Exhibit 4.1
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF THE
CLASS A 9.5% CUMULATIVE CONVERTIBLE
PREFERRED SHARES
(par value $1.00 per share)
AND THE
CLASS B 9.5% CUMULATIVE CONVERTIBLE NON-VOTING
PREFERRED SHARES
(par value $1.00 per share)
of
CAPITAL TRUST
------------------------------------------------
Pursuant to Article VI of the
Amended and Restated Declaration of Trust of
Capital Trust
------------------------------------------------
Capital Trust, a trust organized under the laws of the State of
California (hereinafter called the "Company"), does hereby certify that,
pursuant to authority conferred on its board of trustees (the "Board") by
Article VI of the Amended and Restated Declaration of Trust of the Company, the
Board, at a meeting held on May 23, 1997, adopted the following resolutions
providing for the creation of two classes of the Company's preferred shares of
beneficial interests, consisting of 12,639,405 Class A 9.5% Cumulative
Convertible Preferred Shares, par value $1.00 per share, and 12,639,405 Class B
9.5% Cumulative Convertible Non-Voting Preferred Shares, par value $1.00 per
share.
"RESOLVED, that pursuant to the authority vested in this Board in
accordance with the provisions of Article VI of the Amended and Restated
Declaration of Trust of the Company, two classes of preferred shares of
beneficial interests in the Company, known, respectively, as Class A 9.5%
Cumulative Convertible Preferred Shares, par value $1.00 per share, and Class B
9.5% Cumulative Convertible Non-Voting Preferred Shares, par value $1.00 per
share, be, and each hereby is, created, classified and authorized and that the
designation and number of shares, and relative rights, preferences and
limitations thereof, shall be as follows:
1 Designation and Amount. The shares of the classes of preferred shares
of beneficial interests in the Company created hereby shall be
designated as (i) "Class A 9.5% Cumulative Convertible Preferred
Shares," and the number of shares constituting such class shall be
12,639,405, with a par value of $1.00 per share, and (ii) "Class B 9.5%
Cumulative Convertible Non-Voting Preferred Shares," and the number of
shares constituting such class shall be 12,639,405, with a par value of
$1.00 per share. The relative rights, preferences, restrictions and
other matters relating to the Class A Preferred Shares and the Class B
Preferred Shares are contained in this Certificate of Designation.
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2 Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings:
(a) "Aggregate Consideration Receivable" by the Company in
connection with the issuance of any Common Shares or any
Common Share Equivalents means the sum of:
(i) the aggregate consideration paid to the Company
for such Common Shares or Common Share Equivalents and
(ii) the aggregate consideration or premiums, if any,
stated in such Common Share Equivalents to be
payable for the Common Shares upon the exercise
or conversion of such Common Share Equivalents,
calculated in each case in accordance with section 7(d)(vii)
hereof. In case all or any portion of the consideration to be
received by the Company may be paid in a form other than cash,
the value of such consideration shall be determined in good
faith by the Board or a duly authorized committee thereof
(irrespective of the accounting treatment thereof), and
described in a resolution of the Board or such committee.
(b) "Aggregated Transferor" of a Person shall mean any other
Person other than the Company who previously held Voting
Shares of the Company now held by such Person.
(c) "Annual Dividend Rate" has the meaning set forth in section
3(a) hereof.
(d) "Bank Holding Company" means a bank holding company (as
defined in Section 1841(a) of the Bank Holding Company Act of
1956, as amended) or any affiliate (as defined in Section
1841(k) of the Bank Holding Company Act of 1956, as amended)
of any bank holding company (as defined in Section 1841(a) of
the Bank Holding Company Act of 1956, as amended).
(e) "Board" means the board of trustees of the Company.
(f) "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in the City of New
York, New York are authorized or obligated by law or executive
order to close.
(g) "Capital Shares" means any and all shares, rights, warrants or
options to purchase shares, securities convertible into or
exchangeable or exercisable for shares and participations in
or other equivalents of or interests (other than security
interests) in shares of beneficial interest in the Company,
however designated and whether voting or nonvoting.
(h) "Certificate of Designation" means this Certificate of
Designation, Preferences and Rights establishing the Class A
Preferred Shares and Class B Preferred Shares pursuant to
Article VI of the Amended and Restated Declaration of Trust,
as the same may be amended, supplemented or modified from time
to time in accordance with the terms hereof and pursuant to
applicable law.
(i) "Class A Common Shares" means the class A common shares, par
value $1.00 per share, of beneficial interests in the Company,
having the designations and rights, qualifications,
limitations and restrictions set forth in the Amended and
Restated Declaration of Trust of the Company.
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(j) "Class A Preferred Shares" means the Class A 9.5% Cumulative
Convertible Preferred Shares, par value $1.00 per share, in
the Company established pursuant to this Certificate of
Designation.
(k) "Class B Common Shares" means the class B common shares, par
value $1.00 per share, of beneficial interests in the Company,
having the designations and rights, qualifications,
limitations and restrictions set forth in the Amended and
Restated Declaration of Trust of the Company.
(l) "Class B Preferred Shares" means the Class B 9.5% Cumulative
Convertible Non-Voting Preferred Shares, par value $1.00 per
share, in the Company established pursuant to this Certificate
of Designation.
(m) "Common Shares" means, collectively, the Class A Common Shares
and the Class B Common
Shares.
(n) "Common Share Equivalents" means, without double counting:
(i) Common Shares, where one Common Share shall
constitute one Common Share
Equivalent,
(ii) Capital Shares (including without limitation the
Preferred Shares) convertible into Common
Shares, where any one Capital Share shall
constitute a number of Common Share Equivalents
equal to the number of Common Shares issuable in
respect of such Capital Share,
(iii) any rights, warrants, options and convertible,
exchangeable or exercisable securities entitling
the holder thereof to subscribe for or purchase
any Common Shares, where any such rights,
warrants, options and convertible, exchangeable
or exercisable securities shall constitute a
number of Common Share Equivalents equal to the
number of Common Shares issuable in respect of
such rights, warrants, options or convertible or
exercisable securities, and
(iv) any share appreciation rights entitling the
holders thereof to any interest in an increase
in value, however measured, of Common Shares,
where any such share appreciation rights shall
constitute a number of Common Share Equivalents
equal to the Common Shares equivalent, as nearly
as it may be calculated, of such share
appreciation rights.
(o) "Company" means Capital Trust, a trust organized under the
laws of the State of California.
(p) "Conversion Date" has the meaning set forth in section 7(b)
hereof.
(q) "Conversion Notice" has the meaning set forth in section 7(b)
hereof.
(r) "Conversion Price" has the meaning set forth in section 7(a)
hereof.
(s) "D/E Ratio" means, as of the date of determination, the ratio
of (i) the sum of (x) the total Indebtedness of the Company
and its consolidated Subsidiaries as reflected on the
Company's most recent last regularly prepared balance sheet,
plus (y) all Indebtedness issued by the Company since the date
of such balance sheet less all indebtedness retired or
repurchased by the Company since that date, plus (z) the
Company's pro rata share, based upon its percentage equity
ownership interest therein, of aggregate total Indebtedness of
Equity Affiliates, to (ii)
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the excess of total assets (including the Company's equity in
its Equity Affiliates) over total liabilities of the Company,
as reflected on the Company's most recent last regularly
prepared balance sheet, in each case determined in accordance
with GAAP and after giving effect to the incurrence of any
proposed Indebtedness and the application of proceeds of such
Indebtedness.
(t) "Dividend Payment Date" has the meaning set forth in section
3(a) hereof.
(u) "Dividend Period" has the meaning set forth in section 3(a)
hereof.
(v) "Effective Purchase Price per Share" at which the Company
issues any Common Shares or any Common Share Equivalents means
an amount equal to the ratio of:
(i) the Aggregate Consideration Receivable by the Company in
connection with the issuance of such Common Shares or
Common Share Equivalents to
(ii) the number of Common Shares and Common Share Equivalents
so issued.
(w) "Equity Affiliate" means any Person in which the Company or
any of its consolidated Subsidiaries has an equity interest
which is or, in accordance with GAAP, should be accounted for
on the equity method in the Company's consolidated financial
statements.
(x) "Exempted Transaction" means each and any of the following:
(i) the issuance, from April 1, 1997 through the date of
the Exempted Transaction, of Common Share Equivalents
to employees or officers of the Company or any of its
subsidiaries, or to consultants or service providers to
the Company or any of its subsidiaries, or to trustees
or directors of the Company or any of its subsidiaries,
under an employee benefit plan or similar arrangement
adopted by the Company in an amount not to exceed 10%
of the aggregate number of Common Share Equivalents
outstanding at such time,
(ii) the issuance of any Common Shares or Preferred Shares
of the Company upon the conversion of any Common Shares
or Preferred Shares, and
(iii) the issuance of any Capital Shares of the
Company in exchange, in whole or in part, for
any acquisition by the Company of shares or
other assets of any kind.
(y) "Fair Market Value" of a Common Share" means, as of any date,
the average of the closing prices of Class A Common Shares for
the 20 consecutive Trading Days next preceding the date five
days prior to the date in question. The closing price for each
day shall be:
(i) if the Class A Common Shares are listed or
admitted for trading on the New York Stock
Exchange or any other national securities
exchange, the last sale price, or the closing
bid price if no sale occurred, of one Class A
Common Share on the New York Stock Exchange or,
if not then listed on the New York Stock
Exchange, the principal securities exchange on
which the Class A Common Shares are listed or
admitted for trading; or
(ii) if not listed or admitted for trading as
described in clause (i) of this section 2(y),
the average of the closing sale price or, in the
absence of a closing sale price, the average of
the highest bid and lowest asked prices of one
Class A Common Share quoted in the NASDAQ
National Market System or any similar system of
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automated dissemination of quotations of securities
prices then in common use, if so quoted; or
(iii) if not quoted as described in clause (ii) of
this section 2(y), the average of the highest
bid and lowest offered quotations for one Class
A Common Share as reported by the National
Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and
offered quotations for Class A Common Shares on
at least five of the 20 consecutive Trading Days
next preceding the date five days prior to the
date in question.
If none of the conditions set forth above is met, the closing
price of one Class A Common Share on any day or the average of
such closing prices for any period shall be the fair market
value of one Common Share for such day or period as determined
in good faith by the Board.
"Fair Market Value" of a Preferred Share means the Fair Market
Value of a number of fully paid and nonassessable Class A
Common Shares equal to the ratio of (a) the Liquidation
Preference for such Preferred Share plus an amount equal to
the dividends per share accrued and unpaid thereon as of the
date of such determination to (b) the Conversion Price in
effect as of the date of such determination.
(z) "GAAP" means those generally accepted accounting
principles and practices which are recognized as such
by the American Institute of Certified Public
Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof
and which are consistently applied for all periods
after the date hereof so as to properly reflect the
financial condition, results of operations and changes
in financial position of any Person, except that any
accounting principle or practice required to be changed
by such Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board
or committee of such Boards) in order to continue as a
generally accepted accounting principle or practice may
be so changed.
(aa) "Holder" of a Class A Preferred Share or a Class B Preferred
Share means the Person in whose name such Class A Preferred
Share or Class B Preferred Share is registered on the books of
the Company.
(bb) "Incur" means to issue, assume, guarantee, incur or otherwise
become liable for.
(cc) "Indebtedness" means, with respect to any Person, without
duplication, any liability of such Person (i) for borrowed
money, (ii) evidenced by bonds, debentures, notes or other
similar instruments, (iii) constituting capitalized lease
obligations, (iv) incurred or assumed as the deferred purchase
price of property, or pursuant to conditional sale obligations
and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business) and (v)
which are secured by any Lien on any property or asset of such
first referred to Person.
(dd) "Issuance Date" means, with respect to any Preferred Share,
the date on which such Preferred Share is issued by the
Company.
(ee) "Junior Shares" means Common Shares and any other class or
series of Capital Shares of the Company now or hereafter
authorized, issued or outstanding which is subject, under the
terms of the Company's Amended and Restated Declaration of
Trust (including any certificate of designation adopted
thereunder relating to any class or series of preferred
shares), to the following restrictions and limitations:
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(i) no dividend or distribution can be declared or
paid on the shares of such class or series
unless all accrued dividends and other amounts
then due with respect to the Preferred Shares
shall have been paid in full,
(ii) in the event of any liquidation, dissolution or
winding up of the Company, either voluntary or
involuntary, the Holders of the Preferred Shares
shall be entitled to receive out of assets of
the Company available for distribution to
shareholders, the amount specified in section 4
hereof, before any payment shall be made or any
assets distributed to the holders of such other
class or series of Capital Shares of the
Company, and
(iii) shares of such class or series may not be
redeemed under any circumstances, either at the
option of the Company or of any holder thereof,
unless all of the outstanding Preferred Shares
have theretofore been redeemed or converted.
(ff) "Lien" means any lien, mortgage, deed of trust, pledge, charge
or other encumbrance of any kind, including, without
limitation, any conditional sale or other title retention
agreement and any lease in the nature thereof.
(gg) "Liquidation Preference" means, with respect to each Preferred
Share, an amount equal to $2.69.
(hh) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a
joint-stock company, a trust, a business trust, a government
or any agency or any political subdivision, any unincorporated
organization or any other entity.
(ii) "Preferred Shares" means, collectively, the Class A Preferred
Shares and the Class B Preferred Shares.
(jj) "Restricted Payment" has the meaning set forth in section 3(c)
hereof.
(kk) "Subsidiary" means:
(i) any corporation 50% or more of the Voting Shares of
which is owned, directly or indirectly, by the Company,
or
(ii) any other Person whose accounts are required
under GAAP to be included in the Company's
consolidated financial statements.
(ll) "Trading Day" means, with respect to the Class A Common
Shares: (i) if the Class A Common Shares are listed or
admitted for trading on any national securities exchange, days
on which such national securities exchange is open for
business; or (ii) if the Class A Common Shares are not listed
or admitted for trading on any national securities exchange,
but are quoted on the NASDAQ National Market System, any
similar system of automated dissemination of quotations of
securities prices or the National Quotation Bureau
Incorporated, each day on which quotations may be made on such
system; or (iii) if the Class A Common Shares are not quoted
on any system or listed or admitted for trading on any
securities exchange, a Business Day.
(mm) "Voting Shares" means, with respect to the Company, all
classes of Capital Shares of the Company then outstanding and
normally entitled to vote for the election of directors,
managers or trustees of the Company. Any reference to a
percentage of Voting Shares shall refer to the
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percentage of votes eligible to be cast for the election of
directors, managers or trustees which are attributable to the
applicable Voting Shares.
3 Dividends.
(a) Payment of Dividends. The Holders of the Preferred Shares
shall be entitled to receive, when and as declared by the
Board, out of funds legally available therefor, cash dividends
per share at the rate of 9.5% per annum on the Liquidation
Preference (the "Annual Dividend Rate"). Such dividends shall
accrue (whether or not declared) from and including the
Issuance Date to and including the date on which the
Liquidation Preference is paid on such shares or on which such
shares are converted or redeemed and, to the extent not paid
for any Dividend Period, will be cumulative. Dividends on the
Preferred Shares shall accrue on a daily basis whether or not
the Company shall have earnings or surplus at the time.
Semi-annual dividend periods (each a "Dividend Period") shall
commence on and include the sixteenth day of December and June
of each year and shall end on and include the fifteenth day of
June and December, respectively, of such year; provided,
however, that the first Dividend Period shall commence on the
Issuance Date and shall end on and include December 15, 1997.
Dividends on the Preferred Shares shall be payable, when and
as declared, semi-annually, in arrears, no later than December
26 and June 25 of each year commencing December 26, 1997 (each
such date, a "Dividend Payment Date"), except that if any such
date is not a Business Day, then such dividend shall be paid
on the next succeeding Business Day. Each such dividend shall
be payable to Holders of Preferred Shares at the close of
business on the record date established by the Board, which
record date shall be not more than 60 days prior to the date
fixed for payment thereof.
The amount of dividends payable per Preferred Share for each
full Dividend Period shall be computed by applying the Annual
Dividend Rate to the Liquidation Preference and dividing such
amount by two. The amount of dividends payable for the initial
Dividend Period and any period shorter than a full Dividend
Period shall be computed on the basis of actual days elapsed
and a 360-day year consisting of twelve 30-day months.
The Company shall not declare or pay or set apart for payment
any dividends or make any other distributions on either class
of Preferred Shares unless the Company simultaneously declares
or pays or sets apart for payment dividends or makes
distributions, at the same rate, each share being treated
equally, on the other class of Preferred Shares.
(b) Distribution of Partial Dividend Payments. Except as otherwise
provided in this Certificate of Designation, if on any
Dividend Payment Date the Company pays less than the total
amount of dividends then accrued with respect to the Preferred
Shares, the amount so paid shall be distributed ratably, each
share being treated equally, among the Holders of the
Preferred Shares based upon the number of Preferred Shares
then held by each such Holder.
(c) Limitations on Certain Payments. Unless all accrued dividends
and other amounts then accrued through the end of the last
Dividend Period and unpaid with respect to the Preferred
Shares shall have been paid in full, the Company shall not
declare or pay or set apart for payment any dividends or make
any other distributions on, or make any payment on account of
the purchase, redemption, exchange or other retirement of, any
Capital Shares of the Company other than the Preferred Shares
(each, a "Restricted Payment"); provided, however, that a
"Restricted Payment" shall not include:
(i) any dividend or distribution payable solely in Junior
Shares, or
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(ii) the acquisition of any Capital Shares in exchange
solely for Junior Shares.
4 Liquidation Preference.
In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the Holders of Preferred
Shares shall be entitled to receive out of assets of the Company
available for distribution to shareholders, an amount per share equal
to the Liquidation Preference plus the amount of all dividends per
share accrued and unpaid thereon through the date of final distribution
to shareholders, whether or not declared, before any payment shall be
made or any assets distributed to the holders of any other class or
series of Capital Shares of the Company.
If the assets and funds thus distributed among the Holders of the
Preferred Shares shall be insufficient to permit the payment to such
Holders of the full preferential amount described above, then the
entire assets and funds of the Company legally available for
distribution shall be distributed ratably, each share being treated
equally, among the Holders of the Preferred Shares based on the number
of Preferred Shares then held by each such Holder.
5 Consolidation, Merger and Sale of Assets, etc. Unless all of the
outstanding Preferred Shares shall have been redeemed or converted on
or prior to the effective date of any consolidation, merger or transfer
referred to below involving the Company, without the approval of the
Holders of a majority of the outstanding Preferred Shares, voting
together as a single class, but voting together as a separate class
from the Common Shares, the Company shall not consolidate with or merge
into, or transfer all or substantially all of its assets to, another
Person unless:
(a) in the case of a merger or consolidation, the Company is the
surviving entity, the rights and preferences of the Preferred
Shares are not modified the Company, as the surviving entity,
does not have outstanding any Capital Shares that are not
Junior Shares, and immediately after the consummation of such
merger or consolidation and after giving effect thereto, the
D/E Ratio of the Company shall not exceed 5:1, or
(b) the surviving, resulting or acquiring Person is a Person
organized under the laws of the United States, any state
thereof or the District of Columbia, or a Person organized
under the laws of a foreign jurisdiction whose equity
securities are listed on a national securities exchange in the
United States or authorized for quotation on the NASDAQ
National Market System, the Company shall make effective
provision such that, upon consummation of such transaction,
the Holders of Preferred Shares shall receive preferred shares
of the surviving entity having substantially identical terms
as the Preferred Shares surrendered by them, the surviving,
resulting or acquiring Person does not have outstanding any
Capital Shares that are not Junior Shares and, immediately
after the consummation of such consolidation, merger or
transfer, the D/E Ratio of such Person shall not exceed 5:1.
6 Voting Rights of Preferred Shares.
(a) Voting Rights of the Class A Preferred Shares. In addition to
the voting rights described in sections 5 and 6(c) hereof, the
Class A Preferred Shares shall be entitled to vote together
with the holders of Class A Common Shares as a single class on
all matters submitted for a vote of shareholders, and shall be
entitled to notice of all shareholders' meetings and to act by
written consent in the same manner as the holders of Class A
Common Shares. Each Class A Preferred Share shall entitle the
Holder thereof to such number of votes per share as shall
equal the number of Class A Common Shares into which such
Class A Preferred Share is then convertible.
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(b) Voting Rights of the Class B Preferred Shares. Except for the
voting rights described in sections 5 and 6(c) hereof, the
Class B Preferred Shares shall not have voting rights and
shall not be counted in determining the presence of a quorum.
(c) Preferred Shares Class Vote. So long as any Preferred Shares
remain outstanding, the affirmative vote of the Board and the
Holders of a majority of the outstanding Preferred Shares,
voting together as a single class, but voting together as a
separate class from the Common Shares, shall be required in
order:
(i) to amend, alter or repeal any of the provisions of
this Certificate of Designation;
(ii) to authorize, create or issue any class or series of
Capital Shares of the Company that are not Junior
Shares; and
(iii) for the Company to Incur any Indebtedness if the
Company's D/E Ratio would exceed 5:1.
Any Preferred Shares owned, directly or indirectly, by the
Company or any of its Subsidiaries shall not have voting
rights hereunder and shall not be counted in determining the
presence of a quorum.
7 Conversion Right.
(a) Right of Conversion. Each Class A Preferred Share shall be
convertible at the option of the Holder thereof at any time
and from time to time in whole or in part into:
(i) a number of fully paid and nonassessable Class A
Common Shares equal to the ratio of:
(x) the Liquidation Preference of such
Class A Preferred Share plus an amount
equal to all dividends per share
accrued and unpaid thereon as of the
Conversion Date to
(y) the Conversion Price in effect on the
Conversion Date, or
(ii) an equal number of fully paid and nonassessable Class
B Preferred Shares,
or into such additional or other securities, cash or property
and at such other rates as required in accordance with the
provisions of this section 7.
Each Class B Preferred Share shall be convertible at the
option of the Holder thereof at any time and from time to time
in whole or in part into:
(i) a number of fully paid and nonassessable Class B Common
Shares equal to the ratio of:
(x) the Liquidation Preference of such
Class B Preferred Share plus an amount
equal to all dividends per share
accrued and unpaid thereon as of the
Conversion Date to
(y) the Conversion Price in effect on the Conversion
Date, or
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(ii) if the Holder (a) would not, together with such
Holder's Aggregated Transferors, upon the
issuance of such Class A Preferred Shares, own
more than 4.9% of any class of Voting Shares of
the Company or (b) is not limited by the Bank
Holding Company Act of 1956, as amended, to
holding no more than 4.9% of any class of Voting
Shares of the Company, an equal number of fully
paid and nonassessable Class A Preferred Shares,
or into such additional or other securities, cash or property
and at such other rates as required in accordance with the
provisions of this section 7.
For purposes of this Certificate of Designation, the
"Conversion Price" shall initially be $2.69 per share and
shall be adjusted from time to time in accordance with the
provisions of this section 7.
(b) Conversion Procedures. In order to exercise the conversion
right, the Holder of any Preferred Shares to be converted in
whole or in part shall surrender the certificate or
certificates evidencing such shares to the Company and shall
give written notice to the Company ("Conversion Notice") that
the Holder elects to convert such shares or the portion
thereof specified in said notice into Class A Common Shares,
Class B Common Shares, Class A Preferred Shares or Class B
Preferred Shares, as provided herein and as specified by the
Holder in the Conversion Notice. The Conversion Notice shall
also (i) state the name or names (with address) in which the
certificates for Common Shares or Preferred Shares, as the
case may be, shall be issued and (ii) if Class B Preferred
Shares are to be converted into Class A Preferred Shares,
contain a certification by the Holder that the Holder either
(a) will not, together with such Holder's Aggregated
Transferors, upon the issuance of such Class A Preferred
Shares, own more than 4.9% of any class of Voting Shares of
the Company or (b) is not limited by the Bank Holding Company
Act of 1956, as amended, to holding no more than 4.9% of any
class of Voting Shares of the Company. Each certificate
evidencing Preferred Shares surrendered for conversion shall,
unless the shares issuable on conversion are to be issued in
the same name as the registration of such Preferred Shares, be
duly endorsed by, or be accompanied by instruments of transfer
in form satisfactory to the Company duly executed by, the
Holder or its duly authorized attorney.
As promptly as practicable after receipt of a Conversion
Notice and surrender of the certificate or certificates
evidencing the Preferred Shares relating thereto, the Company
shall issue and deliver to such Holder (or upon the written
order of such Holder) a certificate or certificates for the
number of full Class A Common Shares, Class B Common Shares,
Class A Preferred Shares or Class B Preferred Shares, as
specified in the Conversion Notice, issuable upon the
conversion of such Preferred Shares or portion thereof in
accordance with the provisions of this section 7, and a check
or cash in respect of any fractional shares issuable upon such
conversion, as provided in section 7(c) hereof. In the event
that less than all the Preferred Shares represented by a
certificate are to be converted, the Company shall issue and
deliver or cause to be issued and delivered to (or upon the
written order of) the Holder of the Preferred Shares so
surrendered, without charge to such Holder, a new certificate
or certificates representing a number of Preferred Shares
equal to the unconverted portion of the surrendered
certificate.
Each conversion shall be deemed to have been effected on the
date (the "Conversion Date") on which the certificate or
certificates evidencing such Preferred Shares shall have been
surrendered to the Company or its transfer agent and a
Conversion Notice with respect to such shares shall have been
received by the Company, as described above. Any Person in
whose name any certificate or certificates for Common Shares
or Preferred Shares shall be issuable upon conversion shall be
deemed to have become the holder of record of the shares
represented
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thereby on the Conversion Date; provided, however, if the
certificate or certificates evidencing such Preferred Shares
are surrendered on any date when the share transfer books of
the Company shall be closed, the Holder shall constitute the
Person in whose name the certificates are to be issued as the
record holder thereof for all purposes until the next
succeeding day on which such share transfer books are open,
but such conversion shall be at the Conversion Price in effect
on the date on which such certificate or certificates shall
have been surrendered.
Except as otherwise provided in this section 7, no payment or
adjustment will be made for dividends or other distributions
with respect to any Common Shares or Preferred Shares issuable
upon conversion of Preferred Shares as provided herein.
(c) Cash Payments in Lieu of Fractional Shares. No fractional
shares or scrip representing fractional shares shall be issued
upon conversion of Preferred Shares. If any fractional share
would, but for this section 7(c), be issuable upon the
conversion of any Preferred Shares, the Company shall make a
payment therefor in cash on the first Business Day immediately
preceding the Conversion Date equal to the Fair Market Value
of such fractional share.
(d) Adjustment of Conversion Price for Conversion into Common
Shares. The Conversion Price with respect to the conversion of
the Preferred Shares into Common Shares shall be adjusted from
time to time by the Company as follows:
(i) In the event that the Company shall at any time after the
Issuance Date:
(A) declare a dividend or make a distribution on the
Common Shares in Common Shares,
(B) subdivide or reclassify the Common Shares into a
greater number of shares,
(C) combine the Common Shares into a smaller number
of shares,
(D) pay a dividend or make a distribution on the
Common Shares in any class of its Capital Shares
other than Common Shares, or
(E) reclassify the Common Shares,
then the conversion right and the Conversion
Price in effect immediately prior thereto shall
be adjusted so that the Holder of any Preferred
Shares thereafter surrendered for conversion
into Common Shares shall be entitled to receive
the number of Common Shares or other Capital
Shares of the Company which such Holder would
have owned or have been entitled to receive
after the happening of any of the events
described above had such Preferred Shares been
converted into Common Shares immediately prior
to the happening of such event. An adjustment
made pursuant to this section 7(d)(i) shall
become effective immediately after the record
date in the case of a dividend or distribution
and shall become effective immediately after the
effective date in the case of subdivision,
combination or reclassification. Such adjustment
shall be made successively whenever any event
referred to above shall occur.
(ii) In the event that the Company shall at any time
after the Issuance Date issue any Common Shares
or any Common Share Equivalents other than in an
Exempted Transaction, at an Effective Purchase
Price per Share less than the Conversion
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Price in effect immediately prior to the date of
such issuance, then such Conversion Price shall
be adjusted to equal the ratio of:
(A) the sum of:
(1) the product of:
(a) the number of Common Shares and Common
Share Equivalents outstanding
immediately prior to such issuance and
(b) the Conversion Price in effect
immediately prior to such issuance and
(2) the Aggregate Consideration Receivable by
the Company in connection with such
issuance to
(B) the sum of:
(1) the number of Common Shares and Common Share
Equivalents outstanding immediately prior to
such issuance and
(2) the number of additional Common Shares and
Common Share Equivalents.
For example, if on any given date the Company
has 20,000,000 Common Shares and Common Share
Equivalents outstanding, the Company issues
warrants exercisable at $1 per share to purchase
an additional 1,000,000 Common Shares for a
purchase price of $1 per warrant, and the
Conversion Price in effect on such date is
$2.69, then the Conversion Price shall be
adjusted to equal $2.66, which is calculated as
follows:
$2.66 per share =
[(20,000,000 shares x $2.69/share) + $2,000,000] /
(20,000,000 shares + 1,000,000 shares).
Such adjustment shall be made successively
whenever any shares, rights, warrants, options,
convertible or exercisable securities or share
appreciation rights are issued at an Effective
Purchase Price per Share that is less than the
Conversion Price in effect on the date of such
issuance. To the extent that any right, option,
warrant, convertible or exercisable security or
share appreciation right expires without having
been converted or exercised, the Conversion
Price then in effect shall be readjusted to the
Conversion Price which then would be in effect
if such rights, options, warrants, convertible
or exercisable securities or share appreciation
rights had not been issued, but such
readjustment shall not affect the number of
Common Shares or other Capital Shares delivered
upon any conversion prior to the date such
readjustment is made.
(iii) In the event that the Company shall distribute
to all holders of its Common Shares any of its
assets (other than cash dividends payable on or
after April 1, 1997 which together with all
prior cash dividends payable on or after April
1, 1997, do not exceed the amount of retained
earnings of the Company accrued on or after
April 1, 1997 and on or prior to the date of
such dividends) or debt
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securities, or rights, options, warrants or
convertible or exercisable securities of the
Company (including securities issued for cash,
but excluding distributions of Capital Shares
referred to in section 7(d)(i) hereof), then in
each such case, the Conversion Price shall be
adjusted to equal the Conversion Price in effect
immediately prior to such distribution less an
amount equal to the then fair market value (as
reasonably determined by the Board, in good
faith and as described in a resolution of the
Board) of the portion of the assets or debt
securities of the Company so distributed or of
such rights, options, warrants or convertible or
exchangeable securities applicable to one Common
Share. Such adjustment shall become effective
immediately after the record date for the
determination of shares entitled to receive such
distribution. Notwithstanding the foregoing, no
adjustment of the Conversion Price shall be made
upon the distribution to holders of Common
Shares of such rights, options, warrants,
convertible securities, assets or debt
securities if the plan or arrangement under
which such rights, options, warrants,
convertible securities, assets or debt
securities are issued provides for their
issuance to Holders of Preferred Shares in the
same pro rata amounts upon conversion thereof.
Such adjustment shall be made successively
whenever any event listed above shall occur.
(iv) Anything in this section 7(d) to the contrary
notwithstanding, the Company shall be entitled to make
such reductions in the Conversion Price, in addition to
those required by this section 7(d), as it in its
reasonable discretion shall determine to be advisable
in order that any share dividends, subdivision of
shares, distribution of rights to purchase shares or
securities, or distribution of securities convertible
into or exchangeable for shares hereafter made by the
Company to its shareholders, shall not be taxable.
(v) Whenever the Conversion Price is adjusted as
provided in this section 7(d), or the Preferred Shares
become convertible into shares of securities, property
or assets pursuant to section 7(e) hereof, or the
Company reduces the Conversion Price pursuant to
section 7(f) hereof, the Company shall prepare a notice
of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the date on
which such adjustment becomes effective, and setting
forth in reasonable detail the facts requiring such
adjustment and the calculation of such adjustment, and
shall mail such notice of adjustment to all Holders of
Preferred Shares at their last addresses appearing on
the share transfer books of the Company.
(vi) In any case in which this section 7(d) provides that an
adjustment shall become effective immediately after a
record date for an event, the Company may defer until
the occurrence of such event:
(A) issuing to the Holder of any Preferred
Shares converted after such record date
and before the occurrence of such event
the additional Common Shares issuable
upon such conversion by reason of the
adjustment required by such event over
and above the Common Shares issuable
upon such conversion before giving
effect to such adjustment, and
(B) paying to such Holder any amount in
cash in lieu of any fractional share of
Common Shares pursuant to section 7(c).
(vii) For purposes of any computations of Aggregate
Consideration Receivable or other consideration
pursuant to this section 7(d), the following shall
apply:
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(A) in the case of the issuance of Common
Shares or Common Share Equivalents 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 Company for
any underwriting of the issue or
otherwise in connection therewith; and
(B) in the case of the issuance of Common
Shares or Common Share Equivalents 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
reasonably determined in good faith by
the Board or a duly authorized
committee thereof (irrespective of the
accounting treatment thereof), and
described in a resolution of the Board
or such committee.
(viii) If, after an adjustment a Holder of Preferred
Shares may, upon conversion of such security,
receive two or more classes of Capital Shares of
the Company, the Company shall determine on a
fair basis the allocation of the adjusted
Conversion Price between the classes of Capital
Shares. After such allocation, the conversion
right and the Conversion Price of each class of
Capital Shares shall thereafter be subject to
adjustment on terms comparable to those
applicable to Common Shares in this section 7.
(e) Effect of Reclassification, Consolidation, Merger or Sale.
Unless all of the Preferred Shares shall have been redeemed or
converted on or prior to the effective date of any of the
events referred to in clauses (i), (ii) and (iii) of this
section 7(e), if any of the following events occur, namely:
(i) any reclassification or change of outstanding
Common Shares issuable upon conversion of any
class of Preferred Shares (other than a change
in par value, or from par value to no par value,
or from no par value to par value, or as a
result of a subdivision or combination),
(ii) any consolidation or merger of the Company with
another Person shall be effected as a result of
which holders of Common Shares issuable upon
conversion of any class of Preferred Shares
shall be entitled to receive shares, securities
or other property or assets (including cash)
with respect to or in exchange for such Common
Shares, or
(iii) any sale or conveyance of the properties and assets of
the Company as, or substantially as, an entirety to
any other Person,
then the Company or such successor or purchasing Person, as
the case may be, shall make provisions in its constituent
documents to establish that each Preferred Share then
outstanding (or the successor shares referred to in section
5(b) hereof) shall be convertible into the kind and amount of
shares and other securities or property or assets (including
cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the
number of Common Shares issuable upon conversion of such
Preferred Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance, each
Preferred Share being treated equally. Such provisions shall
provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
section 7.
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If this section 7(e) applies with respect to a transaction,
section 7(d) hereof shall not apply with respect to that
transaction. The above provisions of this section 7(e) shall
similarly apply to successive reclassifications,
consolidations, mergers and sales.
(f) Subdivision, Reclassification or Combination of Preferred
Shares. The Company shall not (i) subdivide or reclassify any
class of Preferred Shares or (ii) combine any class of
Preferred Shares, unless the Company simultaneously
subdivides, reclassifies or combines, at the same rate, each
share being treated equally, all classes of Preferred Shares.
(g)
Taxes on Shares Issued. The issuance of share
certificates upon conversion of Preferred Shares shall
be made without charge to the converting Holder for any
tax in respect of the issuance thereof.
(h) Shares to be Fully Paid. The Company covenants that all Common
Shares and Preferred Shares which may be issued upon
conversion of Preferred Shares will upon issuance be validly
issued, fully paid and nonassessable by the Company and free
from all taxes, liens and charges with respect to the issuance
thereof.
(i) Notice to Holders Prior to Certain Actions.
(i) In the event:
(A) that the Company shall take any action
that would require an adjustment in the
Conversion Price pursuant to section
7(d)(i) or (iii) hereof; or
(B) that any event described in section 7(e)
hereof shall occur; or
(C) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
the Company shall cause notice of such proposed
action or event to be mailed to each Holder of
record of Preferred Shares at its address
appearing on the share transfer books of the
Company, as promptly as possible but in any
event no later than the later of (x) the date 30
days prior to the record date for such proposed
action or the effective date of such event or
(y) the date on which the Company first publicly
announces such proposed action or event.
(ii) In the event that the Company shall take any
action that would require an adjustment in the
Conversion Price pursuant to section 7(d)(ii)
hereof, the Company shall cause notice of such
proposed action or event to be mailed to each
Holder of record of Preferred Shares at its
address appearing on the share transfer books of
the Company, as promptly as possible but in no
event later than the date that the Company
provides public notice of such proposed action
or event.
(iii) In any event, such notice shall specify:
(A) the record date as of which the holders
of record of Common Shares are to be
determined, or
(B) the date on which such proposed event
is expected to become effective, and
the date as of which it is expected
that holders of record of Common Shares
shall be entitled to exchange their
Common Shares for securities or other
property deliverable upon such event.
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Failure to give such notice, or any defect
therein, shall not affect the legality or
validity of such action or event.
8 Reacquired Shares. Any Preferred Shares which are converted,
purchased, redeemed or otherwise acquired by the Company, shall be
retired and canceled by the Company promptly thereafter. No such
shares shall upon their cancellation be reissued.
9 Covenant Regarding Employee Equity Plans. For so long as any shares of
Preferred Stock are outstanding, the Company will not:
(a) grant to any employees or officers of the Company or any of
its subsidiaries, or to any consultants or service providers
to the Company or any of its subsidiaries, or to any trustees
or directors of the Company or any of its subsidiaries, under
an employee benefit plan or similar arrangement adopted by the
Company, any options to purchase Common Share Equivalents
having an exercise price per share less than the fair market
value of a Common Share Equivalent on the date of grant of
such option as determined in good faith by any reasonable
method by the Board, or
(b) issue or sell to any employees or officers of the Company or
any of its subsidiaries, or to any consultants or service
providers to the Company or any of its subsidiaries, or to any
trustees or directors of the Company or any of its
subsidiaries, or to any shareholder of the Company, any Common
Share Equivalents at a price per share below the fair market
value of such Common Share Equivalent on the date of such
issuance or sale as determined in good faith by any reasonable
method by the Board.
10 Certain Restrictions on Transfer; Legend.
(a) Holder shall not transfer Class A Preferred Shares or Class A
Common Shares to any Bank Holding Company, unless, after
giving effect to such transfer, such Bank Holding Company:
(i) would, together with its Aggregated Transferors,
own no more than 4.9% of any class of Voting
Shares of the Company or
(ii) is not limited by the Bank Holding Company Act
of 1956, as amended, to holding not more than
4.9% of the Voting Shares of the Company.
(b) The Class B Preferred Shares and the Class B Common Shares may
be transferred by a Bank Holding Company only:
(i) in accordance with applicable federal and state
securities laws and
(ii) unless the Company shall have received an
opinion of counsel stating that the restriction
in this section 10(b)(ii) is not applicable
under the circumstances:
(A) in a widely dispersed offering in which
no more than 2% of the outstanding
Class B Common Shares and Capital
Shares convertible into Class B Common
Shares are transferred to any one
holder,
(B) to a transferee who has agreed in
writing acceptable to the Company to be
bound by the restrictions set forth in
this section 10.
(c) Holder agrees that substantially the following legend shall be
placed on the certificates representing any Class B Preferred
Shares and Class B Common Shares:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
LIMITATIONS UPON TRANSFER AND CONVERSION CONTAINED IN THE
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE
CLASS B 9.5% CUMULATIVE CONVERTIBLE NON-VOTING PREFERRED
SHARES AND THE BY-LAWS OF THE COMPANY (COPIES OF WHICH ARE ON
FILE AT THE OFFICE OF THE COMPANY)."
"RESOLVED, that the Chairman of the Board, Chief Executive Officer or
Vice Chairman of the Company sign and acknowledge a certificate of designation
setting forth the resolution or resolutions of the Board fixing the voting
powers, designations, preferences and rights of any Preferred Shares of any
class or series, the qualifications, limitations or restrictions thereof, and
the number of the Preferred Shares of such class or series authorized by the
Board, and cause such certificate of designation to be filed among the records
of the Company."
IN WITNESS WHEREOF, Capital Trust has caused this Certificate of
Designation to be duly signed and acknowledged as of this 15th day of June, 1997
by the undersigned, its Chief Executive Officer.
CAPITAL TRUST
By: /s/ John R. Klopp
_______________________________
Name: John R. Klopp
Title: Chief Executive Officer
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