,520,225 and the total number
of outstanding shares of Preferred Stock of the Corporation is 4,881,448,
of which, 2,727,941 are shares of Series A Convertible Preferred Stock and
2,153,507 are shares of Series B Convertible Preferred Stock. The number of
shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required of the Common Stock was more than
50%, the percentage vote required of the Series A Convertible Preferred
Stock was at least 60%, the percentage vote required of the Series B
Convertible Preferred Stock was at least 60%, and the percentage vote
required of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, and the Common Stock voting together as a
single class on an as-converted basis was more than 50%.
22
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed this Certificate as of this 2/nd/ day of October, 2001.
/s/ Gregory G. Dollarhyde
________________________________________
Name: Gregory G. Dollarhyde
Title: President
/s/ Donald D. Breen
________________________________________
Name: Donald D. Breen
Title: Chief Financial Officer
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Amended and Restated Articles of
Incorporation are true and correct as of our own knowledge, as executed in
Thousand Oaks, California, on this 1st day of October, 2001.
/s/ Gregory G. Dollarhyde
________________________________________
Name: Gregory G. Dollarhyde
Title: President
/s/ Donald D. Breen
________________________________________
Name: Donald D. Breen
Title: Chief Financial Officer
23
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FRESH ENTERPRISES, INC.
a California corporation
Gregory G. Dollarhyde and Donald D. Breen certify that:
1. They are the President and Chief Executive Officer, and the Senior
Vice President and Chief Financial Officer, respectively, of Fresh Enterprises,
Inc., a California corporation (the "Corporation").
2. Paragraph A of Article III of the Amended and Restated Articles of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
A. The Corporation shall have the authority to issue sixty-five
million (65,000,000) shares of capital stock, without par value, of which
fifteen million (15,000,000) shares shall be designated as "preferred
stock" and fifty million (50,000,000) shares shall be designated as "common
stock." The preferred stock may be divided into such number of classes or
series as the Board of Directors may determine.
3. The definition of "Qualified Initial Public Offering" contained in
Article III, Paragraph C, Section 1 of the Amended and Restated Articles of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
"Qualified Initial Public Offering shall mean an underwritten public
---------------------------------
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, of shares of Common Stock that is approved by a
majority of the Board of Directors, including the director designated by each of
Catterton, Grumman Hill and Oak Investment in accordance with Section 4 of the
Amended and Restated Shareholders' Agreement among the Corporation and the
holders of its issued and outstanding stock listed on Schedule A thereto dated
October 2, 2001."
4. The Amended and Restated Articles of Incorporation of the Corporation
are hereby amended to add Article VI, which shall read in its entirety as
follows:
VI. VOTING
Effective only when the Corporation becomes a listed corporation
within the meaning of Section 301.5 of the Corporations Code, no holder of
common stock or
preferred stock shall have the right to cumulate such shareholder's votes
in the election of directors as provided under Section 708 of the
Corporations Code.
5. The amendments set forth herein have been duly approved by the Board of
Directors of the Corporation.
6. The foregoing amendments to the Amended and Restated Articles of
Incorporation have been duly approved by the required vote of shareholders in
accordance with Section 903 of the California Corporations Code. The total
number of outstanding shares of Common Stock of the Corporation is 1,520,225 and
the total number of outstanding shares of Preferred Stock of the Corporation is
6,232,853, of which, 2,727,941 are shares of Series A Convertible Preferred
Stock, 2,153,507 are shares of Series B Convertible Preferred Stock, and
1,351,405 are shares of Series C Convertible Preferred Stock. The number of
shares voting in favor of the amendment equaled or exceeded the vote required.
The percentage vote required of the Common Stock was more than 50%, the
percentage vote required of the Series A Convertible Preferred Stock, the Series
B Convertible Preferred Stock, and the Series C Convertible Preferred Stock,
voting together on an as-converted basis was at least 60%, and the percentage
vote required of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, and the
Common Stock voting together as a single class on an as-converted basis was more
than 50%.
IN WITNESS WHEREOF, the undersigned have executed this certificate on April
19, 2002.
/s/ Gregory G. Dollarhyde
--------------------------------------
Gregory G. Dollarhyde
President and Chief Executive Officer
/s/ Donald D. Breen
--------------------------------------
Donald D. Breen
Senior Vice President and Chief
Financial Officer
We further declare under the penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct as of our own knowledge as executed in Thousand Oaks, California, on
this 19th day of April, 2002.
Dated: April 19, 2002
/s/ Gregory G. Dollarhyde
--------------------------------------
Gregory G. Dollarhyde
President and Chief Executive Officer
/s/ Donald D. Breen
--------------------------------------
Donald D. Breen
Senior Vice President and Chief
Financial Officer